-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TcSqcApPFBpY5UuLjNadS4zDf9aGwtfdgaH7jDwK+fXNzeTZsIN8RJQCHwOImown 8K5ksBhlurYZhg8j3LQlAg== 0001005150-98-000168.txt : 19980313 0001005150-98-000168.hdr.sgml : 19980313 ACCESSION NUMBER: 0001005150-98-000168 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 35 FILED AS OF DATE: 19980312 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VACATION PROPERTIES INTERNATIONAL INC CENTRAL INDEX KEY: 0001057507 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-47867 FILM NUMBER: 98564677 BUSINESS ADDRESS: STREET 1: 1355 B LYNNFIELD ROAD CITY: MEMPHIS STATE: TN ZIP: 38119 BUSINESS PHONE: 9018185445 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------- VACATION PROPERTIES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 7011 52-2055247 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification Number)
1355-B Lynnfield Road Suite 245 Memphis, TN 38119 (901) 818-5445 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------- DAVID C. SULLIVAN CHAIRMAN AND CHIEF EXECUTIVE OFFICER VACATION PROPERTIES INTERNATIONAL, INC. 1355-B Lynnfield Road Suite 245 Memphis, TN 38119 (901) 818-5445 (Name and address, including zip code, and telephone number, including area code, of agent for service) Copies to: Bruce S. Mendelsohn, Esq. Peter S. Kolevzon, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. Kramer, Levin, Naftalis & Frankel 1333 New Hampshire Avenue, N.W. 919 Third Avenue Washington, D.C. 20036 New York, New York 10022 (202) 887-4000 (212) 715-9100 ----------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. ----------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE ===================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (1)(2) FEE - --------------------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value per share ........................ 6,679,584 $ 13.00 $86,834,592 $ 25,616.20 ======================================================================================================================
(1) Includes 871,250 shares that the Underwriters have the right to purchase to cover over-allotments. See "Underwriting." (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 of Regulation C under the Securities Act of 1933, as amended. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ SUBJECT TO COMPLETION, DATED MARCH 12, 1998 P R O S P E C T U S 5,808,334 SHARES [LOGO] VACATION PROPERTIES INTERNATIONAL, INC. COMMON STOCK All of the 5,808,334 shares of Common Stock offered hereby are being offered by the Company. Prior to this offering (the "Offering"), there has not been a public market for the Common Stock of the Company. It is currently estimated that the initial public offering price will be between $11.00 and $13.00 per share. See "Underwriting" for information relating to the factors considered in determining the initial public offering price. Application will be made to have the Common Stock approved for listing on the New York Stock Exchange under the symbol "VAC." SEE "RISK FACTORS" COMMENCING ON PAGE 11 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS- SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================ PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY (2) - -------------------------------------------------------------------------------- Per Share $ $ $ - -------------------------------------------------------------------------------- Total (3) $ $ $ ================================================================================
(1) For information regarding indemnification of the Underwriters, see "Underwriting". (2) Before deducting expenses payable by the Company, estimated at $ . (3) The Company has granted to the Underwriters a 30-day option to purchase up to 871,250 additional shares of Common Stock solely to cover over-allotments, if any. See "Underwriting." If the Underwriters exercise such option in full, the Price to Public will total $ , the Underwriting Discount will total $ and the Proceeds to Company will total $ . The shares of Common Stock are offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them and subject to certain conditions. It is expected that certificates for the shares of Common Stock offered hereby will be available for delivery on or about , 1998 at the office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001. ------------ SALOMON SMITH BARNEY NATIONSBANC MONTGOMERY SECURITIES LLC FURMAN SELZ , 1998 Information contained herein is subject to completion or amendment. A Registration Statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. [PICTURES/GRAPHICS TO COME] Aston(Reg. TM) and Aston Hotels & Resorts(Reg. TM) are registered tradenames and trademarks of Aston Brands, LLC. ------------------ CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. SUCH ACTIVITIES, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2 PROSPECTUS SUMMARY Simultaneously with and as a condition to the closing of the Offering, Vacation Properties International, Inc. will acquire, in separate combination transactions (the "Combinations") in exchange for cash and shares of Common Stock, all of the common stock and ownership interests of 13 vacation rental and property management companies and one vacation rental and property management software company (each, a "Founding Company" and, collectively, the "Founding Companies"). Unless otherwise indicated, all references to the "Company" herein include Vacation Properties International, Inc. and the Founding Companies, and references to "VPI" mean Vacation Properties International, Inc. prior to the closing of the Combinations. For more information about the Combinations, see "Certain Transactions." The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and related notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all share, per share and financial information in this Prospectus: (i) has been adjusted to give effect to the Combinations and a 8,834.76-for-one stock split effected on March 9, 1998; (ii) assumes an initial public offering price of $12.00 per share; and (iii) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock." THE COMPANY Upon consummation of the Offering, the Company will be the first national provider of vacation condominium and home rentals in premier destination resorts throughout the United States. Through the consolidation of leading vacation rental and property management companies, the development of a national brand and marketing initiative and best practices management systems, the Company intends to offer vacationers a branded network of high quality, fully furnished, privately-owned condominium and home rentals while offering property owners superior management services designed to enhance their rental income. Currently, most vacationers seeking to rent a condominium or home at a popular destination resort must use a local vacation rental and property management firm to inquire about availability and make reservations. Vacationers typically make rental choices with limited information and, as a result, face great uncertainty concerning the quality of their rental. To address this need, the Company intends to provide vacationers with consistent quality and service, increased information and easy access to a broad array of high quality condominium and home rentals in premier destination resorts. Upon consummation of the Offering, the Company will acquire the 14 Founding Companies which manage approximately 9,200 condominiums and homes nationwide and in Canada. These condominiums and homes are located in beach and island resorts such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks, NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT, and Whistler, B.C. The Company also manages five hotels aggregating approximately 1,650 hotel rooms located primarily in the Hawaiian Islands. The Company provides a wide range of services to both vacationers and property owners. Because of the variety of the Company's resort locations throughout the United States and Canada and the diversity of rental prices throughout its rental pool, the Company is able to target a broad range of vacationers, including families, couples and individuals. For vacationers, the Company offers the convenience and accommodations of a condominium or home, while providing many of the amenities and services of a hotel, generally at a lower cost per person. Vacation condominium and home rentals generally offer greater space and convenience than resort hotel rooms, including separate living, sleeping and eating quarters. As a result, vacationers generally have more privacy and greater flexibility in a vacation condominium or home. The Company typically offers such services as convenient check-in and check-out, frequent housekeeping and cleaning and emergency maintenance assistance. In addition, in most of its markets, the Company provides specialized 3 concierge-type services such as arranging golf tee times, purchasing ski lift tickets and making restaurant reservations. For property owners, the Company offers a comprehensive set of services, including marketing and rental services, maintenance and security. The Company's primary source of revenue is property rental fees, which are charged to the property owners as a percentage of the vacationers' total rental price. Fee percentages for vacation condominiums and homes range from approximately 3% to over 40% of rental rates for the various Founding Companies depending on the type of services provided to the property owner and the type of rental unit managed. On a pro forma basis for the year ended December 31, 1997, the Company recognized $34.1 million of revenues from property rental fees representing approximately 56% of the Company's total revenue. In addition, in many markets, the Company provides traditional real estate brokerage services for property owners seeking to sell their condominiums and homes. The Company believes that a national brand and superior management services, which are designed to enhance rental income for property owners, will provide it with a competitive advantage in attracting additional high quality condominiums and homes in its markets. The vacation rental and property management industry is highly fragmented and inefficient, with an estimated 3,000 vacation rental and property management companies in the United States. Presently, most vacation rental condominiums and homes are managed by and booked through local vacation rental and property management firms, whose principal means of attracting property owners and vacationers is by referral, word of mouth, limited local advertising and direct mailings. The Company believes this presents a significant market penetration opportunity for a well-capitalized company offering a large, national network of high quality vacation condominiums and homes. The Company's objective is to enhance its position as the leading national provider of premier destination resort condominium and home rentals by: o NATIONAL BRAND. Developing a national brand based on offering vacationers a national network of high quality condominiums and homes in premier destination resorts throughout the United States; o SUPERIOR CUSTOMER SERVICE. Offering vacationers superior customer service with the convenience and accommodations of a condominium or home as well as many of the amenities and services of a hotel; o INCREASED RENTAL INCOME. Enhancing value for condominium and home owners with strategies designed to increase occupancy and rental rates resulting in increased rental income; o MANAGEMENT'S EXPERIENCE. Relying on the industry experience of its senior management including three members who worked together at Promus Hotel Corporation, one of whom David Sullivan, the Chairman and Chief Executive Officer of the Company, was the former Chief Operating Officer of Promus Hotel Corporation, as well as Michael Murphy, Senior Vice President of Development of the Company, who has over 20 years experience in the hotel and resort industries; and o LOCAL EXPERTISE. Maintaining the local relationships and expertise of the management teams of the Founding Companies, each of which has extensive experience in their respective resort areas. Management teams already in place from all of the Founding Companies will become employees of the Company, bringing valuable industry relationships and providing local market knowledge in each market in which the Company will operate. The Founding Companies have an average of over 17 years of experience in the industry. Additionally, officers and directors of the Company and the former owners of the Founding Companies, and their respective affiliates will own approximately 62% of the Common Stock of the Company upon completion of the Offering. 4 The Company believes it can achieve significant growth internally and through an active acquisition program. The primary elements of the Company's internal growth strategy include: o NATIONAL MARKETING STRATEGY. Implementing a national marketing strategy emphasizing; (i) cross-selling to existing customers, (ii) bringing in new customers and (iii) increasing the use of marketing channels such as the world wide web, travel agents and national print media, which are difficult for local vacation rental and property management companies to use in a cost-effective manner; o CAPITALIZE ON TECHNOLOGY. Capitalizing on technology by utilizing the technological expertise of First Resort Software, a Founding Company, to create a comprehensive web site that includes all of the Company's condominium, home and hotel rentals through which vacationers can ultimately view photographs and detailed floor plans of the Company's rental properties and homes and make reservations and payments; o GROWTH WITHIN EXISTING MARKETS. Expanding its market share of condominium, home and hotel room rentals in existing markets; and o PROFIT MARGIN EXPANSION. Pursuing opportunities for profit margin expansion via cost synergies and additional revenue sources including the implementation of best practices achieved by tapping the industry experience of the management teams in each of the Founding Companies. The Company also intends to build a national market presence through strategic acquisitions. The vacation rental and property management industry is highly fragmented, which the Company believes provides significant opportunities for consolidation. While the Company will seek to acquire the leading companies in each new market, the Company also plans to pursue tuck-in acquisitions through which it can expand its selection of condominiums and homes available for rent in its existing markets. Many acquisition candidates utilize First Resort's software, which the Company believes will enhance its ability to integrate such companies upon acquisition. The Company believes that the opportunity to join with VPI will be attractive to many vacation rental and property management companies. The Company expects to offer acquisition candidates: (i) affiliation with a national brand; (ii) the ability to cross-sell to customers of other vacation rental and property management companies; (iii) the ability to increase liquidity as a result of the Company's financial strength as a public company; and (iv) the ability to increase profitability as a result of the Company's centralization of certain administrative functions and other economies of scale. The Company intends to finance its acquisitions through internally generated cash flow, borrowing from its credit facility and in certain instances through the issuance of Common Stock. The Company intends to obtain a revolving credit facility, under which capital will be available to pursue acquisitions. The Company's executive offices are located at 1355-B Lynnfield Road, Suite 245, Memphis, Tennessee 38119, and its telephone number is (901) 818-5445. 5 THE OFFERING COMMON STOCK OFFERED BY THE COMPANY................. 5,808,334 shares (1) COMMON STOCK TO BE OUTSTAND ING AFTER THE OFFERING 15,116,667 shares (2) USE OF PROCEEDS.......... To pay the cash portion of the purchase price for the Founding Companies and to repay debt assumed in the Combinations. See "Use of Proceeds." PROPOSED NEW YORK STOCK EX- CHANGE SYMBOL........... VAC - ----------- (1) Does not include up to 871,250 shares of Common Stock subject to over-allotment options granted to the Underwriters. See "Underwriting." (2) Excludes 1,814,000 shares of Common Stock reserved for issuance pursuant to the Company's 1998 Long-Term Incentive Plan, of which options to purchase 1,595,000 shares will be granted by the Company concurrently with the Offering at an exercise price equal to the initial public offering price per share. 6 SUMMARY PRO FORMA COMBINED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) VPI will acquire the Founding Companies simultaneously with and as a condition to the consummation of the Offering. For financial statement presentation purposes, however, Hotel Corporation of the Pacific, Inc., known primarily by its trade name, Aston Hotels & Resorts ("Aston Hotels & Resorts"), one of the Founding Companies, has been designated as the "accounting acquiror." The following summary unaudited pro forma combined financial data present certain data for the Company as adjusted for: (i) the effects of the Combinations on a historical basis; (ii) the effects of certain pro forma adjustments to the historical financial statements; and (iii) the consummation of the Offering and the application of the net proceeds therefrom. See the Unaudited Pro Forma Combined Financial Statements and the notes thereto included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, 1997 ------------------ PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA (1): Revenues: Property rental fees ............................................... $ 34,145 Service fees ....................................................... 12,856 Other .............................................................. 13,842 ----------- 60,843 Operating expenses (2) .............................................. 30,438 ----------- Gross profit ........................................................ 30,405 General and administrative expenses (2) ............................. 13,136 Depreciation and amortization (3) ................................... 3,485 ----------- Income from operations .............................................. 13,784 Interest and other income, net ...................................... 246 ----------- Income before income taxes .......................................... 14,030 Provision for income taxes .......................................... 6,541 ----------- Net income .......................................................... $ 7,489 =========== Net income per share ................................................ $ 0.50 =========== Shares used in computing pro forma net income per share (4) ......... 15,116,667
DECEMBER 31, 1997 ------------------------------ PRO FORMA AS COMBINED (5) ADJUSTED (6) -------------- ------------- BALANCE SHEET DATA: Working capital surplus deficit (7) ....................... $ (60,567) $ 1,254 Total assets (8) .................... 115,504 115,504 Long-term debt ...................... 219 219 Stockholders' equity ................ 18,394 80,215
- ----------- (1) The pro forma combined statement of operations data assume that the Combinations and the Offering were consummated on January 1, 1997 and are not necessarily indicative of the results the Company would have obtained had these events actually then occurred or of the Company's future results. During the period presented above, the Founding Companies were not under common control or management and, therefore, the data presented may not be comparable to or indicative of post-combination results to be achieved by the Company. The pro forma combined statement of operations data are based on preliminary estimates, available information and certain assumptions that management deems appropriate and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. Following the Combinations, the Company expects to realize certain savings as a result of (i) volume purchasing and national contracts for telecommunications, credit card fees, advertising, printing, housekeeping supplies and other operating expenses and (ii) consolidation of insurance, employee benefits and other general and administrative expenses. The Company cannot quantify these savings accurately at this time. It is anticipated that these savings will be substantially offset by the costs of being a publicly traded company and the incremental costs related to the Company's new management team. However, these costs, like the savings that they offset, cannot be quantified accurately. Neither these anticipated savings nor these anticipated costs have been included in the pro forma combined financial information of the Company. 7 (2) The pro forma combined statement of operations data include pro forma reductions in salary, bonuses and benefits to the owners and certain key employees of the Founding Companies to which they have agreed prospectively (the "Compensation Differential") and excludes the effects of the exclusion of certain non-operating assets and the assumption or retirement of certain liabilities that will be retained by certain stockholders of the Founding Companies. For the year ended December 31, 1997, the Compensation Differential was approximately $2.6 million. (3) Reflects amortization of the goodwill (which is not deductible for tax purposes) to be recorded as a result of the Combinations over a 40-year period for each of the Founding Companies other than First Resort, which will be amortized over a 15-year period, and computed on the basis described in the Notes to the Unaudited Pro Forma Combined Financial Statements. (4) Includes (i) 6,173,703 shares to be issued to owners of the Founding Companies; (ii) 3,134,630 shares issued to the management and founders of VPI; and (iii) 5,808,334 shares representing the number of shares sold in the Offering necessary to pay the cash portion of the consideration for the Combinations, to repay debt assumed in the Combinations and to pay the estimated underwriting discount and other Offering expenses. Excludes options to purchase 1,595,000 shares to be issued concurrently with the Offering at an exercise price equal to the initial public offering price. See "Certain Transactions." (5) The pro forma combined balance sheet data assume that the Combinations were consummated on December 31, 1997. The pro forma combined balance sheet data are based upon preliminary estimates, available information and certain assumptions that management deems appropriate and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. (6) Adjusted for the sale of 5,808,334 shares of Common Stock offered hereby (less estimated underwriting discount and offering expenses) and the application of the net proceeds therefrom. (7) Includes the cash portion of the consideration to be paid to the Founding Companies and the amount of debt to be repaid from the net proceeds of the Offering of $61.8 million and approximately $4.4 million representing certain working capital adjustments from certain stockholders of the Founding Companies in connection with the Combinations. (8) Reflects (i) the creation of approximately $72.0 million of goodwill in connection with the Combinations and (ii) a reduction of net assets of approximately $10.7 million, including certain non-operating assets and the assumption or retirement of certain liabilities that will be excluded from the Combinations and retained by certain stockholders of the Founding Companies. 8 SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA (IN THOUSANDS) The following table presents summary data for each of the Founding Companies (see "The Company" for the complete names of each Founding Company) on a historical basis for the periods indicated. Gross profit and income from operations for the Founding Companies for each of the years in the three year period ended December 31, 1997 do not include adjustments for the Compensation Differential. See Compensation Differential Table below.
YEARS ENDED DECEMBER 31, --------------------------------------- 1995 1996 1997 ---------- ------------- ---------- BEACH AND ISLAND RESORTS Aston Hotels & Resorts (Hawaii) Revenues ........................................... $19,048 $19,460 $19,554 Gross profit ....................................... 8,498 9,059 10,646 Income from operations ............................. 3,064 3,485 5,171 Maui Condominium and Home (Hawaii) Revenues ........................................... $ 910 $1,222 $ 1,422 Gross profit ....................................... 560 864 1,056 Income from operations ............................. 29 45 77 Brindley & Brindley (Outer Banks, NC) Revenues ........................................... $ 2,443 $2,950 $ 4,021 Gross profit ....................................... 138 342 993 Income (loss) from operations ...................... (322) 90 511 Coastal Resorts (Bethany Beach, DE) Revenues ........................................... $ 1,902 $1,917 $ 3,615 Gross profit ....................................... 865 1,080 1,827 Income from operations ............................. 450 603 1,183 The Maury People (Nantucket, MA) Revenues ........................................... $ 926 $ 988 $ 1,183 Gross profit ....................................... 758 801 972 Income from operations ............................. 362 135 290 Priscilla Murphy Realty (Sanibel and Captiva Islands, FL) Revenues ........................................... $ 4,316 $4,721 $ 4,740 Gross profit ....................................... 2,997 3,407 3,556 Income from operations ............................. 740 1,282 1,690 Trupp-Hodnett Enterprises (St. Simons Island, GA) Revenues ........................................... $ 3,377 $3,431 $ 4,061 Gross profit ....................................... 1,742 1,779 2,223 Income from operations ............................. 45 126 199 MOUNTAIN RESORTS Collection of Fine Properties (Breckenridge, CO) Revenues ........................................... $ 3,500 $4,141 $ 4,303 Gross profit ....................................... 879 1,364 1,473 Income (loss) from operations ...................... (44) 416 580 Houston and O'Leary (Aspen, CO) Revenues ........................................... $ 837 $ 829 $ 1,596 Gross profit ....................................... 387 220 1,102 Income (loss) from operations ...................... 97 (7) 780
9
YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1996 1997 ------------ --------- --------- Jupiter Property Management (Park City, UT) Revenues ..................................... $1,406 $3,143 $3,986 Gross profit (loss) .......................... (190) 892 1,385 Income (loss) from operations ................ (569) (435) (449) Resort Property Management (Park City, UT)(1) Revenues ..................................... $1,355 $1,630 $2,295 Gross profit ................................. 561 596 735 Income (loss) from operations ................ (3) 20 108 Telluride Resort Accommodations (Telluride, CO) Revenues ..................................... $4,621 $4,750 $4,313 Gross profit ................................. 2,436 1,334 1,276 Income from operations ....................... 528 340 246 Whistler Chalets (Whister, BC, Canada) Revenues ..................................... $2,925 $2,122 $2,098 Gross profit ................................. 1,083 652 670 Income from operations ....................... 40 227 238 SOFTWARE SALES AND SERVICES First Resort (Aspen, CO) Revenues ..................................... $2,207 $2,462 $2,864 Gross profit ................................. 780 986 1,160 Income from operations ....................... 377 467 743
COMPENSATION DIFFERENTIAL
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1996 1997 --------- ---------- --------- Aston Hotels & Resorts .................. $ 380 $ 282 $ 282 Maui Condominium & Home ................. 240 245 284 Brindley & Brindley ..................... 39 37 69 Coastal Resorts ......................... -- -- -- The Maury People ........................ 30 129 142 Priscilla Murphy Realty ................. 250 320 31 Trupp-Hodnett Enterprises ............... 954 850 1,143 Collection of Fine Properties ........... 64 74 94 Houston and O'Leary ..................... 160 178 58 Jupiter Property Management ............. 140 294 298 Resort Property Management(1) ........... 46 149 186 Telluride Resort Accommodations ......... 30 -- -- Whistler Chalets ........................ 33 34 35 First Resort ............................ 76 (53) (42) ------ ------ ------ $2,442 $2,539 $2,580 ====== ====== ======
- ----------- (1) Fiscal years presented are for the periods ending September 30, 1995, 1996 and 1997. 10 RISK FACTORS An investment in the shares of Common Stock offered by this Prospectus involves a high degree of risk. In addition to the other information in this Prospectus, the following risk factors should be considered carefully in evaluating an investment in the Common Stock. This Prospectus contains certain forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain of the factors set forth in the following risk factors and elsewhere in this Prospectus. ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION VPI was founded in September 1997 but has conducted no operations and generated no revenues to date. VPI has entered into agreements to acquire the Founding Companies simultaneously with and as a condition to the closing of the Offering. Prior to the closing of the Offering, each of the Founding Companies has operated as separate independent entities. Currently, the Company has no centralized financial reporting system and will initially rely on the existing reporting systems of the Founding Companies. The pro forma combined financial statements of the Founding Companies cover periods when the Founding Companies and VPI were not under common control or management and, therefore, may not be indicative of the Company's future financial or operating results. The Company's senior management group has been assembled only recently, and there can be no assurance that the management group will be able to integrate and manage effectively the combined entity or effectively implement the Company's operating and growth strategies. The inability of the Company to integrate successfully the Founding Companies would have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Business Strategy" and "-- Growth Strategy." The Founding Companies offer a variety of different services to property owners and vacationers, use different sales and marketing techniques to attract new customers, utilize different fee structures and target different customer segments. In addition, almost all of the Founding Companies operate in different geographic markets with varying levels of competition, development plans and local market dynamics. These differences increase the risk inherent in successfully completing the integration of the Founding Companies. RISKS ASSOCIATED WITH THE VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY; GENERAL ECONOMIC CONDITIONS The Company's business, financial condition and results of operations will be dependent upon various factors affecting the vacation rental and property management industry. Adverse factors such as a reduction in demand for vacation properties, particularly for beach and mountain resort properties, changes in travel and vacation patterns, changes in governmental regulations or the tax treatment of second homes and an oversupply of vacation properties could have a material adverse effect on the Company's business, financial condition and results of operations. Any downturn in the leisure travel and tourism industry resulting from factors such as gasoline or airfare price increases, general economic activities and inflation or deflation also could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, all of the Company's rental properties are located in destination resort communities which are attractive to vacationers primarily for their outdoor recreational opportunities. As a result, adverse weather conditions or natural disasters, such as hurricanes, could have a material adverse effect on the Company's business, financial condition and results of operations. SEASONALITY AND QUARTERLY FLUCTUATIONS The business of the Company is highly seasonal. The results of operations of each of the Founding Companies have been subject to quarterly fluctuations caused primarily by the seasonal variations in the vacation rental and property management industry, with peak seasons dependent on whether the resort is primarily a summer or winter destination. During 1997, the Company derived approximately 43% of 11 its gross profit in the first quarter and 23% of its gross profit in the third quarter. Although the seasonality of the Company's revenues and earnings may be partially mitigated by the geographic diversity of the Founding Companies and companies that may be acquired in the future, there is likely to continue to be a significant seasonal factor with respect to the Company's revenues and earnings. The Company's quarterly results of operations may also be subject to fluctuations as a result of the timing and cost of acquisitions, the timing of real estate sales, changes in relationships with travel providers, extreme weather conditions or other factors affecting leisure travel and the vacation rental and property management industry. Unexpected variations in quarterly results could also adversely affect the price of the Common Stock which in turn could adversely effect the Company's proposed acquisition strategy. See "Management's Discussion of Financial Condition and Results of Operations." DEPENDENCE ON THIRD PARTIES The properties managed by the Company are generally located in destination resorts in which the development of new homes and condominiums, as well as resort amenities such as golf courses and chair lifts, is dependent upon third parties. As a result, the failure of such third parties to continue such development or invest in resort facilities and amenities could have a material adverse effect on the rental value of the Company's properties and, consequently, on the Company's business, financial condition and results of operations. The Company also is dependent on travel agents, package tour providers and wholesalers for a significant portion of its revenues. The Company estimates that approximately 46% of its combined revenues for 1997 were derived from sales made through or to travel agents, package tour providers and wholesalers. The failure of travel agents, package tour and wholesalers providers to continue to recommend or package the Company's vacation properties could have a material adverse effect on the Company's business, financial condition and results of operations. FACTORS AFFECTING INTERNAL GROWTH The Founding Companies have experienced revenue and earnings growth on a pro forma combined basis over the past few years. There can be no assurance that the Company will continue to experience internal growth comparable to these levels, if at all. Factors affecting the ability of the Company to continue to experience internal growth include, but are not limited to, the ability to maintain existing relationships with property owners, expand the number of properties under management and cross-sell among the Founding Companies, as well as continued demand for such rentals. See "Business -- Business Strategy" and "-- Growth Strategy." RISKS OF GEOGRAPHIC CONCENTRATION OF OPERATIONS Two of the Founding Companies manage properties at Hawaiian beach resorts, and five of the Founding Companies manage properties at mountain resorts in Colorado and Utah. For 1997, the Company derived approximately 35% of its combined revenues from such Founding Companies located in Hawaii and approximately 27% of its combined revenues from such Founding Companies located in Colorado and Utah. Adverse events or conditions which affect those areas in particular, such as economic recession, changes in regional travel patterns, extreme weather conditions or natural disasters, would have a more significant adverse effect on the operations of the Company, than if the Company's operations were more geographically diverse. RISKS ASSOCIATED WITH ACQUISITIONS The Company intends to expand the markets it serves and increase the number of properties it manages, in part through the acquisition of additional vacation rental and property management companies. There can be no assurance that the Company will be able to identify, acquire or profitably manage additional businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems. Increased competition for acquisition candidates may develop, in which event there may be fewer acquisition opportunities available to the 12 Company, as well as higher acquisition prices. Further, acquisitions involve a number of special risks, including the failure of acquired companies to achieve anticipated results, diversion of management's attention, failure to retain key personnel, risks associated with unanticipated events or liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Growth Strategy." The Company intends to use shares of Common Stock to finance a substantial portion of the consideration for future acquisitions. In the event that the Common Stock does not maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept shares of Common Stock as part of the consideration for the sale of their businesses, the Company may be required to utilize more of its cash resources, if available, in order to implement its acquisition strategy. If the Company has insufficient cash resources, its growth could be limited unless it is able to obtain additional capital through debt or equity financings. Although the Company intends to obtain a revolving credit facility, there can be no assurance that the Company will be able to obtain this credit facility, or other financing it may need, on terms it deems acceptable. If the Company is unable to obtain financing sufficient for all of its desired acquisitions, it may be unable to implement fully its acquisition strategy. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." MANAGEMENT OF GROWTH The Company expects to grow internally and through acquisitions. The Company expects to expend significant time and effort in expanding existing businesses and in identifying, completing and integrating acquisitions. There can be no assurance that the Company's systems, procedures and controls will be adequate to support the Company's operations as they expand. Any future growth also will impose significant added responsibilities on members of senior management, including the need to identify, recruit and integrate new managers and executives. There can be no assurance that such additional management will be identified and retained by the Company. To the extent that the Company is unable to manage its growth efficiently and effectively, or is unable to attract and retain additional qualified management, the Company's business, financial condition and results of operations could be materially adversely effected. See "Business -- Business Strategy" and "Management." RELIANCE ON KEY PERSONNEL The Company's operations are dependent on the efforts and relationships of David C. Sullivan, its Chairman and Chief Executive Officer, the other executive officers of the Company and the senior management of the Founding Companies. Furthermore, the Company will likely be dependent on the senior management of any businesses acquired in the future. If any of these persons becomes unable to continue in his or her role with the Company, or if the Company is unable to attract and retain other qualified employees, the Company's business, financial condition and results of operations could be materially adversely effected. Although the Company or an individual Founding Company intends to enter into employment agreements with and provide incentives intended to retain key personnel, there can be no assurance that any individual will continue in his or her present capacity with the Company or such Founding Company for any particular period of time. See "Management." SHORT TERM RENTAL AND PROPERTY MANAGEMENT CONTRACTS The Company provides its rental and property management services to property owners pursuant to management contracts which generally have one year terms. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. In addition, although most of the Company's contracts are exclusives, in certain geographic markets, industry standards dictate that rental services be provided on a non-exclusive basis. Non-renewal of a significant number of management contracts or the inability of the Company to attract additional property owners would have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Services Offered to Condominium and Home Owners." 13 RISKS ASSOCIATED WITH HOMEOWNERS' ASSOCIATION MANAGEMENT CONTRACTS The Company currently provides homeowners' association management services at numerous condominium developments pursuant to contracts with the homeowners' association present at such developments. The Company frequently provides rental management services for a significant percentage of the condominiums within such developments. Providing management services for homeowners' associations frequently enables the Company to manage and control the front desk operations, laundry facilities and other related services of the condominium developments. Controlling these services often gives the Company a competitive advantage over other vacation rental and property management companies in retaining the condominiums it currently manages and in attracting new property owners. There can be no assurance that a homeowners' association will not terminate its management agreement with the Company. Termination of a management agreement by a homeowners' association could result in the Company losing the control or management of the front desk and related services, thereby eliminating its competitive advantage and also possibly causing a reduction in the number of properties under management and an increase in the expenses required to retain and maintain the condominiums it manages at that site. Any such termination could have a material adverse effect on the Company's business, financial condition and results of operations. COMPETITION The vacation rental and property management industry is highly competitive and has low barriers to entry. The industry has two distinct customer groups: vacation property renters and vacation property owners. The Company competes for vacationers and property owners primarily with local vacation rental and property management companies located in the Company's markets. Some of these competitors are affiliated with the owners or operators of resorts in which such competitor provides its services. Certain of these competitors may have lower cost structures and may be able to provide their services at lower rates. The Company also competes for vacationers with large hotel and resort companies. Many of these competitors are large companies with greater financial resources than the Company, enabling them to finance acquisition and development opportunities, pay higher prices for the same opportunities or develop and support their own operations. In addition, many of these companies can offer vacationers services not provided by vacation rental and property management companies, and they may have greater name recognition among vacationers. If such companies chose to compete in the vacation rental and property management industry, such competition could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Competition." CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS Following the completion of the Combinations and the Offering, the executive officers and directors of the Company, the founders of VPI and the former stockholders of the Founding Companies and entities affiliated with them will beneficially own approximately 62% of the outstanding shares of Common Stock (approximately 58% if the Underwriters' over-allotment option is exercised in full). These persons, if acting in concert, will be able to exercise control over the Company's affairs, to elect the entire Board of Directors and to control the disposition of any matter submitted to a vote of stockholders. See "Principal Stockholders" and "Description of Capital Stock -- Common Stock and Restricted Common Stock." PORTION OF REVENUES DERIVED FROM REAL ESTATE SALES Approximately 11% of the Company's revenues for 1997 on a combined basis were derived from net real estate brokerage commissions. Any factors which adversely affect real estate sales such as a downturn in general economic conditions or changes in interest rates, the tax treatment of second homes or property values could have a material adverse effect on the Company's business, financial condition and results of operations. GOVERNMENT REGULATION OF VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY The Company's operations are subject to various federal, state and local laws and regulations, including (i) licensing requirements applicable to real estate operations, (ii) laws and regulations relating to consumer protection and (iii) local ordinances. Many states have adopted specific laws and regula- 14 tions which regulate the Company's activities, such as real estate and travel services provider license requirements; anti-fraud laws; telemarketing laws; environmental laws; and labor laws. The Company believes that it is in material compliance with all federal, state, local and foreign laws and regulations to which it is currently subject. However, no assurance can be given that the cost of qualifying under applicable regulations in all jurisdictions in which the Company desires to conduct business will not be significant or that the Company is in fact in compliance with all applicable federal, state, local and foreign laws and regulations. Any substantial changes to existing laws and regulations and/or failure to comply with applicable laws or regulations could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Governmental Regulation." POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK The market price of the Common Stock may be adversely affected by the sale, or availability for sale, of substantial amounts of Common Stock in the public market following the Offering. The 5,808,334 shares of Common Stock being sold in the Offering will be freely tradable unless acquired by affiliates of the Company. Upon the completion of the Offering, the holders of Common Stock who did not purchase shares in the Offering will own 9,308,333 shares of Common Stock, including (i) the stockholders of the Founding Companies who will receive, in the aggregate, 6,173,703 shares in connection with the Combinations and (ii) management and founders of VPI who own 3,134,630 shares. These shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, therefore, may not be sold unless registered under the Securities Act or sold pursuant to an exemption from registration, such as the exemption provided by Rule 144. Furthermore, the stockholders who will receive these shares have agreed with the Company not to sell, transfer or otherwise dispose of any of these shares for one year following the closing of the Offering. However, the stockholders who will receive these shares also have certain demand and piggyback registration rights with respect to these shares. The Company has agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock, for a period of 180 days after the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The holders of all shares outstanding prior to the Offering and the stockholders of the Founding Companies who will receive shares of Common Stock in exchange for their stock in the Founding Companies have agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock for a period of one year from the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The foregoing restrictions will not apply: (i) in the case of the Company, to options or shares of Common Stock issued pursuant to the Company's 1998 Long-Term Incentive Plan or in connection with acquisitions and (ii) in the case of all holders shares of Common Stock disposed of as bona fide gifts, subject in each case to any remaining portion of the one year or 180-day period, as applicable to any shares so issued or transferred. The Company plans to register an additional 3,000,000 shares of Common Stock under the Securities Act after completion of the Offering for use by the Company as consideration for future acquisitions. Upon such registration, these shares will generally be freely tradable after issuance, unless the resale thereof is contractually restricted or unless the holders thereof are subject to the restrictions on resale provided in Rule 145 under the Securities Act. The Company intends to contractually restrict the resale of these shares in connection with future acquisitions accounted for using the purchase method of accounting. The piggyback registration rights described above will not apply to the registration statement to be filed with respect to these 3,000,000 shares. See "Shares Eligible for Future Sale" and "Underwriting." NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public market for the Common Stock and there can be no assurance that an active trading market will develop and continue subsequent to the Offering or that the market price of the Common Stock will not decline below the initial public offering price. The initial 15 public offering price for the Common Stock will be determined by negotiation between the Company and the representatives of the Underwriters and may bear no relationship to the price at which the Common Stock will trade after the Offering. See "Underwriting" for the factors to be considered in determining the initial public offering price. After the Offering, the market price of the Common Stock may be subject to significant fluctuations in response to numerous factors, including variations in the annual or quarterly financial results of the Company or its competitors, changes by financial research analysts in their estimates of the earnings of the Company or the failure of the Company to meet such estimates, conditions in the economy in general or in the vacation rental and property management or leisure travel and tourism industries in particular, unfavorable publicity or changes in applicable laws and regulations (or judicial or administrative interpretations thereof) affecting the Company or the vacation rental and property management industry. Moreover, from time to time, the stock market experiences significant price and volume volatility that may affect the market price of the Common Stock for reasons unrelated to the Company's performance. IMMEDIATE AND SUBSTANTIAL DILUTION The purchasers of the shares of Common Stock offered hereby will experience immediate and substantial dilution in the pro forma net tangible book value of their shares of $ per share. In the event the Company issues additional Common Stock in the future, including shares issued in connection with future acquisitions, purchasers of Common Stock in the Offering may experience further dilution. See "Dilution." ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS The Board of Directors of the Company is empowered to issue preferred stock in one or more series without stockholder action. The existence of this "blank-check" preferred stock could render more difficult or discourage an attempt to obtain control of the Company by means of a tender offer, merger, proxy contest or otherwise. Certain provisions of the General Corporation Law of the State of Delaware (the "DGCL") may also discourage takeover attempts that have not been approved by the Board of Directors. The Company's By-Laws contain other provisions that may have an anti-takeover effect. See "Management -- Directors and Executive Officers" and "Description of Capital Stock." FORWARD-LOOKING STATEMENTS There are a number of statements in this Prospectus that address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such matters as the Company's strategy for internal growth and improved profitability, additional capital expenditures (including the amount and nature thereof), acquisitions of assets and businesses, industry trends and other such matters. These statements are based on certain assumptions and analyses made by the Company in light of its perception of historical trends, current business and economic conditions and expected future development as well as other factors it believes are reasonable or appropriate. However, whether actual results and developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including the risk factors discussed in this Prospectus; general economic, market or business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulations and other factors, most of which are beyond the control of the Company. Consequently, there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. 16 THE COMPANY The Company will be the first national provider of vacation condominium and home rentals at premier destination resorts throughout the United States. Through the consolidation of leading vacation rental and property management companies, the development of a national brand and marketing initiative and best practices management systems, the Company intends to offer vacationers a branded network of high quality, fully furnished, privately-owned condominium and home rentals, while offering property owners superior management services designed to enhance their rental income. Although it has conducted no operations to date, the Company has entered into agreements to acquire, simultaneously with the closing of the Offering, the Founding Companies which managed approximately 11,000 condominiums, homes and hotel rooms in eight states and Canada. The Company's primary source of revenue is property rental fees, charged as a percentage of vacationers' total rental price. Fee percentages for vacation condominiums and homes range from approximately 3% to over 40% of rental prices for the various Founding Companies depending on the type of services provided to the property owner and the type of rental unit managed. December 31, 1997, the Company generated total revenues of approximately $60.8 million which includes $34.1 million of revenues from property rental fees. The following is a brief description of each of the Founding Companies. Information presented regarding the number of rental units is as of January 31, 1998. BEACH AND ISLAND RESORTS ASTON HOTELS & RESORTS. Aston Hotels & Resorts, founded in 1967, is the largest condominium resort management company and one of the largest hotel providers in the State of Hawaii. At a total of 29 resort properties located primarily in Waikiki and on the islands of Maui, Hawaii and Kauai, Aston Hotels & Resorts manages 4,772 rental units, including over 1,500 hotel rooms. Aston Hotels and Resorts' revenue sources for 1997 were property management and service fees (84%) and other services (16%). In addition to a wide range of hotel rooms and hotel-style condominium units in Waikiki, the majority of Aston Hotels and Resorts' units are resort-based condominium rentals situated near the beach and offering a broad array of amenities, including pools, spas, tennis courts and various other outdoor activities. Aston Hotels & Resorts offers a variety of services, including homeowners' association management, housekeeping and linen services, activities referrals, general maintenance and accounting services. Aston Hotels and Resorts' revenues for 1997 were $19.6 million. MAUI CONDOMINIUM AND HOME. Maui Condominium and Home Realty, Inc. ("Maui Condominium and Home"), founded in 1988, is a leading provider of beach vacation property rentals and management services in the Kihei and Wailea beach areas on the Hawaiian island of Maui. Currently, Maui Condominium and Home manages 432 rental units at 20 different properties. Almost all of Maui Condominium and Home's units are located in resort-style complexes with swimming pools, hot tubs and convenient beach access. Maui Condominium and Home's principal revenue sources for 1997 were property rental fees (90%) and service fees (10%). Maui Condominium and Home offers a variety of services, including housekeeping services, accounting services and assistance with refurbishing. Maui Condominium and Home's revenues for 1997 were $1.4 million. BRINDLEY & BRINDLEY. Brindley & Brindley Realty and Development, Inc. and B&B On The Beach Inc. (collectively, "Brindley & Brindley"), founded in 1985, is a leading provider of beach vacation property rentals, management services and sales on the Outer Banks of North Carolina. Currently, Brindley & Brindley manages 446 rental units. Located exclusively in Corolla, North Carolina, Brindley & Brindley offers large, upscale homes well-suited for multiple or extended families. Brindley & Brindley's principal revenue sources for 1997 were property rental and service fees (90%) and net real estate brokerage commissions (10%). Brindley & Brindley offers a variety of services, including general maintenance, housekeeping and linen services. In addition to traditional management services, Brindley & Brindley also offers pool/spa maintenance, small appliance sales and other unique services to property owners. Brindley & Brindley's revenues for 1997 were $4.0 million. COASTAL RESORTS. Coastal Resorts Realty L.L.C. and Coastal Resorts Management, Inc. (collectively, "Coastal Resorts"), founded in 1982, is a leading provider of beach vacation property rentals, management services and sales in the Bethany Beach area of Delaware. Bethany Beach is a popular beach destination in the Mid-Atlantic region that offers full-scale resort facilities. Currently, Coastal Resorts manages 549 rental 17 units, including ocean side condominiums, townhome communities with resort facilities and upscale free-standing homes. Coastal Resorts' revenue sources for 1997 were property rental and service fees (35%), net real estate brokerage commissions (53%) and other (12%). Coastal Resorts offers a variety of services, including housekeeping and maintenance services, 24 hour security and concierge services. Coastal Resorts' revenues for 1997 were $3.6 million. THE MAURY PEOPLE. The Maury People, Inc. ("The Maury People"), whose predecessor was founded in 1969, is a leading provider of beach vacation property rentals and sales on the island of Nantucket off the coast of Massachusetts. Currently, The Maury People provides non-exclusive rental services for approximately 1,200 rental homes ranging from in-town residences to cottages and large, upscale ocean and harbor-front homes. The Maury People's revenue sources for 1997 were net property rental and service fees (30%) and net real estate brokerage commissions (70%). The Maury People is an exclusive affiliate of Sotheby's International Realty. The Maury People's revenues for 1997 were $1.2 million. PRISCILLA MURPHY REALTY. Priscilla Murphy Realty, Inc. and Realty Consultants Inc. (collectively, "Priscilla Murphy Realty"), founded in 1972, is a leading provider of beach vacation property rentals, management services and sales on the Florida islands of Sanibel and Captiva. Currently, Priscilla Murphy Realty manages 902 rental units. Most of Priscilla Murphy Realty's properties are condominium units designed to accommodate a wide range of budgets, from luxury, oceanfront three- and four-bedroom units to more modest single-bedroom units located a short distance from the beach. Priscilla Murphy Realty's revenue sources for 1997 were property rental and service fees (69%) and net real estate brokerage commissions (31%). Priscilla Murphy Realty offers a variety of services, including general maintenance and subcontracted housekeeping and linen services. Priscilla Murphy Realty's revenues for 1997 were $4.7 million. TRUPP-HODNETT ENTERPRISES. Trupp-Hodnett Enterprises, Inc. and THE Management Company (collectively, "Trupp-Hodnett Enterprises"), founded in 1987, is the leading provider of beach vacation property rentals, management services and sales on the island of St. Simons, off the coast of Georgia. St. Simon's Island is a relatively uncommercial resort community located midway between Savannah, Georgia and Jacksonville, Florida and connected to the mainland by a causeway. Currently, Trupp-Hodnett Enterprises manages 435 rental units, ranging from moderately priced hotel rooms, homes and cottages in a variety of island locations to spacious, luxurious oceanfront condominium units with on-site management and access to swimming pools, spas, tennis courts and golf courses. Trupp-Hodnett Enterprises' principal revenue sources for 1997 were property rental and service fees (78%) and net real estate brokerage commissions (22%). Trupp-Hodnett Enterprises offers a variety of services, including homeowner's association management, guest amenities and general maintenance and housekeeping. Trupp-Hodnett Enterprises' revenues for 1997 were $4.1 million. MOUNTAIN RESORTS COLLECTION OF FINE PROPERTIES. Collection of Fine Properties, Inc. and Ten Mile Holdings, Ltd. (collectively, "Collection of Fine Properties"), founded in 1985, is a leading provider of vacation property rental and management services in the mountain resort town of Breckenridge, Colorado. Currently, Collection of Fine Properties manages 472 rental units. Most of the units are situated in condominium complexes with front desks and spa facilities and many of them are situated directly on the slopes with "ski-in ski-out" access. Collection of Fine Properties' revenue sources for 1997 were property rental and service fees (87%) and other services (13%). Collection of Fine Properties offers a variety of services, including association management, general maintenance, housekeeping and linen services and ski equipment rentals. Collection of Fine Properties' revenues for 1997 were $4.3 million. HOUSTON AND O'LEARY. Houston and O'Leary Company ("Houston and O'Leary"), founded in 1986, is a leading provider of luxury vacation property rentals and sales in the mountain resort town of Aspen, Colorado. Currently, Houston and O'Leary provides non-exclusive rental services for 127 rental units. Houston and O'Leary's rental and sale properties consist primarily of unique, free-standing houses, ranging from smaller two-bedroom cottages located in Aspen proper to 10,000-plus square foot ranch-style houses overlooking Aspen. Houston and O'Leary's principal revenue sources for 1997 were real 18 estate brokerage commissions (73%), property rental fees (19%) and other services (8%). Houston and O'Leary provides a concierge service which arranges for a variety of services, including housekeeping and linen services, activities referrals and general maintenance. Houston and O'Leary's revenues for 1997 were $1.6 million. JUPITER PROPERTY MANAGEMENT. Jupiter Property Management at Park City, Inc. ("Jupiter Property Management"), founded in 1976, is a leading provider of vacation property rentals and management services in the Park City, Utah mountain resort area. Park City will be the host of many of the premier events of the 2002 Olympic Winter Games. Currently, Jupiter Property Management manages 306 rental units. While the majority of Jupiter Property Management's units are condominiums situated in Park City proper, the company also offers a wide selection of condominium units and luxury, free-standing homes in the upscale Deer Valley resort area, adjacent to Park City. Jupiter Property Management's revenue sources for 1997 were property rental and service fees (100%). Jupiter Property Management offers a variety of services, including homeowners' association management, housekeeping and linen services and spa maintenance. Jupiter Property Management's revenues for 1997 were $4.0 million. RESORT PROPERTY MANAGEMENT. Resort Property Management, Inc. ("Resort Property Management"), founded in 1978, is a leading provider of vacation property rentals and management services in the Park City, Utah mountain resort area. Currently, Resort Property Management manages 326 rental units. Resort Property Management offers a variety of free-standing homes and condominium units at various resorts, including Deer Valley, throughout the Park City region. A majority of Resort Property Management's condominium units are located in the town of Park City and range from luxury, three-bedroom units in the historic town center to smaller, more affordable units in older condominium complexes. Resort Property Management's revenue sources for 1997 were property rental and service fees (100%). Resort Property Management offers a variety of services, including general maintenance, housekeeping and linen services and complimentary firewood. Resort Property Management's revenues for 1997 were $2.3 million. TELLURIDE RESORT ACCOMMODATIONS. Telluride Resort Accommodations, Inc. ("Telluride Resort Accommodations"), founded in 1985, is a leading provider of vacation property rentals and property management services in the Telluride, Colorado mountain resort area. Currently, Telluride Resort Accommodations manages 447 rental units. Telluride Resort Accommodations' property offerings range from smaller, one-bedroom units in town to large, luxury condominiums and free-standing homes in Telluride's new Mountain Village. Telluride Resort Accommodations' revenue sources for 1997 were property rental and service fees (100%). Telluride Resort Accommodations offers a variety of services, including general maintenance and housekeeping and linen services. Telluride Resort Accommodation's revenues for 1997 were $4.3 million. WHISTLER CHALETS. Whistler Chalets Ltd. ("Whistler Chalets"), founded in 1986, is a leading provider of vacation property rentals and management services in the mountain resort village of Whistler, in British Columbia, Canada. Currently, Whistler Chalets manages 444 rental units. Whistler Chalets offers a variety of rental properties including condominium lodges, luxury townhomes and chalets with village, slopeside, golf course and lakefront locations. Whistler Chalets' revenue sources for 1997 were property rental and service fees (95%) and other (5%). Whistler Chalets offers a variety of services, including housekeeping and linen services, general maintenance, accounting services and payment processing. Whistler Chalets' revenues for 1997 were $2.1 million. SOFTWARE SALES AND SERVICES FIRST RESORT. First Resort Software, Inc. ("First Resort"), founded in 1985, is the leading provider of software services to vacation rental and property management companies. First Resort software allows vacation rental and property management companies to computerize and link the three key areas of the vacation rental and property management business: reservations, rental management and owner accounting. First Resort also offers additional modules and interfaces, including a work order generator, activities management system, credit card interface and world wide web enabled reservations. Most purchasers of First Resort software also enter into annual software service contracts. Currently, First Resort has more than 650 clients. All First Resort software is Year 2000 compliant. First Resort's revenue sources for 1997 were software sales (46%), software service (49%) and other (5%). First Resort's revenues for 1997 were $2.9 million. 19 THE COMBINATIONS The aggregate purchase consideration being paid by VPI to acquire the Founding Companies consists of approximately $61.8 million in cash and retirement of debt, 6,173,703 shares of Common Stock, and the assumption of $219,000 in outstanding indebtedness of the Founding Companies. The closing of each Combination is subject to customary conditions. These conditions include, among others, the accuracy on the closing date of the Combinations of the representations and warranties made by the Founding Companies, their principal stockholders and by the Company; the performance of each of their respective covenants included in the agreements relating to the Combinations; and the absence of any material adverse change in the business, financial condition or results of operations of each Founding Company. No assurance can be given that the conditions to the closing of all the Combinations will be satisfied or waived or that each Combination will close. See "Certain Transactions." The Company's executive offices are located at 1355-B Lynnfield Road, Suite 245, Memphis, TN 38119, and its telephone number is (901) 818-5445. 20 USE OF PROCEEDS The net proceeds to the Company from the sale of the 5,808,334 shares of Common Stock offered hereby (after deducting underwriting discounts and commissions and estimated offering expenses), are estimated to be approximately $ million ($ million if the Underwriters' over-allotment option is exercised in full). Of the net proceeds, $61.8 million will be used to pay the cash portion of the purchase price for the Founding Companies and to repay debt assumed in the Combinations. Approximately $ million will be paid directly or indirectly to former stockholders of the Founding Companies who will become officers, directors, key employees or holders of more than 5% of the Common Stock of the Company. See "Certain Transactions -- Organization of the Company." If the Underwriters' over-allotment option is exercised in full, approximately $ million of remaining net proceeds will be used for working capital and other general corporate purposes, which are expected to include future acquisitions. The Company has reviewed various strategic acquisition opportunities and has held preliminary discussions with several of such acquisition candidates. The Company currently has no agreements to effect any acquisitions at this time. See "Certain Transactions -- Other Transactions." Pending such uses, the net proceeds will be invested in short-term, interest-bearing, investment grade securities. The Company intends to finance its acquisitions through internally generated cash flow, borrowing from its credit facility and in certain instances through the issuance of Common Stock. The Company intends to obtain a commitment for a revolving credit facility, under which capital will be available to pursue acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." DIVIDEND POLICY The Company intends to retain all of its earnings, if any, to finance the expansion of its business and for general corporate purposes, including future acquisitions, and does not anticipate paying any cash dividends on its Common Stock for the foreseeable future. In addition, it is expected that the Company's credit facility will include restrictions on the ability of the Company to pay dividends without the consent of the lender. 21 CAPITALIZATION The following table sets forth the short-term debt and current maturities of long-term obligations and the capitalization of the Company at December 31, 1997 (i) on a pro forma basis to give effect to the Combinations and (ii) as further adjusted to give effect to the Offering and the application of the estimated net proceeds therefrom. See "Use of Proceeds." This table should be read in conjunction with the Unaudited Pro Forma Combined Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus.
DECEMBER 31, 1997 ------------------------------ PRO FORMA (1) AS ADJUSTED --------------- ------------ (IN THOUSANDS) Short-term debt, including current maturities of long-term obliga- tions ............................................................ $ -- $ -- ======= ======= Long-term obligations, less current maturities .................... $ 219 $ 219 Stockholders' equity: Preferred Stock: $0.01 par, 10,000,000 shares authorized; none is- sued or outstanding ............................................ -- -- Common Stock: $0.01 par, 50,000,000 shares authorized; 9,308,333 shares outstanding, pro forma; and 15,116,667 shares outstand- ing, pro forma as adjusted (2) ................................. 93 151 Additional paid-in capital ........................................ 13,616 75,379 Retained earnings ................................................. 4,685 4,685 ------- ------- Total stockholders' equity ..................................... 18,394 80,215 ------- ------- Total capitalization .......................................... $18,613 $80,434 ======= =======
- ---------- (1) Combines the respective accounts of VPI and the Founding Companies at December 31, 1997 and gives effect to the reclassification of the Founding Companies' common stock as additional paid-in capital. (2) Includes 3,134,630 shares of Restricted Common Stock, including 484,202 shares issued to management and an aggregate of 2,650,428 shares issued to Alpine Consolidated II, LLC and Capstone Partners, LLC and certain other stockholders. See "Description of Capital Stock -- Common Stock and Restricted Common Stock." Excludes 1,595,000 shares of Common Stock subject to options to be granted concurrently with the Offering at an exercise price equal to the initial public offering price. See "Management -- 1998 Long-Term Incentive Plan." 22 DILUTION The deficit in pro forma net tangible book value of the Company as of December 31, 1997 was approximately $53.6 million, or approximately $(5.76) per share of Common Stock. The pro forma net tangible book value per share represents the Company's pro forma total tangible assets less its total liabilities, divided by the number of shares of Common Stock to be outstanding after giving effect to the Combinations. After giving effect to the sale of the 5,808,334 shares of Common Stock offered hereby, and after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, the Company's pro forma net tangible book value at December 31, 1997 would have been approximately $ , or approximately $ per share, based on an assumed initial public offering price of $ per share. This represents an immediate increase in pro forma net tangible book value of approximately $ per share to existing stockholders and an immediate dilution of approximately $ per share to new investors purchasing the shares in the Offering. The following table illustrates this pro forma dilution: Assumed initial public offering price per share ........................ $ ------- Pro forma deficit in net tangible book value per share before the Offering ............................................................ $(5.76) Increase in pro forma net tangible book value per share attributable to new investors .................................................... ------ ------- Pro forma net tangible book value per share after the Offering ......... Dilution in net tangible book value per share to new investors ......... $ =======
The following table sets forth, on a pro forma combined basis to give effect to the Combinations as of December 31, 1997, the number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid by existing stockholders and the new investors purchasing shares of Common Stock from the Company in the Offering:
SHARES PURCHASED AVERAGE ------------------------ TOTAL PRICE NUMBER PERCENT CONSIDERATION (1) PER SHARE ------------ --------- ------------------ ---------- Existing Shareholders ......... 9,308,333 61.6% New Investors ................. 5,808,334 38.4 --------- ----- Total ......................... 15,116,667 100.0% ========== =====
- ---------- (1) Total consideration paid by existing stockholders represents the combined stockholders' equity, including the stockholders' equity of the Founding Companies, before the Offering, adjusted to reflect: (i) the payment of $61.8 million in cash to the stockholders of the Founding Companies as part of the consideration for the Combinations and to repay debt assumed in the Combinations; and (ii) the transfer of certain non-operating assets to and the assumption of or retirement of certain liabilities of certain stockholders of the Founding Companies in the net amount of approximately $10.7 million in connection with the Combinations; See "Use of Proceeds" and "Capitalization." 23 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) VPI will consummate the Combinations with the Founding Companies simultaneously with and as a condition to the consummation of the Offering. For financial statement presentation purposes, however, Aston Hotels & Resorts, one of the Founding Companies, has been designated as the "accounting acquiror." The following selected historical financial data of Aston Hotels & Resorts as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1995, 1996 and 1997 have been derived from the audited financial statements of Aston Hotels & Resorts, included elsewhere in this Prospectus. The following selected historical financial data for Aston Hotels & Resorts as of December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993 and 1994 have been derived from unaudited financial statements of Aston Hotels & Resorts, which have been prepared on the same basis as the audited financial statements and, in the opinion of Aston Hotels & Resorts, reflect all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of such data. The selected unaudited pro forma combined financial data present data for the Company, adjusted for (i) the effects of the Combinations on a historical basis; (ii) the effects of certain pro forma adjustments to the historical financial statements described below; and (iii) the consummation of the Offering and the application of the net proceeds therefrom. See the Unaudited Pro Forma Combined Financial Statements and the Notes thereto and the historical Financial Statements of Aston Hotels & Resorts and certain of the Founding Companies and the Notes thereto included elsewhere in the Prospectus.
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1993 1994 1995 1996 1997 ---------- ---------- ---------- ---------- ---------- STATEMENT OF OPERATIONS DATA: ASTON HOTELS & RESORTS Revenues .................................... $15,575 $20,421 $19,048 $19,460 $19,554 Operating expenses .......................... 9,924 12,406 10,550 10,401 8,908 ------- ------- ------- ------- ------- Gross profit ................................ 5,651 8,015 8,498 9,059 10,646 General and administrative expenses ......... 3,651 5,444 5,434 5,574 5,475 ------- ------- ------- ------- ------- Income from operations ...................... 2,000 2,571 3,064 3,485 5,171 Interest expense, net ....................... 93 246 771 342 86 ------- ------- ------- ------- ------- Income from continuing operations ........... $ 1,907 $ 2,325 $ 2,293 $ 3,143 $ 5,085 ======= ======= ======= ======= =======
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA (1): Revenue: Property rental fees .......................................... $ 34,145 Service fees .................................................. 12,856 Other ......................................................... 13,842 ----------- 60,843 Operating expenses (2) .......................................... 30,438 ----------- Gross profit .................................................... 30,405 General and administrative expenses (2) ......................... 13,136 Depreciation and amortization (3) ............................... 3,485 ----------- Income from operations .......................................... 13,784 Interest and other income, net .................................. 246 ----------- Income before income taxes ...................................... 14,030 Provision for income taxes ...................................... 6,541 ----------- Net income ...................................................... $ 7,489 =========== Net income per share ............................................ $ 0.50 =========== Shares used in computing pro forma income per share (4) ......... 15,116,667
24
ASTON HOTELS & RESORTS COMBINED COMPANIES DECEMBER 31, DECEMBER 31, 1997 ---------------------------------------------------------------- -------------------------------- 1993 1994 1995 1996 1997 PRO FORMA (5) AS ADJUSTED (6) ------------ ------------ ------------ ------------ ------------ --------------- ---------------- BALANCE SHEET DATA: Working capital surplus (deficit) (7) ............... $ (1,248) $ (3,919) $ (3,581) $ (1,933) $ (4,588) $ (60,567) $ 1,254 Total assets (8) .............. 5,310 9,373 13,904 13,470 15,062 115,504 115,504 Long-term debt ................ 1,844 2,396 2,133 2,816 2,804 219 219 Stockholders' equity (deficit) (395) (395) (395) 105 105 18,394 80,215
- ---------- (1) The pro forma combined statement of operations data assume that the Combinations and the Offering were consummated on January 1, 1997 and are not necessarily indicative of the results the Company would have obtained had these events actually then occurred or of the Company's future results. During the period presented above, the Founding Companies were not under common control or management and, therefore, the data presented may not be comparable to or indicative of post-combination results to be achieved by the Company. The pro forma combined statement of operations data are based on preliminary estimates, available information and certain assumptions that management deems appropriate and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. Following the Combinations, the Company expects to realize certain savings as a result of (i) volume purchasing and national contracts for telecommunications, credit card fees, advertising, printing, housekeeping supplies and other operating expenses and (ii) consolidation of insurance, employee benefits and other general and administrative expenses. The Company cannot quantify these savings accurately at this time. It is anticipated that these savings will be substantially offset by the costs of being a publicly traded company and the incremental costs related to the Company's new management team. However, these costs, like the savings that they offset, cannot be quantified accurately. Neither these anticipated savings nor these anticipated costs have been included in the pro forma combined financial information of the Company. (2) The pro forma combined statement of operations data includes the Compensation Differential and excludes the effect of the exclusion of certain non-operating assets and the assumption or retirement of certain liabilities that will be retained by certain stockholders of the Founding Companies. For the year ended December 31, 1997, the Compensation Differential was approximately $2.6 million. (3) Reflects amortization of the goodwill (which is not deductible for tax purposes) to be recorded as a result of the Combinations over a 40-year period for each of the Founding Companies other than First Resort, which will be amortized over a 15-year period, and computed on the basis described in the Notes to the Unaudited Pro Forma Combined Financial Statements. (4) Includes (i) 6,173,703 shares to be issued to owners of the Founding Companies; (ii) 3,134,630 shares issued to the management and founders of VPI; and (iii) 5,808,334 shares representing the number of shares sold in the Offering necessary to pay the cash portion of the consideration for the Combinations, to repay debt assumed in the Combinations and to pay the estimated underwriting discount and other Offering expenses. Excludes options to purchase 1,595,000 shares to be issued concurrently with the Offering at an exercise price equal to the initial public offering price. See "Certain Transactions." (5) The pro forma combined balance sheet data assume that the Combinations were consummated on December 31, 1997. The pro forma combined balance sheet data are based upon preliminary estimates, available information and certain assumptions that management deems appropriate and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. (6) Adjusted for the sale of 5,808,334 shares of Common Stock offered hereby (less estimated underwriting discount and offering expenses) and the application of the net proceeds therefrom. (7) Includes the cash portion of the consideration to be paid to the Founding Companies and the amount of debt to be repaid from net proceeds of the Offering of $61.8 million and approximately $4.4 million representing certain working capital adjustments from certain stockholders of the Founding Companies in connection with the Combinations. (8) Reflects (i) the creation of approximately $72.0 million of goodwill in connection with the Combinations and (ii) a reduction of net assets, including certain non-operating assets and the assumption of or retirement of certain liabilities of approximately $10.7 million that will be excluded from the Combinations and retained by certain stockholders of the Founding Companies. 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read with "Selected Financial Data" and the Founding Companies' Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. INTRODUCTION The Company was established to become the first national provider of vacation condominium and home rentals in premier destination resorts throughout the United States. Through the consolidation of leading vacation rental and property management companies, the development of a national brand and marketing initiative and best practices management systems, the Company intends to offer vacationers a branded network of high quality, fully furnished, privately-owned condominium and home rentals while offering property owners superior management services designed to enhance their rental income. Upon consummation of the Offering, the Company will acquire the 14 Founding Companies which manage approximately 11,000 condominiums, homes and hotel rooms nationwide and in Canada. These condominiums and homes are located in beach and island resorts such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks, NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT; and Whistler, B.C. Six of the Founding Companies also offer real estate brokerage services. First Resort Software, one of the Founding Companies, is the leading provider of integrated management services and reservations and accounting software for the vacation rental and property management industry. The Company's revenues are derived primarily from property rental fees on vacation condominium and home rentals, and service fees from additional services provided to vacationers and property owners. The Company receives property rental fees when the properties are rented, which are generally a percentage of the rental price of the vacation condominium or home ranging from approximately 3% to over 40% based upon the type of services provided by the Company to the property owner and the type of rental unit managed. Revenues are recognized by the Company on the property rental fees received from property owners, not on the total rental price of the vacation condominium or home, and generally are recognized ratably over the rental period. On a pro forma basis for the year ended December 31, 1997, the Company recognized $34.1 million of property rental fees representing 56% of the Company's total 1997 revenues. Additional services provided to vacationers, such as reservations, housekeeping, trip cancellation insurance and long-distance telephone, are charged separately and recorded as service fees revenue by the Company. During 1997, the Company recognized $12.9 million of service fees, representing 21% of the Company's total 1997 pro forma revenues. The Company's remaining $13.8 million of 1997 pro forma revenues are derived from other sources, including management of homeowners' associations, the sale and service of vacation rental and property management software, net broker commissions on real estate sales, and a food & beverage facility. The Company does not view the sources of other revenues as a significant area of future growth, but only as a means to retain and increase the number of rental units under Company management. Operating expenses include direct compensation, telecommunications expenses, housekeeping supplies, printing, marketing and food & beverage costs. Compensation includes salary, wages, bonus and benefits for employees involved with the rental or maintenance of the rental units, housekeeping, reservations, marketing and the food & beverage facility. Telecommunications costs result primarily from the cost of toll-free numbers maintained by each of the Founding Companies, as well as the cost of telephone service provided by the Company to property owners in certain markets. General and administrative expenses consist primarily of salary, wages, bonus and benefits for owners as well as other non-operations personnel, fees for professional services, depreciation, rent and other general office expenses. The Founding Companies have operated throughout the periods presented as independent, privately-owned entities, and their results of operations reflect varying tax structures (S Corporations or C Corporations) which have influenced the historical level of owners' compensation. The owners and key employees of the Founding Companies have agreed to certain, and in some cases substantial, reductions in their salary, bonus and benefits in connection with the Combinations (the "Compensation Differential"). The Compensation Differentials for 1996 and 1997 were $2.5 million and $2.6 million, respectively, and have been reflected as pro forma adjustments in the Unaudited Pro Forma Combined Statement of Operations of the Company. 26 Following the Combinations, the Company expects to realize certain savings as a result of (i) volume purchasing and national contracts for telecommunications, credit card fees, advertising, printing, housekeeping supplies and other operating expenses and (ii) consolidation of insurance, employee benefits and other general and administrative expenses. The Company cannot quantify these savings accurately at this time. It is anticipated that these savings will be partially offset by the costs of being a publicly traded company and the incremental costs related to the Company's new management team. However, these costs, like the savings that they offset, cannot be quantified accurately. Neither these anticipated savings nor these anticipated costs have been included in the pro forma combined financial information of the Company. In July 1996, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 97 ("SAB 97") relating to business combinations immediately prior to an initial public offering. SAB 97 requires that these combinations be accounted for using the purchase method of acquisition accounting. Under the purchase method, one of the companies must be designated as the accounting acquiror. Aston Hotels & Resorts has been identified as the accounting acquiror for financial statement presentation purposes. For the remaining companies, $72.0 million, representing the excess of the fair value of the Merger consideration received over the fair value of the net assets to be acquired, will be recorded as "goodwill" on the Company's balance sheet. Goodwill will be amortized as a non-cash charge to the income statement over a 40-year period for each of the Founding Companies other than First Resort, which will be amortized over a 15-year period. The pro forma impact of this amortization expense, which is non-deductible for tax purposes, is $2.0 million per year on an after-tax basis. The amount of goodwill to be recorded and the related amortization expenses will depend in part on the actual initial public offering price of the shares of Common Stock offered hereby. See "Certain Transactions -- Organization of the Company." COMBINED FOUNDING COMPANIES Results of Operations The Founding Companies combined results of operations for the periods presented do not represent combined results of operations presented in accordance with generally accepted accounting principles, but are a summation of the revenues and operating expenses of the individual Founding Companies on a historical basis. The historical combined results of operations exclude the effect of pro forma adjustments and may not be comparable to, and may not be indicative of, the Company's post-combination results of operations because: (i) the Founding Companies were not under common control or management during the periods presented; (ii) the Company will incur incremental costs related to its new corporate management team and the costs of being a publicly traded company; and (iii) the combined data do not reflect potential benefits and cost savings the Company expects to realize when operating as a combined entity. The following table sets forth the combined results of operations of the Founding Companies on a historical basis and as a percentage of revenues for the periods indicated.
YEAR ENDED DECEMBER 31, --------------------------------------------------- 1996 1997 ------------------------ ------------------------ (DOLLARS IN THOUSANDS) Revenues ................... $53,766 100.0% $60,051 100.0% Operating expenses ......... 30,390 56.5 30,977 51.6 ------- ----- ------- ----- Gross profit ............... $23,376 43.5% $29,074 48.4% ======= ===== ======= =====
Revenues. Revenues increased $6.3 million, or 11.7%, from $53.4 million in 1996 to $60.0 million in 1997, primarily due to an increase in property rental and service fees resulting from a higher number of units under management and higher average rental rates. Operating Expenses. Operating expenses were flat year over year. As a percentage of net revenues, operating expenses decreased from 56.5% in 1996 to 51.6% in 1997, primarily due to the increase in revenues, leverage from higher average rental rates, and cost controls. 27 Liquidity and Capital Resources The Company is a holding company that conducts all of its operations through its subsidiaries (the Founding Companies). Accordingly, the primary internal source of the Company's liquidity is through the cash flows of its subsidiaries. The Company generated cash flows from operating activities of $11.5 million in 1997 primarily due to $11.2 million of net income from continuing operations. Cash flows used in investing activities by the Company was $8.9 million in 1997 and was primarily used for acquisition of assets, repayments of advances of affiliates and purchase of property and equipment. The Company's 1997 cash flows from financing activities totaled $917,000 which included $6.1 million of distributions to shareholders and a $4.8 million net advance from long-term debt. As of December 31, 1997, the Company had a working capital deficit of $7.4 million and $14.0 million of outstanding long-term debt, other long-term liabilities and net liabilities of discontinued operations. After the consummation of the Combinations and the Offering, the Company will have approximately $25.3 million in cash, cash equivalents and cash held in trust, of which $15.6 million represents cash held in trust, and approximately $219,000 of outstanding indebtedness. Certain assets, including real estate, personal property, receivables and cash, that are not used in the operations of certain Founding Companies will be excluded from the Combinations and retained by the respective stockholders of such Founding Companies. Certain non-operating assets and the assumption of certain debt, of approximately $10.7 million, will be excluded from the combinations and retained by certain stockholders of the Founding Companies. These exclusions have been reflected in the pro forma balance sheet of the Company as of December 31, 1997. The Company intends to obtain a revolving credit facility. It is anticipated that the credit facility will require the Company to comply with various restrictive loan covenants. The facility is intended to be used for acquisitions, working capital and other general corporate purposes. The Company anticipates that its cash flow from operations will provide cash in excess of the Company's normal working capital needs, debt service requirements and planned capital expenditures for the foreseeable future. The Company made capital expenditures of approximately $1.4 million in 1997. The Company intends to pursue attractive acquisition opportunities. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable. The Company expects to fund future acquisitions primarily through a combination of cash flow from operations and borrowings, including borrowings under the proposed credit facility, as well as issue additional equity. The Company intends to register an additional 3,000,000 shares of its' Common Stock under the Securities Act for use by the Company as consideration for future acquisitions. ASTON HOTELS & RESORTS Results of Continuing Operations Aston Hotels & Resorts is the largest condominium resort management company and one of the largest hotel providers in the state of Hawaii. Aston Hotels & Resorts' principal revenue sources for 1997 were property rental fees (41%) and service fees (43%). Aston Hotels & Resorts has decided to discontinue its hotel leasing and operating business and such business is not reflected in the results of continuing operations. Results of operations for the hotel leasing and operating business are reflected as discontinued operations. The following table sets forth the results of continuing operations for Aston Hotels & Resorts on a historical basis and as a percentage of net revenues for the periods indicated. 28
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------ 1995 1996 1997 ------------------------ ------------------------ ------------------------ (DOLLARS IN THOUSANDS) Revenues .................................... $19,048 100.0% $19,460 100.0% $19,554 100.0% Operating expenses .......................... 10,550 55.4 10,401 53.4 8,908 45.6 ------- ----- ------- ----- ------- ----- Gross profit ................................ 8,498 44.6 9,059 46.6 10,646 54.4 General and administrative expenses ......... 5,434 28.5 5,574 28.6 5,475 28.0 ------- ----- ------- ----- ------- ----- Operating income ............................ $ 3,064 16.1% $ 3,485 17.9% $ 5,171 26.4% ======= ===== ======= ===== ======= ===== Compensation Differential ................... $ 380 $ 282 $ 282
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1996 Revenues. Revenues were flat year over year. Operating Expenses. Operating expenses decreased approximately $1.5 million, or 14.4%, from $10.4 million in 1996 to $8.9 million in 1997. As a percentage of net revenues, operating expenses decreased from 53.4% in 1996 to 45.6% in 1997, primarily due to a reduction in salaries, bonuses, and promotional and marketing expenses. General and Administrative Expenses. General and administrative expenses in total and as a percentage of revenues were relatively flat year over year. Excluding the Compensation Differential of $282,000 in 1996 and 1997, operating income increased from 17.9% to 19.4% in 1996 and from 26.4% to 27.9% in 1997. TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1995 Revenues. Revenues increased $412,000, or 2.2%, from $19.0 million in 1995 to $19.5 million in 1996. Operating Expenses. Operating expenses decreased $149,000, or 1.4%, from $10.6 million in 1995 to $10.4 million in 1996. As a percentage of net revenues, operating expenses decreased from 55.4% to 53.4%, primarily due to higher revenues. General and Administrative Expenses. General and administrative expenses decreased $140,000, or 2.6%, from $5.4 million in 1995 to $5.6 million in 1996. As a percentage of revenues, general and administrative expenses increased from 28.5% in 1995 to 28.6% in 1996, primarily due to higher revenues. Excluding the Compensation Differential of $380,000 and $282,000 in 1995 and 1996, respectively, operating income decreased from 18.1% to 17.6% in 1995 and from 17.9% to 19.4% in 1996. Liquidity and Capital Resources Aston Hotels & Resorts generated cash flows from operating activities of $5.9 million in 1997 primarily due to $5.1 million of net income from continuing operations. Cash flows used in investing activities by Aston Hotels & Resorts was $1.9 million in 1997 and was primarily used for advances to affiliates. As of December 31, 1997, advances to stockholder and affiliates totaled $9.5 million. Aston Hotels & Resorts' 1997 cash flows used in financing activities totaled $4.6 million which included a $3.6 million distribution to a stockholder and $744,000 in payments of other long-term obligations. As of December 31, 1997, Aston Hotels & Resorts had a working capital deficit of $4.6 million, and $5.5 million of outstanding long-term debt, capital leases and net liabilities of discontinued operations. Aston Hotels & Resorts has provided guarantees for, or is the cosigner on, personal debts of its principal stockholder. At December 31, 1997, the personal debts totaled $17.4 million. In addition, Aston Hotels & Resorts' principal stockholder has personally guaranteed certain of Aston Hotels & Resorts debt and capital lease obligations. As of December 31, 1997, the guaranteed obligations totaled $2.8 million. 29 COLLECTION OF FINE PROPERTIES Results of Operations Collection of Fine Properties is a leading provider of vacation property rentals and management services in the ski and mountain resort town of Breckenridge, Colorado. Collection of Fine Properties' principal revenue source for 1997 was property rental fees (82%). The following table sets forth the combined results of operations for Collection of Fine Properties on a historical basis and as a percentage of revenues for the periods indicated.
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 1995 1996 1997 ----------------------- ----------------------- ----------------------- (DOLLARS IN THOUSANDS) Revenues .................................... $3,500 100.0% $4,141 100.0% $4,303 100.0% Operating expenses .......................... 2,621 74.9 2,777 67.1 2,830 65.8 ------ ----- ------ ----- ------ ----- Gross profit ................................ 879 25.1 1,364 32.9 1,473 34.2 General and administrative expenses ......... 923 26.4 948 22.9 893 20.8 ------ ----- ------ ----- ------ ----- Operating income ............................ $ (44) ( 1.3)% $ 416 10.0% $ 580 13.5% ====== ===== ====== ===== ====== ===== Compensation Differential ................... $ 64 $ 74 $ 94
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1996 Revenues. Revenues increased $162,000, or 3.9%, from $4.1 million in 1996 to $4.3 million in 1997, primarily due to an increase in property rental fees resulting primarily from higher average rental rates. Operating Expenses. Operating expenses remained relatively constant at $2.8 million. As a percentage of net revenues, operating expenses decreased from 67.1% in 1996 to 65.8% in 1997, primarily due to slightly higher revenues. General and Administrative Expenses. General and administrative expenses decreased $55,000, or 5.8%, from $948,000 in 1996 to $893,000 in 1997. As a percentage of revenues, general and administrative expenses decreased from 22.9% in 1996 to 20.8% in 1997. Excluding the Compensation Differential of $74,000 and $94,000 in 1996 and 1997, respectively, operating income increased from 10.0% to 11.8% in 1996 and from 13.5% in 15.7% in 1997. TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1995 Revenues. Revenues increased $641,000, or 18.3%, from $3.5 million in 1995 to $4.1 million in 1996, primarily due to an increase in management fees resulting primarily from higher occupancy. Operating Expenses. Operating expenses increased $156,000, or 6.0%, from $2.6 million in 1995 to $2.8 million in 1996. As a percentage of revenues, operating expenses decreased from 74.9% in 1995 to 67.1% in 1996, primarily due to increased revenues. General and Administrative Expenses. General and administrative expenses increased $25,000, or 2.7%, from $923,000 in 1995 to $948,000 in 1996. As a percentage of revenues, general and administrative expenses decreased from 26.4% in 1995 to 22.9% in 1996 primarily due to increased revenues. Excluding the Compensation Differential of $64,000 and $74,000 in 1995 and 1996, respectively, operating income increased from (1.3)% to 0.6% in 1995 and from 10.0% to 11.8% in 1996. Liquidity and Capital Resources Collection of Fine Properties generated cash flows from operating activities of $783,000 in 1997 primarily due to $713,000 of net income. Cash flows used in investing activities by Collection of Fine Properties was $136,000 in 1997 and was primarily used for the purchases of furniture and equipment. Collection of Fine Properties' 1997 cash flows used in financing activities totaled $598,000 which included repayments on their line of credit and notes payable, and distributions to stockholders. As of 30 December 31, 1997, Collection of Fine Properties had a working capital deficit of $871,000 and had $299,000 of long-term debt outstanding. In addition, as of December 31, 1997, Collection of Fine Properties had $653,000 of availability under its line of credit. PRISCILLA MURPHY Results of Operations Priscilla Murphy is a leading provider of beach vacation property rentals, management services and sales on the Florida islands of Sanibel and Captiva. Priscilla Murphy's principal revenue sources for 1997 were property rental fees (53%) and net real estate brokerage commissions (31%). Priscilla Murphy was acquired by its current owners in January 1997. The following table sets forth the results of operations for Priscilla Murphy and its predecessor on a historical basis and as a percentage of revenues for the periods indicated.
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 1995 1996 1997 ----------------------- ----------------------- ----------------------- (DOLLARS IN THOUSANDS) Revenues .................................... $4,316 100.0% $4,721 100.0% $4,740 100.0% Operating expenses .......................... 1,319 30.6 1,314 27.8 1,184 25.0 ------ ----- ------ ----- ------ ----- Gross profit ................................ 2,997 69.4 3,407 72.2 3,556 75.0 General and administrative expenses ......... 2,257 52.3 2,125 45.0 1,866 39.4 ------ ----- ------ ----- ------ ----- Operating income ............................ $ 740 17.1% $1,282 27.2% $1,690 35.7% ====== ===== ====== ===== ====== ===== Compensation Differential ................... $ 250 $ 320 $ 31
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1996 Revenues. Revenues were relatively flat year over year. Operating Expenses. Operating expenses decreased 130,000, or 9.9%, from $1.3 million in 1996 to $1.2 million in 1997 primarily due to better cost control measures since the acquisition resulting in lower salaries and benefits. As a percentage of revenues, operating expenses decreased from 27.8% in 1996 to 25.0% in 1997, primarily due to lower costs. General and Administrative Expenses. General and administrative expenses decreased $259,000, or 12.2%, from $2.1 million in 1996 to $1.9 million in 1997. As a percentage of revenues, general and administrative expenses decreased from 45.0% in 1996 to 39.4% in 1997. Excluding the Compensation Differential of $320,000 and $31,000 in 1996 and 1997, respectively, operating income increased from 27.2% to 33.9% in 1996 and from 35.7% to 36.3% in 1997. TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1995 Revenues. Revenues increased $405,000, or 9.4%, from $4.3 million in 1995 to $4.7 million in 1996, primarily due to an increase in commissions on real estate sales resulting from the increased number of vacation properties sold and slightly higher property rental fees resulting primarily from higher average rental rates. Operating Expenses. Operating expenses were flat year over year. As a percentage of revenues, operating expenses decreased from 30.6% in 1995 to 27.8% in 1996, primarily due to higher revenues. General and Administrative Expenses. General and administrative expenses decreased $132,000, or 5.8%, from $2.3 million in 1995 to $2.1 million in 1996. As a percentage of revenues, general and administrative expenses decreased from 52.3% in 1995 to 45.0% in 1996. Excluding the Compensation Differential of $250,000 and $320,000 in 1995 and 1996, respectively, operating income increased from 17.1% to 22.9% in 1995 and from 27.2% to 33.9% in 1996. 31 Liquidity and Capital Resources Priscilla Murphy generated cash flows from operating activities of $1.9 million in 1997 primarily due to $1.5 million of net income and $203,000 of non-cash depreciation expense. Cash flows used in investing activities by Priscilla Murphy was $5.8 million in 1997 and was used for the January, 1997 acquisition. Priscilla Murphy's 1997 cash flows from financing activities totaled $4.9 million which included $5.8 million in bank financing for the acquisition, offset by $1.2 million in long-term debt repayments. As of December 31, 1997, Priscilla Murphy had a working capital deficit of $42,000, and had $3.9 million of long-term debt outstanding. COASTAL RESORTS Results of Operations Coastal Resorts is a leading provider of beach vacation property rentals, management services and sales in the Bethany Beach area of Delaware. Coastal Resorts' principal revenue sources for 1997 were net real estate commissions (53%) and property rental fees (25%). The following table sets forth the combined results of operations for Coastal Resorts on a historical basis and as a percentage of revenues for the periods indicated.
YEAR ENDED DECEMBER 31, ------------------------------------------------- 1996 1997 ----------------------- --------- (DOLLARS IN THOUSANDS) Revenues .................................... $1,917 100.0% $3,615 100.0% Operating expenses .......................... 837 43.7 1,788 46.5 ------ ----- ------ ----- Gross profit ................................ 1,080 56.3 1,827 50.5 General and administrative expenses ......... 477 24.9 644 17.8 ------ ----- ------ ----- Operating income ............................ $ 603 31.5% $1,183 32.7% ====== ===== ====== ===== Compensation Differential ................... $ -- $ --
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1996 Revenues. Revenues increased $1.7 million, or 88.6%, from $1.9 million in 1996 to $3.6 million in 1997, primarily due to an increase in real estate brokerage commissions resulting from the increased number of vacation properties sold and increased services fees due to a higher number of properties under management and higher occupancy. Operating Expenses. Operating expenses increased $951,000, or 113.6%, from $837,000 in 1996 to $1.8 million in 1997. As a percentage of revenues, operating expenses increased from 43.7% in 1996 to 46.5% in 1997, primarily due to higher property rental activities. General and Administrative Expenses. General and administrative expenses increased $167,000, or 35.0%, from $477,000 in 1996 to $644,000 in 1997. As a percentage of net revenues, general and administrative expenses decreased from 24.9% in 1996 to 17.8% in 1997, primarily due to the significant increase in net revenue in 1997. There were no Compensation Differentials in 1996 or 1997. Liquidity and Capital Resources Coastal Resorts generated cash flows from operating activities of $303,000 in 1997 primarily due to $1.1 million in net income offset by a $1.1 million increase in receivables from related parties. Cash flows used in investing activities by Coastal Resorts was $146,000 in 1997 and was primarily used to purchase furniture and equipment. Coastal Resorts' 1997 cash flows from financing activities totaled $40,000. As of December 31, 1997, Coastal Resorts had a working capital surplus of $980,000 and had a $715,000 note payable to a related party. 32 TRUPP-HODNETT ENTERPRISES Results of Operations Trupp-Hodnett Enterprises is the leading provider of beach vacation property rentals, management services and sales on the island of St. Simons, off the coast of Georgia. Trupp-Hodnett Enterprises' principal revenue sources for 1997 were: property rental fees (69%) and real estate sales commissions (22%). The following table sets forth the results of operations for Trupp-Hodnett Enterprises on a historical basis and as a percentage of revenues for the periods indicated.
YEAR ENDED DECEMBER 31, ------------------------------------------------- 1996 1997 ----------------------- ----------------------- (DOLLARS IN THOUSANDS) Revenues .................................... $3,431 100.0% $4,061 100.0% Operating expenses .......................... 1,652 48.1 1,838 45.3 ------ ----- ------ ----- Gross profit ................................ 1,779 51.9 2,223 54.7% General and administrative expenses ......... 1,653 48.2 2,024 49.8 ------ ----- ------ ----- Operating income ............................ $ 126 3.7% $ 199 4.9% ====== ===== ====== ===== Compensation Differential ................... $ 850 $1,143
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1996 Revenues. Revenues increased $630,000, or 18.4%, from $3.4 million in 1996 to $4.1 million in 1997, primarily due to an increase in real estate brokerage commissions resulting from the increased number of vacation properties sold and an increase in property rental fees resulting primarily from higher average rental rates. Operating Expenses. Operating expenses increased $186,000, or 11.3%, from $1.7 million in 1996 to $1.8 million in 1997. As a percentage of revenues, operating expenses decreased from 48.1% in 1996 to 45.3% in 1997, primarily due to higher revenues and higher average rental rates. General and Administrative Expenses. General and administrative expenses increased $371,000, or 22.4%, from $1.7 million in 1996 to $2.0 million in 1997. As a percentage of revenues, general and administrative expenses increased from 48.2% in 1996 to 49.8% in 1997. Excluding the Compensation Differential of $850,000 and $1.1 million in 1996 and 1997, respectively, operating income increased from 3.7% to 28.4% in 1996 and from 4.9% to 33.0% in 1997. Liquidity and Capital Resources Trupp-Hodnett Enterprises generated cash flows from operating activities of $314,000 in 1997 primarily due to $186,000 of net income and non-cash depreciation expense of $85,000. Cash flows used in investing activities by Trupp-Hodnett Enterprises was $74,000 in 1997 and was primarily used for the purchase of property and equipment. Trupp-Hodnett Enterprises' 1997 cash flows used in financing activities totaled $91,000 which included borrowings and repayments to banks and distributions to shareholders. As of December 31, 1997, Trupp-Hodnett Enterprises had a working capital surplus of $265,000, and had no long-term debt outstanding. In addition, Trupp-Hodnett Enterprises had $130,000 in unused lines of credits. SEASONALITY AND QUARTERLY FLUCTUATIONS The business of the Founding Companies is highly seasonal. The results of operations of each of the Founding Companies have been subject to quarterly fluctuations caused primarily by the seasonal variations in the vacation rental and property management industry, with peak seasons dependent on whether the resort is primarily a summer or winter destination. During 1997, the Company derived approximately 43% of its gross profits in the first quarter and 23% of its gross profits in the third quarter. Although the seasonality of the Company's revenues and earnings may be partially mitigated by 33 the geographic diversity of the Founding Companies and companies that may be acquired in the future, there is likely to continue to be a significant seasonal factor with respect to the Company's revenues and earnings. The Company's quarterly results of operations may also be subject to fluctuations as a result of the timing and cost of acquisitions, the timing of real estate sales, changes in relationships with travel providers, extreme weather conditions or other factors affecting leisure travel and the vacation rental and property management industry. Unexpected variations in quarterly results could also adversely affect the price of the Common Stock which in turn could adversely effect the Company's proposed acquisition strategy. INFLATION Inflation did not have a significant effect on the combined results of operations of the Founding Companies for 1995, 1996 or 1997. 34 BUSINESS GENERAL Upon consummation of the Offering, the Company will be the first national provider of vacation condominium and home rentals in premier destination resorts throughout the United States. Through the consolidation of leading vacation rental and property management companies, the development of a national brand and marketing initiative and best practices management systems, the Company intends to offer vacationers a branded network of high quality, fully furnished, privately-owned condominium and home rentals while offering property owners superior management services designed to enhance their rental income. Currently, most vacationers seeking to rent a condominium or home at a popular destination resort must use a local vacation rental and property management firm to inquire about availability and make reservations. Vacationers typically make rental choices with limited information and, as a result, face great uncertainty concerning the quality of their rental. To address this need, the Company intends to provide vacationers with consistent quality and service, increased information and easy access to a broad array of high quality desirable condominium and home rentals in premier destination resorts. Upon consummation of the Offering, the Company will acquire the 14 Founding Companies which manage approximately 9,200 condominiums and homes nationwide and in Canada. These condominiums and homes are located in beach and island resorts such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks, NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT, and Whistler, B.C. The Company also manages five hotels aggregating approximately 1,650 hotel rooms located primarily in the Hawaiian Islands. The Company provides a wide range of services to both vacationers and property owners. Because of the variety of the Company's resort locations throughout the United States and Canada and the diversity of rental prices throughout its rental pool, the Company is able to target a broad range of vacationers, including families, couples and individuals. For vacationers, the Company offers the convenience and accommodations of a condominium or home, while providing many of the amenities and services of a hotel, generally at a lower cost per person. Vacation condominium and home rentals generally offer greater space and convenience than resort hotel rooms, including separate living, sleeping and eating quarters. As a result, vacationers generally have more privacy and greater flexibility in a vacation condominium or home. The Company typically offers such services as convenient check-in and check-out, frequent housekeeping and cleaning and emergency maintenance assistance. In addition, in most of its markets, the Company provides specialized concierge-type services such as arranging golf tee times, purchasing ski lift tickets and making restaurant reservations. For property owners, the Company offers a comprehensive set of services, including marketing and rental services, maintenance and security. The Company's primary source of revenue is property rental fees, which are charged to the property owners as a percentage of the vacationers' total rental rate. Fee percentages for vacation condominiums and homes range from approximately 3% to over 40% of rental rates for the various Founding Companies depending on the type of services provided to the property owner and the type of rental unit managed. On a pro forma basis for the year ended December 31, 1997, the Company recognized $34.1 million of revenues from property rental fees. In addition, in many markets, the Company provides traditional real estate brokerage services for property owners seeking to sell their condominiums and homes. The Company believes that a national brand and superior management services, which are designed to enhance rental income for property owners, will provide it with a competitive advantage in attracting additional high quality condominiums and homes in its markets. INDUSTRY OVERVIEW Destination resort vacationers primarily have three alternatives for overnight accommodations: commercial lodging establishments, time share resorts and privately owned vacation condominiums and homes. Commercial lodging consists principally of hotels and motels in which a room is rented on a nightly or weekly basis. Vacation ownership or timeshare interests are purchased by the vacationer and typically entitle the buyer to use a furnished vacation residence at a particular resort generally for a 35 one-week period each year, in perpetuity. Lastly, privately-owned vacation condominiums and homes are typically second homes available for rent by property owners seeking incremental income. The domestic vacation rental and property management industry in 1996 generated over $10 billion in total revenues, yielding over $2.5 billion in management fees from over 20 million vacation condominium and home rentals. Industry revenues grew 8.7% from 1995 to 1996, and the Company believes that this growth has been, and will continue to be, driven by two primary factors: the growth in the leisure travel and tourism industry, which reflected a 16.5% increase in revenues from 1995 to 1996, and the increasing number of vacationers seeking to rent vacation condominiums and homes. For many vacationers, particularly those with families, a lengthy stay at a quality commercial lodging establishment can be expensive. Vacation condominium and home rentals generally offer families greater space and convenience than a resort hotel room, including separate living, sleeping and eating quarters. As a result, families generally have more privacy and greater flexibility in a vacation condominium or home. Furthermore, with full kitchens available in most properties, vacationers can also save on dining costs in a vacation condominium or home rental. In addition, vacation condominium and home rentals frequently include access to private yards, swimming pools, tennis courts and other recreational facilities, and generally offer a greater variety of locations, accommodations and price ranges within a market to meet a vacationer's desires. Vacation property rentals are also a less expensive and more flexible alternative to timeshare interests. Unlike vacation property rentals, timeshare interests require the purchase of an ownership interest in a vacation residence and continuing annual maintenance payments. A timeshare owner has the right to use the same vacation residence for the same length of time each year. Subject to availability and the payment of a membership fee and a variable exchange fee to join a timeshare exchange program, a timeshare owner may request that his timeshare interval be exchanged for a timeshare interval at another participating resort. Owners are generally limited to timeshare intervals at participating resorts and to those units which have been assigned an equal or lower rating by the exchange program based on the location, size and quality of the unit, the quality of the resort and the time of year requested. Most vacation condominiums and homes are second homes owned by individuals who reside in different locations and are unable to easily manage the rental process. Vacation rental and property management companies facilitate the rental process by handling all interaction with vacationers, including accepting reservations, rental payments and security deposits; operating check-in and check-out locations; and arranging for inspections, security and maintenance. The publishing of catalogs, print advertising and other marketing activities of a successful vacation rental and property management company also can enhance the vacation condominium or home's occupancy rate and increase rental income to the property owner. The vacation rental and property management industry is highly fragmented, with an estimated 3,000 vacation rental and property management companies in the United States. Presently, most vacation rental condominiums and homes are managed by and booked through local vacation rental and property management firms, whose principal means of attracting property owners and vacationers is by referral, word of mouth, limited local advertising and direct mailings. There is no central reservations service for vacationers or travel agents to obtain information regarding condominium or home rental opportunities at popular destination resorts across the country or for booking such rentals once a destination is selected. As a result, the Company believes the vacation rental and property management industry is highly inefficient and presents a significant market opportunity for a well-capitalized company offering a large, national network of high quality vacation condominiums and homes with superior levels of customer service. BUSINESS STRATEGY The Company's objective is to enhance its position as the leading national provider of premier destination resort condominium and home rentals by pursuing the following business strategies: DEVELOP A NATIONAL BRAND IN PREMIER DESTINATION RESORT CONDOMINIUM AND HOME RENTALS. The Company intends to create the first national brand in vacation condominium and home rentals. To date, there has been no national brand for vacation condominium and home rentals, no industry standards for 36 quality and a general lack of access to reliable information regarding rental opportunities for vacationers. By providing a national network of high quality condominiums and homes in premier destination resorts throughout the United States, the Company intends to increase the information available to vacationers and develop a brand which provides greater confidence and ease to vacationers in making their rental arrangements. In order to ensure high quality, the Company intends to implement a comprehensive quality assurance program which includes the company-wide rating of individual condominiums and homes to assure vacationers that rental accommodations will meet their expectations, as well as customer satisfaction surveys and follow-up calls. OFFER VACATIONERS SUPERIOR CUSTOMER SERVICE. Management believes that maintaining superior levels of customer service is critical to developing a reputation for high quality condominiums and homes and attracting new customers. Vacationers typically rent vacation condominiums and homes for greater space and flexibility, but these customers also frequently desire many of the amenities and services of hotel accommodations. As a result, the Company emphasizes customer service by offering conveniently located check-in locations, efficient check-in and check-out procedures, extended front desk hours, a commitment to clean units and access to emergency contact and maintenance personnel. The Company also strives to offer maximum flexibility to meet the varied needs of its vacationers and in most markets can arrange for services such as golf tee times, rental bicycles, ski lift tickets, grocery delivery or restaurant reservations. By offering the convenience and accommodations of a condominium or home while providing many of the amenities and services of a hotel, the Company believes it will continue to strengthen the loyalty of its existing customers and attract new vacationers into the vacation condominium and home rental market. ENHANCE VALUE FOR CONDOMINIUM AND HOME OWNERS. Through effective national marketing, a recognized brand and implementation of strategies designed to increase occupancy and rental rates, the Company plans to enhance the rental income for vacation condominium and home owners. Since substantially all of the condominiums and homes managed by the Company are second homes with absentee owners, the Company offers a range of high quality vacation rental and property management services designed to meet the broad real estate needs of these owners. In most markets, the Company will assume broad responsibility for the condominium or home, from marketing and handling all aspects involved in renting the individual condominium or home to managing the common properties and homeowners' association. In addition, the Company provides owners with concise, timely and accurate monthly statements and payments for the rental and management of their condominiums and homes. The Company believes that its reputation for high quality, comprehensive management services will be a key competitive advantage in increasing the number of condominiums and homes under its management within its existing markets. CAPITALIZE ON THE EXPERIENCE OF SENIOR MANAGEMENT. The Company intends to capitalize on the industry experience of members of its senior management. David C. Sullivan, the Chairman and Chief Executive Officer is the former Chief Operating Officer of Promus Hotel Corporation, where he was primarily responsible for the creation and expansion of the Hampton Inn, Homewood Suites and Embassy Suites lines. Jeffery M. Jarvis, Senior Vice President and Chief Financial Officer, is the former Vice President, Controller and Principal Accounting Officer of Promus Hotel Corporation and Jules S. Sowder, Senior Vice President of Marketing, is the former Vice President of Marketing of Promus Hotel Corporation. In addition, W. Michael Murphy will serve as Senior Vice President of Development. Mr. Murphy has over 20 years experience in the hotel and resort industries, with particular experience in planning and development. MAINTAIN LOCAL RELATIONSHIPS AND EXPERTISE. The management teams of the Founding Companies each have extensive experience in their respective resort areas, and many of the individuals are very active in the local community. The Company believes that the management teams have a valuable understanding of their respective markets and businesses and have developed strong local relationships. These relationships are critical in attracting additional condominiums and homes for rental and enable the Company to provide additional concierge-type services to its vacationers. Accordingly, the Company intends to operate with a decentralized management strategy and allow local managers to utilize their knowledge and expertise about the condominiums and homes available for rent, the offerings of local competitors and the desires of vacationers in their areas to provide superior customer service. 37 GROWTH STRATEGY The Company intends to enhance its position as the leading national provider of vacation condominium and home rentals in premier destination resorts by pursuing the following growth strategies: IMPLEMENT A NATIONAL MARKETING STRATEGY. The Company intends to implement a national marketing program designed to increase vacationer awareness of its rental condominiums and homes and establish a nationally recognized high quality name and image, while promoting the unique characteristics of its individual resorts. In addition, the Company will market to existing customers of the Founding Companies to capitalize on cross-selling opportunities and increase customer loyalty. Through its collection of approximately 11,000 beach and mountain resort rental properties and the databases of customer information maintained by the Founding Companies, the Company intends to offer customers of each Founding Company similar properties and services in its other resorts. The Company believes the integrated marketing efforts of the Founding Companies will increase customer awareness of the Company's condominiums and homes, lead to an increased demand for the Company's rentals and result in higher occupancy and rental rates for its condominium and home owners. The Company also believes that the anticipated increase in rental income for owners will ultimately be a competitive advantage in attracting new property owners. CAPITALIZE ON TECHNOLOGY. Management believes that investment in technology will be critical in building its national brand and will create a significant competitive advantage. The Company intends to utilize the technological expertise of First Resort, a Founding Company, to enhance the ease and convenience for vacationers of accessing information and making reservations for vacation rentals. The Company's strategy is to create a comprehensive web site that presents all of the Company's condominium, home and hotel room rentals, including photographs and detailed floor plans, and allows vacationers to make reservations and payments. Several of the Founding Companies already provide photographs and rate and availability information for condominiums and homes over the world wide web, and the Company intends to leverage these capabilities to implement a central reservation system with world wide web functionality. In addition to facilitating the ability to provide one-stop shopping, the Company intends to link the Founding Companies' and future acquired companies' databases in order to enhance its cross-selling and direct marketing efforts. INCREASED USE OF ADDITIONAL MARKETING CHANNELS. Currently, most vacationers locate vacation condominiums and homes through referrals, word-of-mouth, limited local advertising and direct mailings. The Company believes there are significant opportunities to expand the use of additional marketing channels. The Company intends to capitalize on its extensive market presence by increasing the use of other marketing channels such as the world wide web, travel agents and national print media, which are difficult for local vacation rental and property management companies to use in a cost-effective manner. Given the Company's size and presence in premier destination resorts, the Company believes it will be an attractive partner to travel agents, tour package operators and other travel providers. These relationships should be a significant source of new customers and, in particular, will be a valuable marketing channel for off-peak seasons. Lastly, the Company plans to focus greater marketing efforts on European and other international travelers through a more extensive use of international print media, wholesalers and packaged tour companies. EXPAND MARKET SHARE OF CONDOMINIUM AND HOME RENTALS IN EXISTING MARKETS. A key element of the Company's growth strategy is to increase its selection of condominium and homes in order to expand its market share and strengthen the local brands of each of the Founding Companies. The Company intends to attract new property owners by achieving high occupancy rates through effective national marketing, cross-selling and by offering additional incentives to property owners, such as participation in a rental exchange program. In addition, in order to capture a higher portion of the rental business from new condominiums and homes being built in its markets, the Company will focus on building and strengthening its relationships with both local and national developers as well as real estate brokerage companies. PURSUE OPPORTUNITIES FOR PROFIT MARGIN EXPANSION VIA COST SAVINGS AND ADDITIONAL REVENUE SOURCES. Through the implementation of best practices, the Company believes there are numerous opportunities to improve the margins of the Founding Companies. First, the Company will strive to im- 38 prove the efficiency of certain basic services such as reservations, housekeeping and laundry. The Company also believes that larger inventories of condominiums and homes in its markets will provide certain economies of scale in advertising, check-in locations management, housekeeping and other services. In addition, several of the Founding Companies have developed unique additional revenue opportunities, such as assisting property owners in refurbishing their properties, offering trip cancellation insurance and charging fees for certain concierge-type services, several of which are adaptable at other Founding Companies. The Company believes that enhanced efficiency and economies of scale will reduce overall operating costs and allow the Company to achieve increased margins by spreading operating and corporate overhead costs over a larger revenue base. BUILD NATIONAL MARKET PRESENCE THROUGH STRATEGIC ACQUISITIONS. The vacation rental and property management industry is highly fragmented, with over 3,000 geographically dispersed companies in the United States. The Company believes that such fragmentation provides significant opportunities for consolidation. The Company intends to aggressively pursue both domestic and international acquisitions in order to gain a presence in additional premier destination resort locations as well as expand its market share in existing resorts. The Company will seek companies with strong reputations and a commitment to high quality condominiums and homes and customer service. While the Company will seek to acquire the leading companies in each new market, the Company also plans to pursue tuck-in acquisitions through which it can expand its selection of condominiums and homes available for rent in its existing markets. Many acquisition candidates utilize First Resort's software, which the Company believes will enhance its ability to integrate such companies upon acquisition. The Company expects to offer acquisition candidates: (i) affiliation with a national brand; (ii) the ability to cross-sell to customers of other vacation rental and property management companies; (iii) the ability to increase liquidity as a result of the Company's financial strength as a public company; and (iv) the ability to increase profitability as a result of the Company's centralization of certain administrative functions and other economies of scale. MARKETS The Company currently manages condominiums and homes in many popular beach and mountain resorts in the United States and Canada. Through the implementation of its acquisition strategy, the Company plans to establish an international network of vacation condominiums and homes in every major type of premier destination resort market, including beach, mountain, golf and tennis resorts. 39 The following table sets forth certain information regarding the Founding Companies as of January 31, 1998 with the exception of First Resort:
DATE NUMBER OF NUMBER OF FOUNDED (1) CONDOMINIUMS(2) HOMES TOTAL UNITS ------------- ----------------- ---------- ------------ BEACH AND ISLAND RESORTS HAWAII Aston Hotels & Resorts ............ 1967 4,771 1 4,772 Maui Condominium and Home ......... 1988 430 2 432 THE OUTER BANKS, NC Brindley & Brindley ............... 1985 49 397 446 BETHANY BEACH, DE Coastal Resorts ................... 1982 545 4 549 NANTUCKET, MA The Maury People(3) ............... 1969 -- 1,200 1,200 SANIBEL AND CAPTIVA ISLANDS, FL Priscilla Murphy Realty ........... 1972 669 233 902 ST. SIMONS ISLAND, GA Trupp-Hodnett Enterprises ......... 1987 381 54 435 MOUNTAIN RESORTS BRECKENRIDGE, CO Collection of Fine Properties ..... 1985 462 10 472 ASPEN, CO Houston and O'Leary(3) ............ 1986 7 120 127 PARK CITY, UT Jupiter Property Management ....... 1976 297 9 306 PARK CITY, UT Resort Property Management ........ 1978 280 46 326 TELLURIDE, CO Telluride Resort Accommodations ... 1985 433 14 447 WHISTLER, B.C., CANADA Whistler Chalets .................. 1986 432 12 444 ----- ----- ------ Total ............................ 8,756 2,102 10,858 (2) ===== ===== ======
- ---------- (1) Includes predecessor entities. (2) Includes 1,545 hotel rooms at Aston Hotels & Resorts, 33 hotel rooms at Collection of Fine Properties and 33 hotel rooms at Trupp-Hodnett Enterprises. (3) Houston and O'Leary and The Maury People are the only Founding Companies which have non-exclusive rental agreements for their rental properties. SERVICES OFFERED SERVICES OFFERED TO VACATIONERS. The Company provides services to vacationers during all stages of the rental transaction from the selection and reservation of a condominium or home to the vacationers' arrival and throughout their stay. To make the selection and reservation process as simple and convenient as possible, the Company currently provides vacationers with catalogs containing color photographs and descriptions of available condominiums or homes, and reservations are taken over the phone by reservation agents at each of its resort communities who are familiar with the specific condominiums 40 and homes available. Many of the Founding Companies use a rating system to ensure that vacationers' expectations are met by the condominium or home selected and several of the Founding Companies also have world wide web sites where vacationers can obtain price and availability information. For the vacationers' arrival, the Company offers conveniently located check-in and check-out locations, many of which are located on-site at the front desk of the Company's condominium properties. Off-site check-in locations are typically conveniently located and easily accessible in their respective resort communities. In most destination resort communities, the Company maintains more than one conveniently located check-in facility. During their stay, vacationers at most locations are offered frequent cleaning and housekeeping services and access to emergency contact and maintenance personnel. In most locations, the Company offers more specialized "concierge" services such as bicycle and ski equipment rentals, ski lift tickets sales, shuttles to ski areas, golf tee times and restaurant reservations. The Company typically receives a fee for the provision of such services. SERVICES OFFERED TO CONDOMINIUM AND HOME OWNERS. The Company provides condominium and home owners a wide range of high-quality vacation rental and property management services designed to meet their broad real estate needs. In most markets, the Company will assume complete responsibility for the condominium or home, including marketing, renting and maintaining the specific property as well as providing security and managing the common properties and homeowners' association. The Company currently engages in extensive marketing activities, including direct catalog mailings to prior and prospective vacationers and direct solicitations of travel agents, wholesalers and package tour operators. The Company also handles all interaction with vacationers, including accepting rental payments and security deposits, operating check-in and check-out locations and offering linen, housekeeping and other services. Property owners are paid rental income each month for rental activity in the preceding month and are given a concise, timely and accurate monthly statement which details the rental activity and management of their condominiums and homes. Property maintenance services are provided by both Company employees and third party independent contractors. Services are either regularly scheduled, or provided on an "as needed" basis, depending on the service and the location. In most markets, after each annual or semi-annual inspection, the Company makes recommendations to property owners for maintenance, refurbishments and renovations necessary to maintain the quality of their condominiums and homes. In several of its destination resort markets, the Company provides professional interior design and refurbishment services to property owners to assist with the upkeep and appearance of their condominiums and homes. The Company includes routine maintenance services, such as replacing light bulbs or broken china, as part of an all inclusive commission structure in certain locations. In other markets, the Company collects fees from property owners for maintenance services through service and maintenance agreements and fee for service arrangements. For owners desiring to sell their vacation condominium or home, many of the Founding Companies provide traditional real estate brokerage services, including listing and showing the property. In 1997, net real estate sales commissions represented approximately 11% of combined revenues. The relative amount of such revenue varies by Founding Company but is more significant in those markets where the Company primarily offers free-standing homes, rather than condominiums, such as Aspen and Nantucket. The Company believes that the provision of real estate brokerage services provides it with a competitive advantage in identifying and securing properties for its rental management services and allowing it to meet all of the needs of vacation property owners. MARKETING The marketing efforts of traditional vacation rental and property management companies, including the Founding Companies, are primarily through word of mouth referrals from satisfied customers (both vacationers and property owners), print advertising primarily in local newspapers and regional magazines and direct mail solicitations and catalogs sent to prior customers. Potential customers call as a result of a referral or in response to an advertisement or other promotion and are assisted by reservation agents in selecting the appropriate vacation property and making the reservation. In addition to these efforts, several of the Founding Companies also market their rental inventories to travel agents, tour 41 package operators and other travel providers. Tour package operators typically combine transportation to a destination resort with the Company's vacation condominiums and homes and a car rental. Tour packages are distributed almost exclusively through travel agents. The Company markets to travel agents and package tour operators primarily through advertisements in trade publications, such as the Hotel and Travel Index, and attendance at national and regional travel industry trade shows. Several of the Founding Companies also have sites on the world wide web. They are actively updated to increase the probability of meeting vacationers' search criteria for lodging in their destination resort communities. Vacation rentals for those companies attributable to initial contacts through their web sites have increased significantly over the past three years. The Company estimates that combined revenues for 1997 were derived 50% from traditional direct marketing, 30% from package tour operators and wholesalers, 16% from travel agents and 4% from world wide web contacts The Company believes that a national marketing campaign should increase the effectiveness of the Founding Companies and companies to be acquired in the future, and expand the universe of potential customers for each resort location in which the Company operates. The Company plans to leverage the reputations of the Founding Companies to establish a nationally recognized high quality brand. The extensive databases regarding previous and potential vacationers maintained by the Founding Companies will be used to aggressively cross-sell vacation opportunities in other destination resorts through direct solicitations. Similar condominiums and homes and services in other leading markets will be offered to customers of each Founding Company. The Company also intends to capitalize on its extensive market presence and increase its use of the world wide web, travel agents and the print media. The Company plans to leverage the technology and expertise of First Resort to create a central reservations system easily accessible on the world wide web which vacationers ultimately can use to view photographs and detailed floor plans of the condominiums and homes, and make reservations and payments. The Company also believes that the Company's extensive national selection of vacation condominiums and homes will make it an attractive partner to travel agents, tour package operators and other travel providers. These relationships should be a significant source of new customers and, in particular, will be a valuable marketing channel for off-peak seasons. Lastly, the Company plans to focus greater marketing efforts on European and other international travelers through a more extensive use of international print media, wholesalers and packaged tour companies. TECHNOLOGY First Resort, one of the Founding Companies, is the leading provider of integrated management, reservations and accounting software for the vacation rental and property management industry. Ten of the Founding Companies and over 650 other vacation rental and property management companies use First Resort's software programs. First Resort's software programs were developed to overcome problems encountered by rental property managers in attempting to utilize software programs developed for the hotel industry. First Resort's basic software allows vacation rental and property management companies to automate and computerize their reservations, billings, rental management and accounting tasks. Vacation rental and property management companies can use the software to generate current rates on individual condominium and homes and call up specific descriptions of those condominiums and homes for potential customers. The software also allows companies to generate monthly revenue reports for property owners and to coordinate maintenance and housekeeping schedules. First Resort also offers additional modules and interfaces, including a work order generator, activities management system, credit card interface and world wide web enabled reservations. While the Company plans to use First Resort's resources and expertise to enhance the technological capabilities of the other Founding Companies, First Resort will continue to market its software products to independent vacation rental and property management companies and provide service and technical support. The Company intends to rely extensively on the products and management expertise of First Resort to implement its technology strategy. Management believes that investment in technology will be critical in building a national, branded vacation rental and property management company for premier destination resorts and will be a significant competitive advantage in the future. The Company plans to utilize 42 First Resort software to implement a central reservations system with world wide web functionality to allow vacationers to make their rental arrangements at any of the Company's properties. First Resort also is developing a JAVA Client/Server based graphical reservations application that will allow users of its software to completely integrate their reservations systems with the world wide web, as well as a JAVA Client/Server based version of all of its existing software applications. First Resort's software also will allow the Company to quickly link the Founding Companies' and future acquired companies' databases. The Company intends to develop proprietary data mining tools in order to enhance its cross-selling and direct marketing efforts. COMPETITION The vacation rental and property management industry is highly competitive and has low barriers to entry. The industry has two distinct customer groups: vacation property renters and vacation property owners. The Company believes that the principal competitive factors in attracting vacation property renters are: (i) market share and visibility; (ii) quality, cost and breadth of services and properties provided; and (iii) long-term customer relationships. The principal competitive factors in attracting vacation property owners are: (i) the ability to generate higher rental income and (ii) comprehensive management services at competitive prices. The Company competes for vacationers and property owners primarily with approximately 3,000 owner-operated companies that typically operate in a limited geographic area. Some of the Company's competitors are affiliated with the owners or operators of resorts in which such competitor provides its services. Certain of these smaller competitors may have lower overhead cost structures and may be able to provide their services at lower rates. The Company also competes for vacationers with large hotel and resort companies. Many of these competitor companies have greater financial resources than the Company enabling them to finance acquisition and development opportunities, to pay higher prices for the same opportunities or to develop and support their own operations. In addition, many of these companies can offer vacationers services not provided by vacation rental and property management companies, and they may have greater name recognition among vacationers. These companies might be willing to sacrifice profitability to capture a greater portion of the market for vacationers or pay higher prices than the Company for the same acquisition opportunities. Consequently, the Company may encounter significant competition in its efforts to achieve its internal and acquisition growth objectives as well as its operating strategies focused on increasing the profitability of the Founding Companies and subsequently acquired companies. EMPLOYEES Upon consummation of the Offering, the Company will have approximately 1,300 employees. The Company relies significantly on temporary employees to meet peak season demands. In the course of performing service and maintenance work, the Company also utilizes the services of independent contractors. The Company believes its relationships with its employees and independent contractors are good. LEGAL PROCEEDINGS The Company is involved in various legal actions arising in the ordinary course of business. The Company believes that none of these actions will have a material adverse effect on its business, financial condition or results of operations. FACILITIES All of the Company's facilities will be leased although two of the Founding Companies, Collection of Fine Properties and Whistler Chalets, currently own their facilities. Prior to the Combinations, these Founding Companies are transferring ownership of their facilities and certain other properties to their stockholders or to entities controlled by their stockholders who will enter into leases with the Company for such facilities. The Company intends whenever possible to require acquired companies that own facilities to also transfer those facilities to their owners prior to acquisition. The Company currently has 43 57 leased and owned properties consisting principally of offices, maintenance, laundry and storage facilities, of which 50 of these are leased under leases with remaining terms from two months to ten years. Some of the facilities currently operated by the Company are, or will be after the Combinations, leased from related parties. See "Certain Transactions -- Leases of Facilities." GOVERNMENTAL REGULATION The Company's operations are subject to various federal, state and local laws and regulations, including (i) licensing requirements applicable to real estate operations and (ii) laws and regulations relating to consumer protection. On a federal level, the Federal Trade Commission has taken the most active regulatory role through the Federal Trade Commission Act, which prohibits unfair or deceptive acts or competition in interstate commerce. Other federal legislation to which the Company is or may be subject includes the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Interstate Land Sales Full Disclosure Act, Telephone Consumer Protection Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, Fair Housing Act and the Civil Rights Acts of 1964 and 1968. Many state and local regulations governing real estate services require permits and licenses to be held by individuals. In some cases, a required permit or license held by a single individual may be sufficient to authorize specified activities for all the Company's employees who work in the state or county that issued the permit or license. In addition, certain international laws and regulations may also be applicable to the Company's international operations. The Company believes that it is in material compliance with all federal, state, local and foreign laws and regulations to which it is currently subject. 44 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information concerning the Company's directors, executive officers and certain key employees, and those persons who will become directors and executive officers of the Company upon consummation of the Offering.
NAME AGE POSITION - --------------------------------- ----- -------------------------------------------------- David C. Sullivan ............... 58 Chairman and Chief Executive Officer, Director Jeffery M. Jarvis ............... 42 Senior Vice President and Chief Financial Officer W. Michael Murphy ............... 52 Senior Vice President, Development Jules S. Sowder ................. 41 Senior Vice President, Marketing Luis Alonso ..................... 33 CEO-Collection of Fine Properties; Director Park Brady ...................... 50 President-Telluride Resort Accommodations; Director Douglas R. Brindley ............. 40 President-Brindley & Brindley; Director Paul T. Dobson .................. 43 Vice President-Maui Condominium and Home; Director Sharon Benson Doucette .......... 60 President-The Maury People; Director Joshua M. Freeman ............... 33 President-Coastal Resorts; Director Evan H. Gull .................... 51 Vice President-First Resort; Director Charles O. Howey ................ 70 Chairman-Priscilla Murphy Realty; Director Heidi O'Leary Houston ........... 45 President-Houston and O'Leary; Director Daniel L. Meehan ................ 48 President-Resort Property Management; Director J. Patrick McCurdy .............. 50 President-Whistler Chalets; Director Andre S. Tatibouet .............. 57 CEO-Aston Hotels & Resorts; Director Hans F. Trupp ................... 58 Chairman-Trupp-Hodnett Enterprises; Director Michael D. Rose ................. 56 Director Elan J. Blutinger ............... 43 Director D. Fraser Bullock ............... 43 Director Leonard A. Potter ............... 36 Advisory Director
DAVID C. SULLIVAN will become the Chairman and Chief Executive Officer and a director of the Company upon the consummation of the Offering. From April 1995 to December 1997, Mr. Sullivan was the Executive Vice President and Chief Operating Officer, and a director, of Promus Hotel Corporation, a publicly traded hotel franchisor, manager and owner of hotels whose brands include Hampton Inn, Homewood Suites and Embassy Suites. From 1993 to 1995, Mr. Sullivan was the Executive Vice President and Chief Operation Officer of the Hotel Division of The Promus Companies Incorporated ("PCI"). He was the Senior Vice President of Development and Operations of the Hampton Inn/Homewood Suites Hotel Division of PCI from 1991 to 1993. From 1990 to 1991, Mr. Sullivan was the Vice President of Development of the Hampton Inn Hotel Division of PCI. JEFFERY M. JARVIS will become Senior Vice President and Chief Financial Officer of the Company upon the consummation of the Offering. From April 1995 to January 1998, Mr. Jarvis was the Vice President, Controller and Principal Accounting Officer of Promus Hotel Corporation. From September 1994 to April 1995, Mr. Jarvis was the Director of Special Projects for PCI. He was the Director of Finance of Harrah's St. Louis Riverport from June of 1994 to September 1994, and was the Assistant Controller of PCI from 1992 to 1994. From 1979 to 1992, Mr. Jarvis was a Senior Audit Manager of Arthur Andersen LLP. W. MICHAEL MURPHY will become the Senior Vice President of Development of the Company upon the consummation of the Offering. Mr. Murphy was President of Footprints International, a company involved in the planning of resort properties in the Bahamas, from 1996 to 1997. From 1994 to 1996, he 45 was a Senior Managing Director of Geller & Co., a Chicago-based hotel advisory and asset management firm. Prior to joining Geller & Co. he acted as a hotel consultant from 1992 to 1994. Mr. Murphy was a founding partner of the hotel investment firm of Moeckel Murphy (1990-1992) and a founding general partner of Metric Partners (1981-1990), a real estate investment company that was a joint venture between the partners of The Fox Group and Metropolitan Life Insurance Company. Prior to that time, he was the Director of Real Estate for Holiday Inns, Inc. from 1973 to 1981. JULES S. SOWDER will become the Senior Vice President of Marketing of the Company upon the consummation of the Offering. Ms. Sowder was Vice President of Marketing for Promus Hotel Corporation from 1995 to January 1998. From 1993 to 1995, she served as the Vice President of Marketing for the Hampton Inn division of Promus Hotel Corporation. She served as Director of Marketing for the Hampton Inn division from 1990 to 1993. Ms. Sowder has been recognized by Travel Agent Magazine as one of the Top 10 most successful women in the hotel industry. LUIS ALONSO will become a director of the Company after the consummation of the Offering. Mr. Alonso has served as the Chief Executive Officer and President of Collection of Fine Properties since January 1997, when Tyra Management Company and two other management companies merged into the newly formed Collection of Fine Properties. Mr. Alonso was the President of Tyra Management Company from 1985 until the merger. Mr. Alonso is a member of the Breckenridge Town Council and is Vice Chairman of the Breckenridge Central Reservation Board. PARK BRADY will become a director of the Company after the consummation of the Offering. Mr. Brady is a founder of Telluride Resort Accommodations, and has served as the President and a director of the company since June 1997. He has served as Director of Sales and Marketing for Telluride Resort Accommodations from 1989 to 1994, and as General Manager from 1987 to 1989. From 1994 to 1997, Mr. Brady developed real estate projects in the Telluride area. Mr. Brady is a former member of the Telluride Town Council and is also former Chairman of the Telluride Chamber Resort Association. DOUGLAS R. BRINDLEY will become a director of the Company after the consummation of the Offering. Mr. Brindley and his wife Betty Shotton Brindley are co-founders of both B&B On The Beach, Inc. and Brindley & Brindley Realty & Development, Inc. Mr. Brindley is a director and President of both companies. PAUL T. DOBSON will become a director of the Company after the consummation of the Offering. Mr. Dobson is a co-founder of Maui Condominium and Home and has served as the company's Vice President since 1991. Mr. Dobson is the current President of the Vacation Rental Managers Association, a trade organization representing over 300 vacation rental and property management companies in North America. SHARON BENSON DOUCETTE will become a director of the Company after the consummation of the Offering. Ms. Doucette has been the President and/or Treasurer of The Maury People since its incorporation in 1990. Prior to that time, Ms. Doucette was a partner in and subsequently the sole proprietor of a predecessor real estate company, beginning in the late 1970s. JOSHUA M. FREEMAN will become a director of the Company after the consummation of the Offering. Mr. Freeman has served since 1996 as President and Managing Member of Coastal Resorts Realty L.L.C. and as President and a director of Coastal Resorts Management, Inc. Mr. Freeman has served as the President and Chief Operating Officer of Carl M. Freeman Associates, Inc., a real estate development and management company, since 1992. EVAN H. GULL will become a director of the Company after the consummation of the Offering. Mr. Gull is a co-founder of First Resort and is currently a director and the Vice President of Software Development, a position he has held since April 1995. Mr. Gull was the Chief Operating Officer of the company from 1993 to 1995. He also served as the Department Manager for Sales and Administration during that same time period. He is the principal developer of First Resort's software products. CHARLES O. HOWEY will become a director of the Company after the consummation of the Offering. Mr. Howey has served as Chairman of Priscilla Murphy Realty since January 1997. Mr. Howey has also been President of C.O. Management Services, a regional property management company, since the 1950's. He is the founder and past president of Howey & Associates, Inc., an independent insurance agency. 46 HEIDI O'LEARY HOUSTON will become a director of the Company after the consummation of the Offering. Ms. Houston formed Houston and O'Leary in 1986 and has served as President and principal broker since the company's formation. DANIEL L. MEEHAN will become a director of the Company after the consummation of the Offering. Mr. Meehan is the co-founder and has served as President of Resort Property Management since 1982. Mr. Meehan has over 23 years of experience in the property management industry, the last 19 of them in Park City. J. PATRICK MCCURDY will become a director of the Company after the consummation of the Offering. Mr. McCurdy has served as the President and Secretary of Whistler Chalets, since he founded the company in 1986. Mr. McCurdy is a director and a former Vice-President of the Vacation Rental Managers Association. ANDRE S. TATIBOUET will become a director of the Company after the consummation of the Offering. Mr. Tatibouet has been the Chairman and Chief Executive Officer of Aston Hotels & Resorts since 1969. Mr. Tatibouet is a director of the Hawaii Hotel Association, the Hawaii Visitors Bureau and the American Hotel & Motel Association. HANS F. TRUPP will become a director of the Company after the consummation of the Offering. Mr. Trupp has served as the Chairman of Trupp-Hodnett Enterprises since 1987. He was also Chairman of Trupp-McGinty Realty, Inc. from 1984 to 1987 and Trupp McGinty Realtors/Insurers, which was formed in 1978. MICHAEL D. ROSE will become a director of the Company after the consummation of the Offering. Mr. Rose served as Chairman of the Board of Promus Hotel Corporation from April 1995 to December 1997. From June 1995 to December 1996, he was Chairman of the Board of Harrah's Entertainment, Inc. Prior to that, Mr. Rose served as Chairman of the Board (1989-1995) and President (1989-1991) of PCI and Chairman of the Board (1984-1990) and President (1988-1990) of Holiday Corporation. Mr. Rose is also a director of Ashland, Inc., Darden Restaurants, Inc., First Tennessee National Corporation, General Mills, Inc., Promus Hotel Corporation and Stein Mart, Inc. ELAN J. BLUTINGER has been a director of the Company since its formation in September 1997. He is a co-founder and Managing Director of Alpine Consolidated II, LLC, a consolidator of highly fragmented businesses. He was a co-founder of Travel Services International, Inc. and is currently a director of the company and Chairman of its Compensation Committee. From 1996 until December 1997, he was a co-founder and Managing Director of Alpine Consolidated LLC. From 1987 until its acquisition in 1995, he was the Chief Executive Officer of Shoppers Express, which became "OnCart" in 1997, an electronic retailing service in the grocery industry, and served as a director until December 1997. From 1983 until its acquisition in 1986 by IDI, Mr. Blutinger was Chief Executive Officer of DSI, a pioneer in wholesale software distribution. Mr. Blutinger is an investor in Capstone Partners, LLC. D. FRASER BULLOCK has been a director of the Company since its formation in September 1997. Mr. Bullock is a Managing Director of Alpine Consolidated II, LLC. He was a co-founder of Travel Services International, Inc. and is currently a director of the company and Chairman of its Audit Committee. From its inception in 1994 to 1996, he was the President and Chief Operating Officer of VISA Interactive, a wholly-owned subsidiary of VISA International. In 1993, Mr. Bullock became the President and Chief Operating Officer of U.S. Order, Inc., a provider of remote electronic transaction processing, until it was acquired by VISA International in 1994. From 1991 to 1992, Mr. Bullock was the Senior Vice President of U.S. Order, Inc. From 1986 to 1991, he was the Chief Financial Officer and Executive Vice President of World Corp., Inc., a holding company with various operating subsidiaries including World Airways, Inc. Mr. Bullock was a founding partner of Bain Capital, a Manager of Bain and Company, and a founder of MediVision, Inc., a consolidation of eye surgery centers. LEONARD A. POTTER has been a director of the Company since its formation in September 1997. After the Offering, he will be an Advisory Director to the Board. Mr. Potter is a co-founder and Managing Director of Capstone Partners, LLC, a venture firm specializing in consolidation transactions. He was a co-founder of Travel Services International, Inc. and is currently an advisory director to its board of 47 directors. Capstone Partners, LLC was a co-sponsor of Staffmark, Inc., a consolidation of six staffing service companies in September 1996 with a simultaneous initial public offering. Prior to forming Capstone Partners, LLC in April 1996, Mr. Potter was an attorney at Morgan, Lewis & Bockius LLP for more than five years practicing in the areas of mergers and acquisitions and securities law. While at Morgan, Lewis & Bockius he represented a number of public companies in connection with their creation and subsequent implementation of consolidation strategies similar to the Company's, including U.S. Office Products, F.Y.I., Inc. and Cotelligent Group. BOARD OF DIRECTORS BOARD COMMITTEES. The Company expects that the Board of Directors will establish an Executive Committee, Audit Committee and a Compensation Committee, effective upon the closing of the Offering. The Executive Committee will be granted such authority as may be determined from time to time by a majority of the Board of Directors. The Audit Committee will review the results and scope of the audit and other services provided by the Company's independent accountants. The Compensation Committee will approve salaries and certain incentive compensation for management and key employees of the Company and will administer the 1998 Long-Term Incentive Plan. DIRECTOR COMPENSATION. Directors who are also employees of the Company or one of its subsidiaries will not receive additional compensation for serving as directors. Each director who is not an employee of the Company or one of its subsidiaries will receive $2,000 for attendance at each Board of Directors meeting and $1,000 for each committee meeting (unless held on the same day as a Board of Directors meeting). In addition, under the Company's 1998 Long-Term Incentive Plan, each non-employee director will automatically receive an option to acquire 10,000 shares of Common Stock upon such person's initial election as a director and, subject to a certain exception, an annual option to acquire 5,000 shares at each annual meeting of the Company's stockholders thereafter at which such director is re-elected or remains a director. See "-- 1998 Long-Term Incentive Plan." Directors also will be reimbursed for out-of-pocket expenses incurred in attending meetings of the Board of Directors or committees thereof, in their capacity as directors. The Advisory Director will attend meetings of the Board of Directors, consult with officers and directors of the Company and provide guidance, but not direction, concerning management and operation of the Company's business. The Advisory Director is not a director of the Company and, accordingly, will not have a right to vote as a director. All officers serve at the discretion of the Board of Directors. EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE The Company was incorporated in September 1997, has conducted no operations and generated no revenues to date and did not compensate any of its executive officers for services rendered in 1997. The Company anticipates that during 1998 its most highly compensated executive officers will be Messrs. Sullivan, Jarvis, Murphy and Ms. Sowder. The Company will grant Messrs. Sullivan, Jarvis, Murphy and Ms. Sowder options to purchase 100,000, 50,000, 50,000 and 25,000 shares of Common Stock, respectively, at the initial public offering price per share. These options will vest in equal installments on each of the four anniversaries of the date of the consummation of the Offering. Messrs. Sullivan, Jarvis, Murphy and Ms. Sowder have entered into employment agreements with the Company, effective upon the consummation of the Offering, providing for annual base salaries of $200,000, $150,000, $150,000 and $125,000, respectively. Each of these agreements are for a term of three years (the "Initial Term"). In addition, certain executive officers of the Founding Companies, including each representative of the Founding Companies serving as a director of the Company, other than Messrs. Brady, Freeman and Howey, will enter into employment agreements for an Initial Term of three years, effective upon the consummation of the Offering. Unless terminated or not renewed by the Company or the employee, the term will continue after the Initial Term on a year-to-year basis on the same terms and conditions existing at the time of renewal. Each employment agreement will contain a covenant not to compete (the "Covenant") with the Company for a period of two years immediately following termi- 48 nation of employment or, in the case of a termination by the Company without cause in the absence of a change in control, for a period of one year following termination of employment. Under the Covenant, the executive officer generally is prohibited from: (i) engaging in any hotel management or non-commercial property management, rental or sales business in direct competition with the Company within defined geographic areas in which the Company or its subsidiaries does business; (ii) enticing a managerial employee of the Company away from the Company; (iii) calling upon any person or entity which is, or has been, within one year prior to the date of termination, a customer of the Company; or (iv) calling upon a prospective acquisition candidate which the employee knew was approached or analyzed by the Company, for the purpose of acquiring the entity. The Covenant may be enforced by injunctions or restraining orders and shall be construed in accordance with the changing location of the Company. Each of these employment agreements will provide that, in the event of a termination of employment by the Company without cause during the Initial Term the employee will be entitled to receive from the Company an amount equal to his or her then current salary for the remainder of the Initial Term or for one year, whichever is greater. In the event of a termination of employment without cause after the Initial Term of the employment agreement, the employee will be entitled to receive an amount equal to his or her then current salary for one year. In the event of a change in control of the Company (as defined in the agreement) during the Initial Term, if the employee is not given at least five days' notice of such change in control and the successor's intent to be bound by such employment agreement, the employee may elect to terminate his or her employment and receive in one lump sum three times the amount he or she would receive pursuant to a termination without cause during the Initial Term. The employment agreements also state, that in the event of a termination without cause by the Company or a change in control, the employee may elect to waive the right to receive severance compensation and, in such event, the noncompetition provisions of the employment agreement will not apply. In the event the employee is given at least five days' notice of such change in control, the employee may elect to terminate his or her employment agreement and receive in one lump sum two times the amount he or she would receive pursuant to a termination without cause during the Initial Term. In such an event, the noncompetition provisions of the employment agreement would apply for two years from the effective date of termination. Each Agreement and Plan of Organization also contains a covenant prohibiting the former owners of the Founding Companies from competing with the Company for a period of three years following the consummation of the Offering. These noncompetition provisions will not apply with respect to a former owner of a Founding Company who has entered into an employment agreement with the Company in the event the former owner is terminated without cause and elects to waive the right to receive severance compensation. 1998 LONG-TERM INCENTIVE PLAN No stock options were granted to, or exercised by or held by any executive officer in 1997. In March 1998, the Board of Directors and the Company's stockholders approved the Company's 1998 Long-Term Incentive Plan (the "Plan"). The purpose of the Plan is to provide a means by which the Company can attract and retain executive officers, employee directors, other key employees, non-employee and advisory directors and consultants of and other service providers to the Company and its subsidiaries and to compensate such persons in a way that provides additional incentives and enables such persons to acquire or increase a proprietary interest in the Company. Individual awards under the Plan may take the form of one or more of: (i) either incentive stock options ("ISOs") or non-qualified stock options ("NQSOs"); (ii) stock appreciation rights ("SARs"); (iii) restricted or deferred stock; (iv) dividend equivalents; (v) bonus shares and awards in lieu of Company obligations to pay cash compensation; (vi) non-employee directors' deferred shares; and (vii) other awards the value of which is based in whole or in part upon the value of the Common Stock. The Plan will generally be administered by a committee (the "Committee"), which will initially be the Compensation Committee of the Board of Directors, except that the Board of Directors will itself perform the Committee's functions under the Plan for purposes of grants of awards to non-employee 49 directors, and may perform any other function of the Committee as well. The Committee generally is empowered to select the individuals who will receive awards and the terms and conditions of those awards, including exercise prices for options and other exercisable awards, vesting and forfeiture conditions (if any), performance conditions, the extent to which awards may be transferable and periods during which awards will remain outstanding. Awards may be settled in cash, shares, other awards or other property, as determined by the Committee. The Company has reserved 1,814,000 shares of Common Stock for use in connection with the Plan. The maximum number of shares of Common Stock that may be subject to outstanding awards under the Plan will not exceed 12% of the aggregate number of shares of Common Stock outstanding, minus the number of shares previously issued pursuant to awards granted under the Plan. Shares of Common Stock which are attributable to awards which have expired, terminated or been canceled or forfeited are available for issuance or use in connection with future awards. The Plan provides for: (i) the automatic grant to each non-employee director and advisory director (a "Non-Employee Director") serving at the commencement of the Offering of an option to purchase 10,000 shares; and thereafter (ii) the automatic grant to each Non-Employee Director of an option to purchase 10,000 shares upon such person's initial election as a director or appointment as an advisory director. In addition, the Plan provides for an automatic annual grant to each Non-Employee Director of an option to purchase 5,000 shares at each annual meeting of stockholders following the Offering; provided, however, that if the first annual meeting of stockholders following a person's initial election as a non-employee director or appointment by the Board as an advisory director is within three months of the date of such election or appointment, such person will not be granted an option to purchase 5,000 shares of Common Stock at such annual meeting. These options will have an exercise price per share equal to the fair market value of a share at the date of grant. Options granted under the Plan will expire at the earlier of 10 years from the date of grant or one year after termination of service as a director or advisory director, and options will be immediately exercisable. In addition, the Plan permits Non-Employee Directors to elect to receive, in lieu of cash directors' fees, shares, or credits representing "deferred shares" that may be settled at future dates, as elected by the Non-Employee Directors. The number of shares or deferred shares received will be equal to the number of shares which, at the date the fees would otherwise be payable, will have an aggregate fair market value equal to the amount of such fees. At the commencement of the Offering, the Non-Employee Directors will be Messrs. Blutinger, Brady, Bullock, Freeman, Howey, Potter and Rose. The Plan will remain in effect until terminated by the Board of Directors. The Plan may be amended by the Board of Directors without the consent of the stockholders of the Company, except that any amendment, although effective when made, will be subject to stockholder approval if required by any federal or state law or regulation or by the rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted. The number of shares reserved or deliverable under the Plan, the annual per-participant limits, the number of shares subject to options automatically granted to non-employee directors and the number of shares subject to outstanding awards are subject to adjustment in the event of stock splits, stock dividends and other extraordinary corporate events. In connection with the Offering, options in the form of NQSOs to purchase a total of 400,000 shares of Common Stock of the Company will be granted to management of the Company, including 100,000 shares to Mr. Sullivan, 50,000 shares to Mr. Jarvis, 50,000 shares to Mr. Murphy, 25,000 shares to Ms. Sowder, an aggregate of 250,000 shares to Alpine Consolidated II, LLC and Capstone Partners, LLC and an aggregate of 945,000 shares to the employees of the Company and the Founding Companies. Each of the foregoing option grants will have an exercise price equal to the initial public offering price per share in the Offering, and will vest as to 25% each on the date that is 12 months, 24 months, 36 months and 48 months after the closing of the Offering. Unvested options generally will be forfeited upon a termination of employment that is voluntary by the participant. Upon a change of control of the Company (as defined in the Plan), vesting will be accelerated. The options generally will expire on the earlier of 10 years after the date of grant or three months after termination of employment (immediately in the event of a termination for cause), unless otherwise determined by the Committee. 50 CERTAIN TRANSACTIONS ORGANIZATION OF THE COMPANY VPI was formed in September 1997. VPI was initially capitalized by Alpine Consolidated II, LLC, of which Elan J. Blutinger and D. Fraser Bullock, each a Director of the Company, are Managing Directors, and Capstone Partners, LLC, of which Leonard A. Potter, an Advisory Director of the Company, is a Managing Director. As a result of a 8,834.76-for-one stock split effected in the form of a stock dividend on March 9, 1998, the 300 shares of Common Stock initially issued by VPI will aggregate 2,650,428 shares on the closing of the Offering. In November and December of 1997 and January of 1998, the Company issued a total of 487,369 shares of Common Stock (post-split) at $.01 per share to various directors and members of management, including the following individuals: Mr. Sullivan -- 289,202 shares, Mr. Jarvis -- 40,000 shares, Ms. Sowder -- 25,000 shares, Mr. Dobson -- 2,000 shares, and Mr. Brindley -- 1,167 shares. The Company also issued 84,467 shares of Common Stock at $.01 per share to certain consultants to the Company during the same period. VPI Funding, LLC ("VPIF"), a Delaware limited liability company, has agreed to lend to VPI from time to time an amount equal to the legal, accounting and other transactional costs, expenses and disbursements incurred by VPI in connection with the Combinations and the Offering. The member managers of VPIF are Alpine Consolidated II, LLC and Capstone Partners, LLC. Any amounts loaned by VPIF to VPI with respect to the foregoing will be repaid without interest by the Company from the gross proceeds of the offering at the time of the Combinations. As of March 6, 1998, VPIF had loaned $1.0 million to VPI. The aggregate consideration to be paid by VPI in the Combinations consists of (i) approximately $61.8 million in cash and assumed indebtedness (ii) 6,173,703 shares of Common Stock. The Company also will assume an aggregate of $219,000 of indebtedness of the Founding Companies in connection with the Combinations. The consideration to be paid for each of the Founding Companies was determined through arm's-length negotiations between VPI and representatives of each Founding Company. The factors considered by the Company in determining the consideration to be paid included, among others, the historical operating results, the net worth, the amount and type of indebtedness and the future prospects of the Founding Companies. Each Founding Company was represented by independent counsel in the negotiation of the terms and conditions of the Combinations. The aggregate consideration to be paid by VPI for each of the Founding Companies by the Company are as follows:
SHARES OF COMPANY CASH COMMON STOCK - ----------------------------------------- -------------------- ------------- Aston Hotels & Resorts .................. $ 29,500,000 1,708,333 Brindley & Brindley ..................... 2,000,000 195,000 Coastal Resorts ......................... -- 816,667 Collection of Fine Properties ........... 4,850,000 404,167 First Resort ............................ 2,854,800 290,767 Houston and O'Leary ..................... 2,470,000 248,167 Jupiter Property Management ............. 1,257,000 104,750 Maui Condominium and Home ............... 1,375,000 166,667 The Maury People ........................ 2,000,000 150,000 Priscilla Murphy Realty ................. 5,500,000 (1) 1,093,333 Resort Property Management .............. 1,200,000 108,333 Telluride Resort Accommodations ......... 3,013,762 125,103 Trupp-Hodnett Enterprises ............... 5,000,000 627,833 Whistler Chalets ........................ 800,000 134,583 ------------ --------- $ 61,820,562 6,173,703 ============ =========
- ---------- (1) Represents estimated amount of indebtedness of Priscilla Murphy Realty to be retired at the time of the Combinations. The above table does not include debt of approximately $219,000 that will be assumed by VPI. 51 The purchase price of certain of the Founding Companies will be increased by working capital adjustments based on cash and receivable balances as of March 31, 1998 of the respective Founding Companies. In addition, net assets of approximately $10.7 million, including certain non-operating assets and the assumption or retirement of certain liabilities will be excluded from the Combinations and retained by certain former stockholders of the Founding Companies. The closing of each of the Combinations is subject to customary conditions. These conditions include, among others, the accuracy on the closing date of the representations and warranties made by the Founding Companies, their principal stockholders and by the Company; the performance of each of their respective covenants included in the agreements relating to the Combinations; and the nonexistence of a material adverse change in the business, financial condition or results of operations of each Founding Company. There can be no assurance that the conditions of the Combinations will be satisfied or waived or that the agreements relating to the Combinations will not be terminated prior to consummation. If any of the Combinations is terminated for any reason, the Company likely will not consummate the Offering on the terms described herein. Pursuant to the agreements to be entered into in connection with the Combinations, substantially all of the stockholders of the Founding Companies have agreed not to compete with the Company for three years, commencing on the date of closing of the Offering. In connection with the Combinations, and as consideration for their interests in the Founding Companies, certain executive officers, directors and holders of more than 5% of the outstanding shares of Common Stock of the Company, together with their spouses and trusts for the benefit of their immediate families will receive, directly or indirectly, cash and shares of Common Stock of the Company as follows:
SHARES OF CASH COMMON STOCK -------------------- ------------- Luis Alonso .................... $ 1,455,000 121,250 Park Brady ..................... 304,763 31,041 Douglas R. Brindley ............ 2,000,000 195,000 Paul T. Dobson ................. 687,500 83,334 Sharon Benson Doucette ......... 2,000,000 150,000 Joshua M. Freeman .............. -- 803,519 Evan H. Gull ................... 1,057,333 88,111 Charles O. Howey ............... 2,145,000 (1) 426,401 Heidi O'Leary Houston .......... 2,470,000 248,167 Daniel L. Meehan ............... 1,200,000 98,333 J. Patrick McCurdy ............. 800,000 134,583 Andre S. Tatibouet ............. 20,930,000 1,708,333 Hans F. Trupp .................. 1,000,000 386,692
- ---------- (1) Represents estimated amount of the pro rata portion of indebtedness of Priscilla Murphy Realty to be retired at the time of the Combinations. LEASES OF FACILITIES BRINDLEY & BRINDLEY. During 1995, 1996 and 1997, Brindley & Brindley leased office space and facilities for its property management and real estate brokerage activities from Douglas R. Brindley and his wife, Betty Shotton Brindley, pursuant to two oral agreements, each on a month-to-month basis. The aggregate annual rent paid by Brindley & Brindley to the Brindleys was $63,800, $70,800 and $103,500 in 1995, 1996 and 1997, respectively. Brindley & Brindley entered into two written lease agreements with the Brindleys for these facilities that commenced on January 1, 1998. The terms of these leases expire December 31, 2002, with options to extend for two 5-year periods at the end of the lease periods and provide for aggregate annual rental payments of approximately $133,500. COASTAL RESORTS. Coastal Resorts leases office space and facilities under three separate lease agreements from Carl M. Freeman Associates, Inc. ("CMFA"). Joshua M. Freeman is the President and a stockholder of CMFA, and his father is the controlling stockholder of CMFA. The aggregate annual rent paid by Coastal Resorts to CMFA under these leases was approximately $69,000 and $77,000 in 1996 and 1997, respectively. The leases terminate on December 31, 1998, December 31, 1999 and May 21, 2002. 52 COLLECTION OF FINE PROPERTIES. The Company has adopted a policy that, wherever possible, it will not own any real property. Therefore, the Company has required two Founding Companies that own real property, Collection of Fine Properties and Whistler Chalets, to agree to transfer such real property to their stockholders or to entities controlled by their stockholders prior to the Combinations. Accordingly, certain office space owned by Collection of Fine Properties will be distributed to an entity or entities controlled by the stockholders thereof, including Luis Alonso, prior to the Combinations and then leased to the Company. Lease agreements for these properties will be entered into prior to the Combinations. The leases for such property will provide for aggregate annual rentals of approximately $73,000. THE MAURY PEOPLE. It is presently contemplated that in early 1999, The Maury People will transfer its offices to new facilities owned by a trust of which Sharon Doucette is the primary beneficiary. The lease for the new facilities will begin in April 1999 and terminate on March 31, 2004, with one option to extend for an additional five years. The annual base rental payments on the lease will be $185,400 for the first year, and increase each year thereafter by the amount of increase, if any, in the Consumer Price Index, subject to a 6% annual ceiling on increases. PRISCILLA MURPHY REALTY. Priscilla Murphy Realty has leased office space and facilities since August 25, 1997, from trusts affiliated with Charles O. Howey, under three separate lease agreements. The aggregate rent paid in 1997 by Priscilla Murphy Realty to Mr. Howey's affiliated trusts under these lease agreements was approximately $45,000. Two of the leases terminate on June 30, 2001 and the remaining lease terminates on December 31, 2002. Priscilla Murphy Realty entered into a fourth lease with the same trusts on January 28, 1998, to rent an additional office property for an annual rent payment of $12,000. This lease also terminates on December 31, 2002. RESORT PROPERTY MANAGEMENT. Resort Property Management plans to move into new office space that is owned by Daniel L. Meehan and his wife, Kimberlie Meehan, in June 1998. It is anticipated that the term of the lease will be for ten years with two options to extend the lease for five years each and that the estimated annual rent for the new facilities will be approximately $100,000, with annual increases equal to the increase in the Consumer Price Index. A lease agreement will be entered into prior to the Combinations. TRUPP-HODNETT ENTERPRISES. Trupp-Hodnett Enterprises leases office space and facilities that are co-owned by Hans F. Trupp for its management and real estate brokerage activities, under four separate lease agreements. Trupp-Hodnett Enterprises made aggregate annual rent payments of $57,313, $92,713 and $109,513 for these properties in 1995, 1996 and 1997, respectively. Two of the leases terminate on December 31, 2009, one terminates on December 31, 2008 and the fourth terminates on April 30, 2007. WHISTLER CHALETS. Office space owned by Whistler Chalets will be distributed to an entity controlled by J. Patrick McCurdy prior to the Combinations and then leased to the Company. The lease for such property will have a term of 5 years, with 3 renewal options of 5 years each, and will provide for annual rentals of approximately $30,000. The lease agreement will be entered into prior to the Combinations. MANAGEMENT AGREEMENTS ASTON HOTELS & RESORTS. Since 1994, Aston Hotels & Resorts has managed two hotels owned by Andre S. Tatibouet. The aggregate management fees received by Aston Hotels & Resorts for the management of these properties were $243,000, $501,000 and $506,000 in 1995, 1996 and 1997, respectively. The management agreements for these hotels terminate on December 31, 2003. In addition Aston Hotels & Resorts currently is a party to two lease and management agreements for two hotels dated February 1, 1996 and February 21, 1991, respectively. Prior to the Combinations, Aston Hotels & Resorts will transfer the lease and management agreements to AST Holdings, Inc. and simultaneously enter into management agreements with AST Holdings, Inc. to manage these properties. AST Holdings, Inc. is owned by Mr. Tatibouet. COLLECTION OF FINE PROPERTIES. Prior to the Combinations, Collection of Fine Properties will distribute to Luis Alonso and another stockholder eight condominiums currently owned and managed by Collection of Fine Properties. Subsequently, Collection of Fine Properties will manage these properties, pursuant to its standard management agreement. 53 TRUPP-HODNETT ENTERPRISES. Pursuant to an agreement dated January 1, 1994, Trupp-Hodnett Enterprises provides management services for a 74-room hotel that is co-owned by Hans F. Trupp, for $42,000 a year. The management agreement terminates on December 31, 1999. Trupp-Hodnett Enterprises also manages several vacation condominiums owned or co-owned by Mr. Trupp pursuant to its standard management agreement. Trupp-Hodnett Enterprises has received aggregate property management fees related to Mr. Trupp's ownership of these properties of $53,480, $48,390 and $44,233 for 1995, 1996 and 1997, respectively. WHISTLER CHALETS. Prior to the Combinations, Whistler Chalets will distribute to J. Patrick McCurdy six vacation condominiums currently owned and managed by Whistler Chalets. Subsequently, Whistler Chalets will manage these properties, together with one additional vacation condominium owned by Mr. McCurdy that it currently manages, pursuant to its standard management agreement. Additionally, Whistler Chalets paid management fees to Whistler Blackcomb Central Reservations, Inc. ("Whistler Blackcomb") for the management services of Mr. McCurdy in the amount of $513,900, $537,176 and $29,600 for 1995, 1996 and 1997, respectively. Mr. McCurdy is the President and owner of Whistler Blackcomb. As of December 31, 1997, Whistler Chalets was indebted to Whistler Blackcomb in the amount of $471,811 for unpaid management fees. These fees will be paid prior to the Combinations. No management fees will be payable to Whistler Blackcomb after the Combinations. OTHER TRANSACTIONS ASTON HOTELS & RESORTS. Since July 22, 1997, Aston Hotels & Resorts has provided administrative services to AST International, LLC. ("AST International"), an entity controlled by Andre S. Tatibouet, under an oral agreement, and will continue to perform these services after the Combinations under a written agreement. AST International has been billed $419,730 by Aston Hotels & Resorts for its services since July 22, 1997. Aston Hotels & Resorts receives sales representation and accounting services from HCP, Inc. ("HCP"), a company owned by Mr. Tatibouet. Aston Hotels & Resorts paid HCP $390,000, $481,000 and $476,000 in 1995, 1996 and 1997, respectively, for these services. This arrangement will not continue after the Combinations. Under the terms of an oral agreement, Aston Hotels & Resorts provides management and clerical personnel for AST Development, Inc. ("AST Development") in return for consulting and support services. AST Development is owned by Mr. Tatibouet. The costs incurred by Aston Hotels & Resorts relative to AST Development were $125,000, $125,000 and $126,000 for 1995, 1996 and 1997, respectively. This agreement will continue in a limited form pursuant to a written agreement after the Combinations. Aston Hotels & Resorts has oral consulting agreements with Mr. Tatibouet's wife and Mr. Tatibouet's mother, who received annual aggregate compensation from Aston Hotels & Resorts of $229,000, $221,000 and $232,000 in 1995, 1996 and 1997, respectively. These agreements will not continue after the Combinations. Additionally, Aston Hotels & Resorts has executed three promissory notes, each payable to Mr. Tatibouet's wife, in the aggregate amount of $285,000. These notes are each dated December 31, 1997, and each comes due on February 28, 1999. These notes will be paid prior to the Combinations. Mr. Tatibouet currently owes Aston Hotels & Resorts an aggregate amount of $7.3 million. In addition, the Coral Reef Hotel, the Waikiki Beachside Hotel, Aston International and HCP, Inc., all entities owned or controlled by Mr. Tatibouet, in the aggregate owe Aston Hotels & Resorts a total of $1,797,243. No interest is being charged on these receivables, of which $4 million will remain outstanding after the Combinations. The remaining $4 million balance will bear interest at the Prime Rate less 0.5, with a minimum of 6% and maximum of 10%, to be paid within ten years. Additionally, as of December 31, 1997, Aston Hotels & Resorts had guaranteed or cosigned on personal debts and obligations of Mr. Tatibouet in the aggregate amount of $17,374,000. The Company will be released from liability on these debts or they will be repaid prior to, or as soon as practicable after, the Combinations. Aston Hotels & Resorts leased storage space from a limited partnership, Waikiki International Plaza in which Mr. Tatibouet and Aston Hotels & Resorts are each general partners with respective 45% and 5% partnership interests. The leased storage space was sold to an unrelated third party in December 1997. The aggregate annual rent paid by Aston Hotels & Resorts to Waikiki International Plaza was $128,000, $114,000 and $110,000 in 1995, 1996 and 1997, respectively. 54 BRINDLEY & BRINDLEY. Brindley & Brindley receives real estate sales commissions from Outer Banks Ventures, Inc. ("Outer Banks Ventures") pursuant to an exclusive listing agreement giving Brindley & Brindley the right to sell all land developed by the company. Douglas R. Brindley is the Vice President of Outer Banks Ventures and his father is the owner and President of Outer Banks Ventures. Brindley & Brindley received commissions from Outer Banks Ventures in the amount of $7,200, $23,800 and $69,800 in 1995, 1996 and 1997, respectively. COASTAL RESORTS. Coastal Resorts purchased all the assets of Interstate Realty Co., Inc. ("Interstate Realty") from CMF Properties, Inc. ("CMF Properties") on December 30, 1996 for $759,000. Coastal Resorts purchased all the outstanding stock of Sea Colony Management, Inc., a wholly owned subsidiary of CMF Properties on December 30, 1996 for $132,000. CMF Properties was a majority owned subsidiary of CMFA. These acquisitions were financed by loans from CMFA to Coastal Resorts in the aggregate amount of $675,000 which were paid in full on January 13, 1998. On December 31, 1997, Coastal Resorts sold the service mark "Sea Colony" to Sea Colony Development Corporation, Inc. ("Sea Colony Development") for $115,000 and a ten year license to use the service mark at no charge under the terms of a license agreement. Sea Colony Development is owned by Joshua M. Freeman. Pursuant to an exclusive listing agreement with Sea Colony Development dated January 1, 1997, Coastal Resorts receives a real estate sales commission of 6.5% of the purchase price of each new home sold at the Sea Colony condominium community in Bethany Beach, Delaware. Under the agreement, Coastal Resorts is also required to develop a marketing plan, at its own expense, to promote home sales in the Sea Colony community. Coastal Resorts earned commissions in the amount of $1,244,000 for 1997. As of December 31, 1997, Coastal Resorts had a net receivable from Sea Colony Development of $673,707, consisting of a receivable of $1,244,000 for home sales commissions and a payable of $570,435 for commissions, marketing and advertising expenses paid by Sea Colony Development on behalf of Coastal Resorts. This agreement terminates on December 31, 1999. Pursuant to an agreement dated January 1, 1997, Coastal Resorts receives sales commissions of 6% for selling properties developed by Cove Resort Limited Partnership ("Cove Resort"). CMFA is the general partner and a 70% owner of Cove Resort. Under the agreement, Coastal Resorts is also required to develop a marketing plan, at its own expense, to promote home sales in The Cove community. Coastal Resorts was paid $18,750 under this agreement in 1997. The agreement terminates on December 31, 1999. Coastal Resorts has a management agreement with CMF Fitness, Inc. ("CMF Fitness") dated June 1, 1996, to manage the Sea Colony Fitness Center for $5,834 a month. CMF Fitness is a wholly owned subsidiary of CMFA. CMF Fitness paid Coastal Resorts $40,838 and $70,000 in 1996 and 1997, respectively, under the agreement. The agreement terminates on the earlier of (i) December 31 of the year in which the last new home in the Sea Colony development is sold or (ii) December 31, 2005. Pursuant to an agreement with Sea Colony Water Company, L.L.C. ("Sea Colony Water") dated January 1, 1997, Coastal Resorts was appointed exclusive agent for and manager of the Sea Colony Water Plant. Sea Colony Water is a wholly owned subsidiary of CMFA. Under the terms of the agreement, Coastal Resorts is entitled to retain all revenue collected by the water plant, less costs and expenses and certain payments to Sea Colony Water. Coastal Resorts received net revenues of $143,488 in 1997 from its management of the water plant. This agreement terminates on December 31, 2001 or upon the sale of the water plant. Coastal Resorts has also entered into an agreement with Sea Colony Water dated January 1, 1997 to provide construction supervision services for an upgrade to the water plant for two years. Coastal Resorts' fee for the services is the direct costs it incurs plus 5%. Coastal Resorts did not receive any payments under this agreement in 1997. Pursuant to an agreement with CMF Paymaster, Inc. ("Paymaster") dated January 1, 1997, Paymaster provides administrative services relating to payroll and employee benefit matters to Coastal Resorts, at a cost of $2 per pay period per employee. Paymaster is indirectly owned by Mr. Freeman. Coastal Resorts did not make any payments to Paymaster under this agreement in 1997. This agreement terminates on December 31, 1999. 55 COLLECTION OF FINE PROPERTIES. Pursuant to an oral agreement, Collection of Fine Properties performs accounting and bookkeeping services for L&D Development Company ("L&D Development"). Luis Alonso owns 30% of L&D Development. The annual amounts paid to Collection of Fine Properties from L&D Development were $60,000, $57,000 and $75,000 in 1995, 1996 and 1997, respectively. Collection of Fine Properties has a mortgage note for $125,000 as of December 31, 1997 at an interest rate of the Prime Rate plus 0.5%, which is guaranteed by Mr. Alonso and others and will be assumed prior to the Combinations by them. In addition, as of December 31, 1997, the Company had receivables in the amount of $633,509 from Mr. Alonso and persons affiliated with him. FIRST RESORT. First Resort purchased the rights to software designed by Evan H. Gull under the terms of a purchase agreement dated January 1, 1987. The agreement gave Mr. Gull the right to receive royalty payments through 1997. The royalties paid by First Resort to Mr. Gull were $61,800 , $57,040 and $24,307 in 1995, 1996 and 1997, respectively. HOUSTON AND O'LEARY. Effective as of January 1, 1998 a stockholder of Houston and O'Leary redeemed his stock and took on certain liabilities of Houston and O'Leary in return for receiving certain assets of Houston and O'Leary, including several notes receivable to Houston & O'Leary from the stockholder and Heidi O'Leary Houston, in the aggregate amount of $297,000. PRISCILLA MURPHY REALTY. Charles O. Howey loaned $200,000 to Priscilla Murphy Realty on December 31, 1997 at an interest rate of 7.95%. As of December 31, 1997, the balance on this loan was $150,000. The note does not have a set maturity date. As of December 31, 1997, Priscilla Murphy Realty also was indebted to C.O. Condominium Corporation for $2,063,000 under the terms of a promissory note issued to C.O. Condominium Corporation, dated January 3, 1997. The interest rate on the note is 7.95%. C.O. Condominium Corporation is owned by Mr. Howey. RESORT PROPERTY MANAGEMENT. Daniel L. Meehan loaned Resort Property Management $50,000 on May 25, 1997 and $60,000 on September 29, 1997, both loans at an interest rate of 9.5%. The loans were both paid on November 10, 1997. Mr. Meehan also maintains a bank revolving credit agreement for $250,000 at a 10.25% interest rate, under which he draws funds which he loans to Resort Property Management for cash flow purposes. Resort Property Management makes interest and principal payments on the loan directly to the bank. At the present time, the balance on the revolving credit is zero. TELLURIDE RESORT ACCOMMODATIONS. Park Brady will enter into a consulting agreement with the Company, effective upon the consummation of the Offering. The term of the agreement shall be for one year, during which time Mr. Brady will provide up to ten hours of consulting services per week for a nominal consideration. TRUPP-HODNETT ENTERPRISES. In 1997, Trupp-Hodnett Enterprises sold a building, the related land (with a total book value of $135,000) and the related $124,000 mortgage note payable to the stockholders of Trupp-Hodnett Enterprises, including Hans F. Trupp, for $11,000 in cash. WHISTLER CHALETS. As of December 31, 1997, Res - Resort Services Inc. ("Resort Services") was indebted to Whistler Chalets in the amount of $83,639 for various expenses paid by Whistler Chalets on behalf of Resort Services. Resort Services is owned by J. Patrick McCurdy. Mr. McCurdy is currently indebted to Whistler Chalets in the amount of $144,426 for advances against his management fees and expenses. Both of these debts will be paid prior to the Combinations. PUT-CALL AGREEMENT The Company has entered into a put-call agreement with Scottsdale Resort Accommodations, L.L.C. ("Scottsdale Resort Accommodations") and its stockholders (the "Stockholders") dated December 22, 1997. The Stockholders are stockholders of Telluride Resort Accommodations. Pursuant to the agreement, if Scottsdale Resort Accommodations achieves earnings before incomes taxes of $300,000 for a trailing twelve-month period, the Stockholders can require the Company to purchase the outstanding stock of Scottsdale Resort Accommodations. Conversely, the Company has the right to purchase the 56 outstanding stock of Scottsdale Resort Accommodations if Scottsdale Resort Accommodations achieves earnings before income taxes of $500,000 for a similar period. The purchase price will be seven times Scottsdale Resort Accommodations' earnings before income taxes for the relevant twelve-month period, to be paid in Common Stock of the Company, unless the Stockholders elect to receive up to 50% of the purchase price in cash. COMPANY POLICY In the future, any transactions with officers, directors and holders of more than 5% of the Common Stock will be approved by a majority of the Board of Directors, including a majority of the disinterested members of the Board of Directors. 57 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Common Stock of the Company, after giving effect to the Combinations and the Offering, by: (i) each person known to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each of the Company's directors and persons who have consented to be named as directors ("named directors"); (iii) each named executive officer; and (iv) all executive officers, directors and named directors as a group. All persons listed have an address in care of the Company's principal executive offices and have sole voting and investment power with respect to their shares unless otherwise indicated.
PERCENTAGE OWNED ---------------------------- NAMES AND ADDRESS BEFORE OF BENEFICIAL OWNER SHARES OFFERING AFTER OFFERING - ------------------------------------------------ ------------ ---------- --------------- David C. Sullivan ....................... 289,202 3.1% 1.9% Jeffery M. Jarvis ....................... 40,000 * * W. Michael Murphy ....................... 40,000 * * Jules S. Sowder ......................... 25,000 * * Luis Alonso ............................. 121,250 1.3 * Park Brady .............................. 31,041 * * Douglas R. Brindley (1) ................. 196,167 2.1 1.3 Paul T. Dobson .......................... 85,334 * * Sharon Benson Doucette .................. 150,000 1.6 1.0 Joshua M. Freeman (2) ................... 803,519 8.6 5.3 Evan H. Gull ............................ 88,111 * * Charles O. Howey (3) .................... 426,401 4.6 2.8 Heidi O'Leary Houston ................... 248,167 2.7 1.6 Daniel L. Meehan ........................ 98,333 1.1 * J. Patrick McCurdy ...................... 134,583 1.4 * Andre S. Tatibouet ...................... 1,708,333 18.4 11.3 Hans F. Trupp ........................... 386,692 4.2 2.6 Michael D. Rose (4) ..................... 41,667 * * Elan J. Blutinger (5) ................... 1,898,776 20.4 12.6 D. Fraser Bullock (5) ................... 1,898,776 20.4 12.6 Alpine Consolidated, LLC ................ 1,898,776 20.4 12.6 Capstone Partners, LLC (6) .............. 949,388 10.2 6.3 All Directors and Executive Officers as a Group (20 persons) ..................... 7,760,797 82.9% 51.3%
- ---------- * Less than 1.0% (1) Includes 97,500 shares owned by Betty Shotton Brindley, his spouse. (2) Includes 477,750 shares owned by CMF Coastal Resorts L.L.C., in which Mr. Freeman has a 98% membership interest. (3) Includes 98,400 shares beneficially owned by Dolores Howey, his spouse. (4) Includes 41,667 shares which Mr. Rose will purchase in the Offering at the initial offering price. (5) Includes for each of Messrs. Blutinger and Bullock 250,000 shares which may be acquired upon the exercise of options and 1,732,109 shares held by Alpine Consolidated II, LLC., Elan J. Blutinger and D. Fraser Bullock as Managing Directors of Alpine Consolidated II, LLC. (6) Includes 83,333 shares which may be acquired upon the exercise of options. Leonard A. Potter, an Advisory Director, is a Managing Director of Capstone Partners, LLC. 58 DESCRIPTION OF CAPITAL STOCK GENERAL The Company's authorized capital stock consists of 50,000,000 shares of Common Stock, par value $.01 per share of which 3,134,630 shares shall be designated restricted stock (the "Restricted Common Stock"), and 10,000,000 shares of undesignated preferred stock, par value $.01 per share (the "Preferred Stock"). After giving effect to the Combinations and the completion of the Offering, the Company will have outstanding 15,116,667 shares of Common Stock (of which 3,134,630 are shares of Restricted Common Stock) and no shares of Preferred Stock. See "Shares Eligible for Future Sale." The following statements are brief summaries of certain provisions with respect to the Company's capital stock contained in its Certificate of Incorporation and By-Laws, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. The following is qualified in its entirety by reference thereto. COMMON STOCK AND RESTRICTED COMMON STOCK All of the rights, privileges and obligations of the Common Stock and Restricted Common Stock are the same, except for voting rights. The holders of Common Stock are entitled to one vote for each share on all matters voted upon by stockholders, including the election of directors. The holders of Restricted Common Stock are entitled to one half of one vote for each share held on all matters. Subject to the rights of any then outstanding shares of Preferred Stock, the holders of Common Stock are entitled to such dividends as may be declared in the discretion of the Board of Directors out of funds legally available therefor. See "Dividend Policy." Holders of Common Stock are entitled to share ratably in the net assets of the Company upon liquidation after payment or provision for all liabilities and any preferential liquidation rights of any Preferred Stock then outstanding. The holders of Common Stock have no preemptive rights to purchase shares of stock of the Company. Shares of Common Stock are not subject to any redemption provisions and are not convertible into any other securities of the Company, except as provided in the following paragraph. All outstanding shares of Common Stock are, and the shares of Common Stock to be issued pursuant to the Offering will be upon payment therefor, fully paid and non-assessable. Each share of Restricted Common Stock will automatically convert to Common Stock on a share for share basis: (a) in the event of a disposition of such share of Restricted Common Stock by the holder thereof (other than a disposition which is a distribution by a holder to its partners or beneficial owners or a transfer to a related party of such holder (as defined in Sections 267, 707, 318 and/or 4946 of the Code)); (b) in the event any person acquires beneficial ownership of 15% or more of the outstanding shares of Common Stock of the Company; (c) in the event any person offers to acquire 15% or more of the outstanding shares of Common Stock of the Company; or (d) in the event a majority of the aggregate number of votes which may be voted by the holders of outstanding shares of Common Stock and Restricted Stock entitled to vote and approve such conversion. At December 31, 2000, the Company may elect to convert any outstanding shares of Restricted Common Stock into shares of Common Stock in the event 80% or more of the outstanding shares of Restricted Common Stock have been converted into shares of Common Stock. The Company will apply for listing of the Common Stock on the New York Stock Exchange under the symbol "VAC". PREFERRED STOCK The Preferred Stock may be issued from time to time by the Board of Directors in one or more series. Subject to the provisions of the Company's Certificate of Incorporation and limitations prescribed by law, the Board of Directors is expressly authorized to adopt resolutions to issue the shares, to fix the number of shares and to change the number of shares constituting any series and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether 58 dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any series of the Preferred Stock, in each case without any further action or vote by the stockholders. The Company has no current plans to issue any shares of Preferred Stock. One of the effects of undesignated Preferred Stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of the Company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of the Company's management. The issuance of shares of the Preferred Stock pursuant to the Board of Directors' authority described above may adversely affect the rights of the holders of Common Stock. For example, Preferred Stock issued by the Company may rank prior to the Common Stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of Common Stock. Accordingly, the issuance of shares of Preferred Stock may discourage bids for the Common Stock or may otherwise adversely affect the market price of the Common Stock. STATUTORY BUSINESS COMBINATION PROVISION Upon the consummation of the Offering, the Company will be subject to the provisions of Section 203 of the DGCL ("Section 203"). Section 203 provides, with certain exceptions, that a Delaware corporation may not engage in any of a broad range of business combinations with a person or an affiliate or associate of such person, who is an "interested stockholder" for a period of three years from the date that such person became an interested stockholder unless: (i) the transaction resulting in a person becoming an interested stockholder, or the business combination, is approved by the Board of Directors of the corporation before the person becomes an interested stockholder; (ii) the interested stockholder acquired 85% or more of the outstanding voting stock of the corporation in the same transaction that makes such person an interested stockholder (excluding shares owned by persons who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans); or (iii) on or after the date the person becomes an interested stockholder, the business combination is approved by the corporation's board of directors and by the holders of at least 66% of the corporation's outstanding voting stock at an annual or special meeting, excluding shares owned by the interested stockholder. Under Section 203, an "interested stockholder" is defined as any person who is (i) the owner of 15% or more of the outstanding voting stock of the corporation or (ii) an affiliate or associate of the corporation and who was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. The Company's stockholders, by adopting an amendment to the Certificate of Incorporation, may elect not to be governed by Section 203, which election would be effective 12 months after such adoption. The provisions of Section 203 could delay or frustrate a change in control of the Company, deny stockholders the receipt of a premium on their Common Stock and have an adverse effect on the Common Stock. The provisions also could discourage, impede or prevent a merger or tender offer, even if such event would be favorable to the interests of stockholders. LIMITATION ON DIRECTORS' LIABILITIES Limitation on Liability. Pursuant to the Company's Certificate of Incorporation and as permitted by Section 102(b)(7) of the DGCL, directors of the Company are not liable to the Company or its stockholders for monetary damages for breach of fiduciary duty, except for liability in connection with a breach of duty of loyalty, for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, for dividend payments or stock repurchases that are illegal under Delaware law or for any transaction in which a director has derived an improper personal benefit. Indemnification. To the maximum extent permitted by law, the Certificate of Incorporation provides for mandatory indemnification of directors and officers of the Company against any expense, liability and loss to which they become subject, or which they may incur as a result of having been a director or officer of the Company. In addition, the Company must advance or reimburse directors and officers for expenses incurred by them in connection with certain claims. 59 ADVANCE NOTICE REQUIREMENTS FOR DIRECTOR NOMINEES. The Company's By-Laws establish an advance notice procedure with regard to the nomination of candidates for election as directors at any meeting of stockholders called for the election of directors. The procedure provides that a notice relating to the nomination of directors must be timely given in writing to the Chairman of the Board of Directors of the Company prior to the meeting. To be timely, notice relating to the nomination of directors must be delivered not less than 90 days prior to any such meeting of stockholders called for the election of directors. Notice to the Company from a stockholder who proposes to nominate a person at a meeting for election as a director must be accompanied by each proposed nominee's written consent and contain the name, address and principal occupation of each proposed nominee. Such notice must also contain the total number of shares of capital stock of the Company that will be voted for each of the proposed nominees, the name and address of the notifying stockholder and the number of shares of capital stock of the Company owned by the notifying stockholder. Although the Company's By-Laws do not give the Board of Directors any power to approve or disapprove stockholder nominations for the election of directors or of any other business desired by stockholders to be conducted at an annual or any other meeting, the Company's By-Laws (i) may have the effect of precluding a nomination for the election of directors or precluding the conduct of business at a particular meeting if the proper procedures are not followed or (ii) may discourage or deter a third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company, even if the conduct of such solicitation or such attempt might be beneficial to the Company and its stockholders. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is American Stock Transfer and Trust Company. 60 SHARES ELIGIBLE FOR FUTURE SALE After the Offering, the Company will have outstanding 15,116,667 shares of Common Stock. The 5,808,334 shares sold in the Offering (plus any additional shares sold upon exercise of the Underwriters' over-allotment option) will be freely tradable without restriction unless acquired by affiliates of the Company. None of the remaining 9,308,333 outstanding shares of Common Stock (including 3,134,630 shares of Restricted Common Stock beneficially owned by the Company's officers, directors and certain other stockholders) has been registered under the Securities Act, which means that they may be resold publicly only upon registration under the Securities Act or in compliance with an exemption from the registration requirements of the Securities Act, including the exemption provided by Rule 144 thereunder. In general, under Rule 144 as currently in effect, if one year has elapsed since the later of the date of the acquisition of the restricted shares of Common Stock from either the Company or any affiliate of the Company, the acquiror or subsequent holder thereof may sell, within any three-month period commencing 90 days after the date of the Prospectus relating to the Offering, a number of shares that does not exceed the greater of one percent of the then outstanding shares of the Common Stock, or the average weekly trading volume of the Common Stock on the New York Stock Exchange during the four calendar weeks preceding the date on which notice of the proposed sale is sent to the Commission. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. If two years have elapsed since the later of the date of the acquisition of restricted shares of Common Stock from the Company or any affiliate of the Company, a person who is not deemed to have been an affiliate of the Company at any time for 90 days preceding a sale would be entitled to sell such shares under Rule 144 without regard to the volume limitations, manner of sale provisions or notice requirements. Upon the completion of the Offering, the holders of Common Stock who did not purchase shares in the Offering will own an aggregate of 9,308,333 shares of Common Stock, including the stockholders of the Founding Companies, who will receive in the aggregate 6,173,703 shares in connection with the Combinations, and management and founders of VPI, who own an aggregate of 3,134,630 shares. These shares have not been registered under the Securities Act and, therefore, may not be sold unless registered under the Securities Act or sold pursuant to an exemption from registration, such as the exemption provided by Rule 144. Furthermore, these stockholders have separately agreed with the Company not to sell, transfer or otherwise dispose of any of these shares for one year following the closing of the Offering. These stockholders also have certain demand and piggyback registration rights with respect to these shares. The Company has agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock, for a period of 180 days after the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The holders of all shares outstanding prior to the Offering and the stockholders of the Founding Companies who will receive shares of Common Stock in exchange for their stock in the Founding Companies have agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock for a period of one year from the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The foregoing restrictions will not apply: (i) in the case of the Company, to options or shares of Common Stock issued pursuant to the Company's 1998 Long-Term Incentive Plan or in connection with acquisitions and (ii) in the case of all holders shares of Common Stock disposed of as bona fide gifts, subject in each case to any remaining portion of the one year or 180-day period, as applicable, to any shares so issued or transferred. In evaluating any request for a waiver of the one year or 180-day lock-up period, as applicable, Smith Barney Inc. will consider, in accordance with its customary practice, all relevant facts and circumstances at the time of the request, including, without limitation, the recent trading market for the Common Stock, the size of the request and, with respect to a request by the Company to issue additional equity securities, the purpose of such an issuance. See "Underwriting." 61 The 3,000,000 shares of Common Stock to be registered by the Company for use as consideration in future acquisitions will be, upon issuance thereof, freely tradable unless acquired by parties to the acquisition or affiliates of such parties, other than the issuer, in which case they may be sold pursuant to Rule 145 under the Securities Act. Rule 145 permits such persons to resell immediately securities acquired in transactions covered under the Rule, provided such securities are resold in accordance with the public information, volume limitations and manner of sale requirements of Rule 144. If a period of one year has elapsed since the date such securities were acquired in such transaction and if the issuer meets the public information requirements of Rule 144, Rule 145 permits a person who is not an affiliate of the issuer to freely resell such securities. The Company intends to contractually restrict the resale of these shares in connection with future acquisitions accounted for using the purchase method of accounting. The piggyback registration rights described above will not apply to the registration statement to filed with respect to these 3,000,000 shares. Sales, or the availability for sale of, substantial amounts of the Common Stock in the public market could adversely affect prevailing market prices and the ability of the Company to raise equity capital in the future. 62 UNDERWRITING The Underwriters named below (the "Underwriters") represented by Smith Barney Inc., NationsBanc Montgomery Securities LLC and Furman Selz LLC (the "Representatives"), have severally agreed, subject to the terms and conditions in the underwriting agreement (the "Underwriting Agreement") by and between the Company and the Underwriters, to purchase from the Company the number of shares of Common Stock indicated below opposite its name, at the public offering price less the underwriting discount set forth on the cover page of this Prospectus. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters are committed to purchase all of the shares of Common Stock, if they purchase any.
NUMBER OF UNDERWRITERS SHARES ------------ ------ Smith Barney Inc. ............................. NationsBanc Montgomery Securities LLC ......... Furman Selz LLC ............................... Total ...................................... 5,808,334 =========
The Representatives have advised the Company that the Underwriters propose initially to offer the shares of Common Stock to the public on the terms set forth on the cover page of this Prospectus. The Underwriters may allow selected dealers a concession of not more than $ per share; and the Underwriters may allow, and such dealers may reallow, a concession of not more than $ per share to certain other dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Representatives. The Common Stock is offered subject to receipt and acceptance by the Underwriters, and to certain other conditions, including the right to reject orders in whole or in part. The Company has granted to the Underwriters an option, exercisable for the 30-day period after the date of this Prospectus, to purchase up to a maximum of 871,250 additional shares of Common Stock to cover over-allotments, if any, at the same price per share as the initial shares to be purchased by the Underwriters. To the extent that the Underwriters exercise such over-allotment option, the Underwriters will be committed, subject to certain conditions, to purchase such additional shares in approximately the same proportion as set forth in the above table. The Underwriters may purchase such shares only to cover over-allotments made in connection with the Offering. The Underwriting Agreement provides that the Company will indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act, or will contribute to payments the Underwriters may be required to make in respect thereof. The Company has agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock, for a period of 180 days after the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The holders of all shares outstanding prior to the Offering and the stockholders of the Founding Companies who will receive shares of Common Stock in exchange for their stock in the Founding Companies have agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock for a period of one year from the date of this Prospectus without the prior written consent of Smith Barney Inc. on behalf of the Underwriters. The foregoing restrictions will not 63 apply: (i) in the case of the Company to options or shares of Common Stock issued pursuant to the Company's 1998 Long-Term Incentive Plan or in connection with acquisitions and (ii) in the case of all holders shares of Common Stock disposed of as bona fide gifts, subject in each case to any remaining portion of the one year or 180-day period, as applicable, to any shares so issued or transferred. In evaluating any request for a waiver of the 180-day lock-up period, Smith Barney Inc. will consider, in accordance with its customary practice, all relevant facts and circumstances at the time of the request, including, without limitation, the recent trading market for the Common Stock, the size of the request and, with respect to a request by the Company to issue additional equity securities, the purpose of such an issuance. See "Shares Eligible for Future Sale." In connection with the Offering, certain Underwriters and selling group members and their respective affiliates may engage in transactions that stabilize, maintain or otherwise affect the market price of the Common Stock. Such transactions may include stabilization transactions effected in accordance with Rule 104 of Regulation M under the Securities Exchange Act of 1934, pursuant to which such persons may bid for or purchase Common Stock for the purpose of stabilizing its market price. The Underwriters also may create a short position for the account of the Underwriters by selling more Common Stock in connection with the Offering than they are committed to purchase from the Company and, in such case, may purchase Common Stock in the open market following completion of the Offering to cover all or a portion of such short position. The Underwriters may also cover all or a portion of such short position, up to 871,250 shares of Common Stock, by exercising the Underwriters' over-allotment option referred to above. In addition, Smith Barney Inc., on behalf of the Underwriters, may impose "penalty bids" under contractual arrangements with the Underwriters whereby it may reclaim from an Underwriter (or dealer participating in the Offering) for the account of the other Underwriters, the selling concession with respect to Common Stock that is distributed in the Offering but subsequently purchased for the account of the Underwriters in the open market. Any of the transactions described in this paragraph may result in the maintenance of the price of the Common Stock at a level above that which might otherwise prevail in the open market. None of the transactions described in this paragraph is required, and, if any such transactions are undertaken, they may be discontinued at any time. The Representatives have informed the Company that the Underwriters do not intend to make sales of Common Stock offered by this Prospectus to accounts over which they exercise discretionary authority in excess of 5% of the number of shares of Common Stock offered hereby. Prior to the Offering, there has been no public trading market for the Common Stock. Consequently, the initial public offering price will be determined by negotiations between the Company and the Representatives. Among the factors expected to be considered in such negotiations are the history of and the prospects for the industry in which the Company competes, an assessment of the Company's management, the past and present earnings of the Founding Companies and the trend of such earnings, the prospects for future earnings of the Company, the present state of the Company's development, the general condition of the economy and the securities markets at the time of the Offering and the market price of and demand for publicly traded stock of comparable companies in recent periods. LEGAL MATTERS The validity of the issuance of the shares of Common Stock offered by this Prospectus will be passed upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C. Certain legal matters related to the Offering will be passed upon for the Underwriters by Kramer, Levin, Naftalis & Frankel, New York, New York. The Company has agreed with Akin, Gump, Strauss, Hauer & Feld, L.L.P. to discount part of its legal fees unless the Offering is consummated, in which event the Company will pay the entire amount of such fees as well as a bonus amount. EXPERTS The audited financial statements of Vacation Properties International, Inc., Hotel Corporation of the Pacific, Inc., Brindley & Brindley Realty Development, Inc., and B&B On The Beach Inc., Coastal Resorts Management, Inc. and Coastal Resorts Realty LLC, Interstate Realty Company, Inc. and Sea 64 Colony Management, Inc., Collection of Fine Prospecties, Inc., First Resort Software, Inc., Houston and O'Leary Company, The Maury People, Inc., Howey Acquisition, Inc., Priscilla Murphy Realty, Inc., Resort Property Management, Inc., Telluride Resort Accomodations, Inc., and Trupp-Hodnett Enterprises, Inc. and THE Management Company, included elsewhere in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The audited financial statements of Collection of Fine Properties, Inc., included elsewhere in this Prospectus have been audited by Morrison, Brown, Argiz and Company, independent auditors, as indicated in their report with respect thereto, and in reliance upon the authority of said firm as experts in giving said report. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement on Form S-1 with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information pertaining to the Company and the shares of Common Stock offered hereby, reference is made to such Registration Statement, including the exhibits, financial statements and schedules filed therewith. Statements contained in this Prospectus as to the contents of any contract or any other document are not necessarily complete, and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including the exhibits and schedules thereto, may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional offices located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained from the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such Internet web site is http://www.sec.gov. 65 INDEX TO FINANCIAL STATEMENTS UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA HISTORICAL FINANCIAL STATEMENTS PAGE ----- VACATION PROPERTIES INTERNATIONAL, INC. PRO FORMA: Basis of Presentation .............................................. F-3 Unaudited Pro Forma Combined Balance Sheet ......................... F-4 Unaudited Pro Forma Combined Statement of Operations ............... F-6 Notes to Unaudited Pro Forma Combined Financial Statements ......... F-8 VACATION PROPERTIES INTERNATIONAL, INC.: Report of Independent Public Accountants ........................... F-11 Balance Sheet ...................................................... F-12 Notes to Financial Statements ...................................... F-13 HOTEL CORPORATION OF THE PACIFIC, INC.: Report of Independent Public Accountants ........................... F-16 Balance Sheets ..................................................... F-17 Statements of Operations ........................................... F-18 Statements of Changes in Stockholders' Equity (Deficit) ............ F-19 Statements of Cash Flows ........................................... F-20 Notes to Financial Statements ...................................... F-21 BRINDLEY & BRINDLEY: Report of Independent Public Accountants ........................... F-30 Combined Balance Sheet ............................................. F-31 Combined Statement of Operations ................................... F-32 Combined Statement of Changes in Stockholders' Equity .............. F-33 Combined Statement of Cash Flows ................................... F-34 Notes to Combined Financial Statements ............................. F-35 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY, LLC: Report of Independent Public Accountants ........................... F-38 Combined Balance Sheets ............................................ F-40 Combined Statements of Operations .................................. F-41 Statements of Changes in Stockholders' and Members' Equity ......... F-42 Combined Statements of Cash Flows .................................. F-43 Notes to Combined Financial Statements ............................. F-45 COLLECTION OF FINE PROPERTIES, INC.: Independent Auditor's Report ....................................... F-51 Consolidated Balance Sheets ........................................ F-52 Consolidated Statements of Operations .............................. F-53 Consolidated Statements of Changes in Stockholders' Equity ......... F-54 Consolidated Statements of Cash Flows .............................. F-55 Notes to Consolidated Financial Statements ......................... F-57 FIRST RESORT SOFTWARE, INC.: Report of Independent Public Accountants ........................... F-63 Balance Sheet ...................................................... F-64 Statement of Operations ............................................ F-65 Statement of Changes in Stockholders' Equity (Deficit) ............. F-66 Statement of Cash Flows ............................................ F-67 Notes to Financial Statements ...................................... F-68 F-1 PAGE ------ HOUSTON AND O'LEARY COMPANY: Report of Independent Public Accountants ........................... F-71 Balance Sheet ...................................................... F-72 Statement of Operations ............................................ F-73 Statement of Changes in Stockholders' Equity ....................... F-74 Statement of Cash Flows ............................................ F-75 Notes to Financial Statements ...................................... F-76 THE MAURY PEOPLE, INC.: Report of Independent Public Accountants ........................... F-79 Balance Sheet ...................................................... F-80 Statement of Operations ............................................ F-81 Statement of Changes in Stockholders' Equity (Deficit) ............. F-82 Statement of Cash Flows ............................................ F-83 Notes to Financial Statements ...................................... F-84 HOWEY ACQUISITION, INC. d.b.a PRISCILLA MURPHY REALTY, INC.: Reports of Independent Public Accountants .......................... F-88 Consolidated Balance Sheets ........................................ F-90 Consolidated Statements of Operations .............................. F-91 Consolidated Statements of Changes in Stockholders' Equity ......... F-92 Consolidated Statements of Cash Flows .............................. F-93 Notes to Consolidated Financial Statements ......................... F-95 RESORT PROPERTY MANAGEMENT, INC.: Report of Independent Public Accountants ........................... F-98 Balance Sheets ..................................................... F-99 Statements of Operations ........................................... F-100 Statements of Changes in Stockholders' Deficit ..................... F-101 Statements of Cash Flows ........................................... F-102 Notes to Financial Statements ...................................... F-103 TELLURIDE RESORT ACCOMMODATIONS, INC.: Report of Independent Public Accountants ........................... F-107 Balance Sheet ...................................................... F-108 Statement of Operations ............................................ F-109 Statement of Changes in Stockholders' Deficit ...................... F-110 Statement of Cash Flows ............................................ F-111 Notes to Financial Statements ...................................... F-112 TRUPP HODNETT COMPANY: Report of Independent Public Accountants ........................... F-115 Combined Balance Sheets ............................................ F-116 Combined Statements of Operations .................................. F-117 Combined Statements of Changes in Stockholders' Equity ............. F-118 Combined Statements of Cash Flows .................................. F-119 Notes to Financial Statements ...................................... F-121 F-2 VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS BASIS OF PRESENTATION The following unaudited pro forma combined financial statements give effect to the acquisitions by Vacation Properties International, Inc. ("VPI" or the "Company"), of the outstanding capital stock of Hotel Corporation of the Pacific, Inc. ("Aston") and Brindley & Brindley Realty, Inc. and B&B on the Beach, Inc. (collectively "Brindley and Brindley"), Coastal Resorts Management, Inc. and Coastal Resorts Realty, LLC (collectively "Coastal Resorts"), Collection of Fine Properties, Inc. ("CFP"), First Resort Software, Inc. ("FRS"), Houston & O'Leary Company ("H&O"), Jupiter Property Management, Inc. at Park City ("JPM"), Maui Condo & Home Realty, Inc. ("Maui"), The Maury People, Inc. ("Maury"), Howey Acquisition, Inc. and Priscilla Murphy Realty, Inc. (collectively "PMR"), Resort Property Management, Inc. ("RPM"), Telluride Resort Accommodations, Inc. ("TRA"), Trupp-Hodnett Enterprises, Inc. and THE Management Company (collectively "THE"), and Whistler Chalets Limited ("Whistler"), (collectively the "Founding Companies"). These acquisitions (the "Combinations") will occur simultaneously with the closing of VPI's initial public offering (the "Offering") and will be accounted for using the purchase method of accounting. Aston, one of the Founding Companies has been designated as the accounting acquiror in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 97 which states that the combining company which receives the largest portion of voting rights in the combined corporation is presumed to be the acquiror for accounting purposes. The unaudited pro forma combined balance sheet gives effect to the Combinations and the Offering as if they had occurred on December 31, 1997. The unaudited pro forma combined statement of income gives effect to these transactions as if they had occurred on January 1, 1997. The Company has preliminarily analyzed the savings that it expects to be realized by consolidating certain operational and general and administrative functions. To the extent the owners and certain key employees of the Founding companies have agreed prospectively to reductions in salary, bonuses and benefits, these reductions have been reflected in the unaudited pro forma combined statement of income. Additionally, the effects of the exclusion of certain non-operating assets and the assumption of or retirement of certain liabilities that will be retained by the stockholders of the Founding companies have been eliminated in the unaudited pro forma financial statements. With respect to other potential cost savings, the Company has not and cannot quantify these savings until completion of the combination of the Founding Companies. It is anticipated that these savings will be partially offset by the costs of being a publicly held company and the incremental increase in costs related to the Company's new management. However, these costs, like the savings that they offset, cannot be quantified accurately. Neither the anticipated savings nor the anticipated costs have been included in the pro forma combined financial information of VPI. The pro forma adjustments are based on preliminary estimates, available information and certain assumptions and may be revised as additional information becomes available. The unaudited pro forma financial data do not purport to represent what the Company's financial position or results of operations would actually have been if such transactions in fact had occurred on those dates and are not necessarily representative of the Company's financial position or results of operations for any future period. Since the Founding Companies were not under common control or management, historical combined results may not be comparable to, or indicative of, future performance. The unaudited pro forma combined financial statements should be read in conjunction with the other financial statement and notes thereto included elsewhere in the Prospectus. See "Risk Factors" included elsewhere herein. F-3 PAGE 1 OF 2 VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET - DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
BRINDLEY & COASTAL VPI ASTON BRINDLEY RESORTS ------- --------- ------------ --------- ASSETS Current assets: Cash and cash equivalents ................................ $ -- $ 1,632 $ 24 $ 203 Trade and other receivables, net of allowance ............ -- 1,195 62 1,247 Other current assets ..................................... 244 129 3,932 442 ---- ------- ------ ------ Total current assets .................................... 244 2,956 4,018 1,892 Property and equipment, net ............................... -- 1,776 125 278 Goodwill .................................................. -- -- -- 626 Other assets .............................................. -- 10,330 -- 92 ---- ------- ------ ------ Total assets ............................................ $244 $15,062 $4,143 $2,888 ==== ======= ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt ..................... $ -- $ 597 $ 19 $ -- Customer deposits, deferred revenues and payable to property owners ...................................... -- -- 3,895 470 Accounts payable, and accrued liabilities ................ 244 6,538 108 442 Payables to Founding Companies' Stockholders ............. -- -- -- -- Other current liabilities ................................ -- 409 -- -- ---- ------- ------ ------ Total current liabilities ............................... 244 7,544 4,022 912 Long-term debt, net of current maturities ................. -- 2,804 22 715 Other long-term liabilities ............................... -- 4,609 -- -- Commitments and contingencies ............................. Stockholders' Equity (Deficit): Common stock 2,650,428 shares outstanding (VPI), 9,308,333 shares outstanding (pro forma combined), 15,116,667 shares outstanding (pro forma as adjusted),. -- 100 -- -- Additional paid-in capital ............................... -- 5 -- 125 Retained earnings (deficit) .............................. -- -- 99 1,136 ---- ------- ------ ------ Total stockholders' equity (deficit) .................... -- 105 99 1,261 ---- ------- ------ ------ Total liabilities and stockholders' equity (deficit)..... $244 $15,062 $4,143 $2,888 ==== ======= ====== ======
CFP FRS H&O JPM MAURY --------- ------- ------- ----------- ------ ASSETS Current assets: Cash and cash equivalents ................................ $2,713 $126 $259 $ 14 $297 Trade and other receivables, net of allowance ............ 701 426 279 456 -- Other current assets ..................................... 434 45 45 1,155 572 ------ ---- ---- --------- ---- Total current assets .................................... 3,848 597 583 1,625 869 Property and equipment, net ............................... 1,964 275 157 387 99 Goodwill .................................................. 54 -- -- 139 -- Other assets .............................................. -- -- -- 114 -- ------ ---- ---- --------- ---- Total assets ............................................ $5,866 $872 $740 $ 2,265 $968 ====== ==== ==== ========= ==== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt ..................... $ 180 $ -- $164 $ 1,628 $ -- Customer deposits, deferred revenues and payable to property owners ...................................... 3,364 506 255 1,890 656 Accounts payable, and accrued liabilities ................ 1,175 130 136 428 224 Payables to Founding Companies' Stockholders ............. -- -- -- -- -- Other current liabilities ................................ -- -- -- -- -- ------ ---- ---- --------- ---- Total current liabilities ............................... 4,719 636 555 3,946 880 Long-term debt, net of current maturities ................. 299 -- -- 553 -- Other long-term liabilities ............................... 15 125 -- 123 -- Commitments and contingencies ............................. Stockholders' Equity (Deficit): Common stock 2,650,428 shares outstanding (VPI), 9,308,333 shares outstanding (pro forma combined), 15,116,667 shares outstanding (pro forma as adjusted) .. 788 3 -- 2 1 Additional paid-in capital ............................... -- 13 -- 385 -- Retained earnings (deficit) .............................. 45 95 185 (2,744) 87 ------ ---- ---- --------- ---- Total stockholders' equity (deficit) .................... 833 111 185 (2,357) 88 ------ ---- ---- --------- ---- Total liabilities and stockholders' equity (deficit)..... $5,866 $872 $740 $ 2,265 $968 ====== ==== ==== ========= ====
The accompanying notes are an integral part of these unaudited pro forma combined financial statements. F-4 PAGE 2 OF 2 VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
PMR RPM TRA THE MAUI ---------- --------- --------- --------- ------ ASSETS Current assets: Cash and cash equivalents ......................... $ 904 $ 186 $2,103 $ 293 $ 73 Trade and other receivables, net of allowance ..... 39 70 544 132 121 Other current assets .............................. 4,539 22 12 378 23 ------- ------- ------ ------ ---- Total current assets ............................. 5,482 278 2,659 803 217 Property and equipment, net ........................ 102 203 62 259 24 Goodwill ........................................... 5,436 -- -- -- -- Other assets ....................................... 187 54 -- -- 29 ------- ------- ------ ------ ---- Total assets ..................................... $11,207 $ 535 $2,721 $1,062 $270 ======= ======= ====== ====== ==== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt .............. $ 803 $ 171 $ 194 $ -- $ -- Customer deposits, deferred revenues and pay- able to property owners .......................... 4,479 269 2,096 347 -- Accounts payable and accrued liabilities .......... 242 32 849 191 95 Payables to Founding Companies' Stockholders....... -- -- -- -- -- Other current liabilities ......................... -- -- -- -- -- ------- ------- ------ ------ ---- Total current liabilities ........................ 5,524 472 3,139 538 95 Long-term debt, net of current maturities .......... 3,925 310 -- -- -- Other long-term liabilities ........................ -- 3 -- -- 3 Commitments and contingencies ...................... Stockholders' Equity (Deficit): Common stock 2,650,428 shares outstanding (VPI), 9,308,333 shares outstanding (pro forma combined), 15,116,667 shares outstanding (pro forma as adjusted) .............................. 100 -- 216 17 1 Additional paid-in capital ........................ 150 26 -- -- -- Retained earnings (deficit) ....................... 1,508 (276) (634) 507 171 ------- ------- ------ ------ ---- Total stockholders' equity (deficit) ............. 1,758 (250) (418) 524 172 ------- ------- ------ ------ ---- Total liabilities and stockholders' equity (deficit) ....................................... $11,207 $ 535 $2,721 $1,062 $270 ======= ======= ====== ====== ====
PRO FORMA OFFERING ADJUSTMENTS PRO ADJUSTMENTS AS WHISTLER (NOTE 3) FORMA (NOTE 3) ADJUSTED ---------- ------------- ----------- ------------- ----------- ASSETS Current assets: Cash and cash equivalents ......................... $ 698 $ 152 $ 9,677 $ -- $ 9,677 Trade and other receivables, net of allowance ..... 15 (1,042) 4,245 -- 4,245 Other current assets .............................. 1,061 5,723 18,756 -- 18,756 ------ -------- -------- ---------- -------- Total current assets ............................. 1,774 4,833 32,678 -- 32,678 Property and equipment, net ........................ 1,416 (1,467) 5,660 -- 5,660 Goodwill ........................................... -- 65,780 72,035 -- 72,035 Other assets ....................................... 2 (5,677) 5,131 -- 5,131 ------ -------- -------- ---------- -------- Total assets ..................................... $3,192 $ 63,469 $115,504 $ -- $115,504 ====== ======== ======== ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt .............. $ 53 $ (3,809) $ -- $ -- $ -- Customer deposits, deferred revenues and pay- able to property owners .......................... 1,018 -- 19,245 -- 19,245 Accounts payable and accrued liabilities .......... 936 -- 11,770 -- 11,770 Payables to Founding Companies' Stockholders....... -- 61,821 61,821 (61,821) -- Other current liabilities ......................... -- -- 409 -- 409 ------ -------- -------- ---------- -------- Total current liabilities ........................ 2,007 58,012 93,245 (61,821) 31,424 Long-term debt, net of current maturities .......... 902 (9,311) 219 -- 219 Other long-term liabilities ........................ 171 (1,403) 3,646 -- 3,646 Commitments and contingencies ...................... Stockholders' Equity (Deficit): Common stock 2,650,428 shares outstanding (VPI), 9,308,333 shares outstanding(pro forma combined), 15,116,667 shares outstanding (pro forma as adjusted) ............................... -- (1,135) 93 58 151 Additional paid-in capital ........................ -- 12,912 13,616 61,763 75,379 Retained earnings (deficit) ....................... 112 4,394 4,685 -- 4,685 ------ -------- -------- ---------- -------- Total stockholders' equity (deficit) ............. 112 16,171 18,394 61,821 80,215 ------ -------- -------- ---------- -------- Total liabilities and stockholders' equity (deficit) ....................................... 3,192 $ 63,469 $115,504 $ -- $115,504 ====== ======== ======== ========== ========
The accompanying notes are an integral part of these unaudited pro forma combined financial statements. F-5 PAGE 1 OF 2 VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
BRINDLEY & COASTAL VPI ASTON BRINDLEY RESORTS ----- ---------- ------------ --------- Revenues ......................................... $-- $19,554 $4,021 $3,615 Operating expenses ............................... -- 8,908 3,028 1,788 --- ------- ------ ------ Gross profit .................................... -- 10,646 993 1,827 General and administrative expenses .............. -- 5,081 395 559 Depreciation and amortization .................... -- 394 87 85 --- ------- ------ ------ Income (loss) from operations ................... -- 5,171 511 1,183 Interest (expense) and other income, net ......... -- (86) 42 (47) --- ------- ------ ------ Income (loss) before income taxes ................ -- 5,085 553 1,136 Provision for income taxes ....................... -- -- -- -- --- ------- ------ ------ Net income (loss) ................................ $-- $ 5,085 $ 553 $1,136 === ======= ====== ====== CFP FRS H&O JPM MAURY --------- --------- --------- --------- --------- Revenues ......................................... $4,303 $2,864 $1,596 $3,986 $1,183 Operating expenses ............................... 2,830 1,704 494 2,601 211 ------ ------ ------ ------ ------ Gross profit .................................... 1,473 1,160 1,102 1,385 972 General and administrative expenses .............. 586 372 274 1,675 654 Depreciation and amortization .................... 307 45 48 159 28 ------ ------ ------ ------ ------ Income (loss) from operations ................... 580 743 780 (449) 290 Interest (expense) and other income, net ......... 133 25 (15) (145) 28 ------ ------ ------ ------ ------ Income (loss) before income taxes ................ 713 768 765 (594) 318 Provision for income taxes ....................... -- -- -- -- -- ------ ------ ------ ------ ------ Net income (loss) ................................ $ 713 $ 768 $ 765 $ (594) $ 318 ====== ====== ====== ====== ======
The accompanying notes are an integral part of these unaudited pro forma combined financial statements. F-6 PAGE 2 OF 2 VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE AND PURCHASE DATA)
PMR RPM TRA THE --------- --------- --------- --------- Revenues .................................................... $4,740 $2,295 $4,313 $4,061 Operating expenses .......................................... 1,184 1,560 3,037 1,838 ------ ------ ------ ------ Gross profit ............................................... 3,556 735 1,276 2,223 General and administrative expenses ......................... 1,663 548 982 1,939 Depreciation and amortization ............................... 203 79 48 85 ------ ------ ------ ------ Income (loss) from operations .............................. 1,690 108 246 199 Interest (expense) and other income, net .................... (182) 217 31 47 ------ ------ ------ ------ Income (loss) before income taxes ........................... 1,508 325 277 246 Provision for income taxes .................................. -- 75 -- 60 ------ ------ ------ ------ Net income (loss) ........................................... $1,508 $ 250 $ 277 $ 186 ====== ====== ====== ====== Net income per share ........................................ Shares used in computing net income per share (Note 5) ...... PRO FORMA ADJUSTMENTS PRO MAUI WHISTLER (NOTE 4) FORMA ------------ ---------- --------------- -------------- Revenues .................................................... $1,422 $2,098 $ 792 (a) $ 60,843 Operating expenses .......................................... 366 1,428 (539)(a) 30,438 ------ ------ --------- ------------ Gross profit ............................................... 1,056 670 1,331 30,405 General and administrative expenses ......................... 954 387 (2,933) 13,136 Depreciation and amortization ............................... 25 45 1,847 (b) 3,485 ------ ------ --------- ------------ Income (loss) from operations .............................. 77 238 2,417 13,784 Interest (expense) and other income, net .................... (1) (32) 231 (a) 246 -------- ------ --------- ------------ Income (loss) before income taxes ........................... 76 206 2,648 14,030 Provision for income taxes .................................. 21 4 6,381 (c) 6,541 ------- ------ --------- ------------ Net income (loss) ........................................... $ 55 $ 202 $ (2,239) $ 7,489 ======= ====== ========= ============ Net income per share ........................................ $ 0.50 ============ Shares used in computing net income per share (Note 5) ...... 15,116,667
The accompanying notes are an integral part of these unaudited pro forma combined financial statements. F-7 VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS 1. GENERAL: Vacation Properties International, Inc. ("VPI"), was formed to create a leading single provider of vacation property rental, management and real estate services. VPI has conducted no operations to date and will acquire substantially all of the assets of the Founding Companies concurrently with the consummation of the Offering. The historical financial statements reflect the financial position and results of operations of VPI and the Founding Companies as of December 31, 1997, and for the year ended December 31, 1997, and were derived from the respective VPI and Founding Company financial statements where indicated. The audited historical financial statements included elsewhere herein have been included in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 80. 2. ACQUISITION OF FOUNDING COMPANIES: Concurrent with the closing of the Offering, VPI will acquire all of the outstanding capital stock of the Founding Companies. The Combinations will be accounted for using the purchase method of accounting with Aston being designated as the accounting acquiror. The following table sets forth the consideration to be paid (a) in cash (including debt to be retired) and (b) in shares of Common Stock to the stockholders of each of the Founding Companies. The consideration to be paid for each of the Founding Companies was determined through arm's-length negotiations between VPI and representatives of each Founding Company. The factors considered by the Company in determining the consideration to be paid included, among others, the historical operating results, the net worth, the amount and type of indebtedness and the future prospects of the Founding Companies. For purposes of computing the estimated purchase price for accounting purposes, the value of the shares is determined using an estimated fair value of $9.60 per share, which represents a discount of 20 percent from the assumed initial public offering price of $12 per share due to restrictions on the sale and transferability of the shares issued. The purchase price for the Acquisitions is subject to certain working capital adjustments at closing. See "Certain Transactions - Organization of the Company."
SHARES OF CASH COMMON STOCK ---------------- ------------- (IN THOUSANDS) Aston Hotels & Resorts ................. $ 29,500 1,708,333 Brindley & Brindley .................... 2,000 195,000 Coastal Resorts ........................ -- 816,667 Collection of Fine Properties .......... 4,850 404,167 First Resort ........................... 2,855 290,767 Houston and O'Leary .................... 2,470 248,167 Jupiter Property Management ............ 1,257 104,750 Maui Condominium and Home .............. 1,375 166,667 The Maury People ....................... 2,000 150,000 Priscilla Murphy Realty ................ 5,500 1,093,333 Resort Property Management ............. 1,200 108,333 Telluride Resort Accomodations ......... 3,014 125,103 Trupp-Hodnett Enterprises .............. 5,000 627,833 Whistler Chalets ....................... 800 134,583 -------- --------- $ 61,821 6,173,703 ======== =========
The above table does not include debt of approximately $219,000 to be assumed by VPI. F-8 VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES NOTES TO UNAUDITED PRO FORMA - (CONTINUED) 3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS: The following table summarizes unaudited pro forma combined balance sheet adjustments (in thousands):
PRO FORMA (A) (B) (C) ADJUSTMENTS ----------- ----------- ----------- ------------ Cash and cash equivalents ........................... $ -- $ 152 $ -- $ 152 Trade and other receivables ......................... (440) (602) -- (1,042) Other current assets ................................ (553) 4,821 1,455 5,723 Property and equipment, net ......................... (1,467) -- -- (1,467) Goodwill ............................................ -- 65,780 -- 65,780 Other assets ........................................ -- (5,677) -- (5,677) Current maturities on long-term debt ................ 3,809 -- -- 3,809 Payable to Founding Companies' stockholders ......... -- (61,821) -- (61,821) Long-term debt ...................................... 9,311 -- -- 9,311 Other long-term liabilities ......................... -- 1,403 -- 1,403 Common stock ........................................ -- 1,135 -- 1,135 Additional paid-in capital .......................... -- (12,912) -- (12,912) Retained earnings ................................... (10,660) 7,721 (1,455) (4,394) --------- --------- -------- --------- $ -- $ -- $ -- $ -- ========= ========= ======== =========
OFFERING (D) (E) ADJUSTMENTS ----------- -------------- ------------ Cash and cash equivalents ........................ $ 61,821 $ (61,821) $ -- Payables to Founding Companies' stockholders ..... -- 61,821 61,821 Common stock ..................................... (58) -- (58) Additional paid-in capital ....................... (61,763) -- (61,763) --------- ---------- --------- $ -- $ -- $ -- ========= ========== =========
(a) Reflects a reduction of net assets of approximately $10.7 million including certain non-operating assets and the assumption of or retirement of certain liabilities that will be excluded from the Combinations and retained by certain stockholders of the Founding Companies. (b) Reflects the Combinations of the Founding Companies including: (i) the liability for cash consideration to be paid of $61.8 million; (ii) approximately $4.4 million representing certain working capital adjustments to be made in connection with the Combinations; (iii) the issuance of 6,173,703 shares of common stock to the stockholders of the Founding Companies; (iv) the issuance of 484,202 shares of common stock to management, and (v) the creation of approximately $72.0 million of goodwill. (c) Reflects the deferred income tax asset attributable to the temporary differences between financial reporting and income tax bases of assets and liabilities currently held in S Corporations. (d) Reflects the proceeds from the issuance of 5,808,334 shares of common stock, net of estimated offering costs (based on an assumed initial public offering price of $12 per share). Offering costs primarily consist of underwriting discounts and commissions, accounting fees, legal fees and printing expenses. (e) Reflects the cash portion of the consideration to be paid to the Founding Companies in connection with the Combinations. F-9 VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES NOTES TO UNAUDITED PRO FORMA - (CONTINUED) 4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS: (a) Reflects (i) a reduction in salaries, bonuses and benefits derived from contractual agreements which establish the compensation of the owners and certain key employees of the Founding Companies subsequent to the Offering and (ii) the effect of the exclusion of certain non-operating assets and the assumption of or retirement of certain liabilities that will be retained by certain stockholders of the Founding Companies. (b) Reflects the amortization of goodwill using a 40-year estimated life for each of the Founding Companies other than First Resort Software, Inc. which will be amortized over a 15-year estimated life. (c) Reflects the incremental provision for federal and state income taxes relating to the other statement of operations adjustments and to reflect income taxes on S Corporation income. 5. NET INCOME PER SHARE The shares used in computing net income per share include: (i) 3,134,630 shares issued to management of and founders of VPI; (ii) 6,173,703 shares to be issued to the stockholders of the Founding Companies in connection with the Combinations; and (iii) 5,808,334 shares to be issued in connection with the Offering necessary to pay the $61,821,000 cash portion of the consideration for the Combinations and to pay the estimated underwriting discount and other offering expenses in the aggregate amount of $7,879,000. Excludes 1,814,000 shares of Common Stock reserved for issuance pursuant to the Company's 1998 Long-Term Incentive Plan, of which options to purchase 1,595,000 shares will be granted by the Company concurrently with the Offering at an exercise price equal to the initial public offering price. F-10 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Vacation Properties International, Inc.: We have audited the accompanying balance sheet of Vacation Properties International, Inc., as of December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Vacation Properties International, Inc., as of December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas March 11, 1998 F-11 VACATION PROPERTIES INTERNATIONAL, INC. BALANCE SHEET
DECEMBER 31, 1997 ------------- ASSETS CASH AND CASH EQUIVALENTS .................................................. $ 200 DEFERRED OFFERING COSTS .................................................... 244,000 -------- Total Assets ............................................................ $244,200 ======== LIABILITIES AND STOCKHOLDERS' EQUITY ACCRUED LIABILITIES AND AMOUNTS DUE TO VPI FUNDING, LLC $244,000 -------- STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par, 10,000,000 authorized, none outstanding........ -- Common stock, $0.01 par, 50,000,000 shares authorized, and 2,650,428 shares outstanding ...................................................... 200 -------- Total stockholders' equity .............................................. 200 -------- Total liabilities and stockholders' equity .............................. $244,200 ======== Reflects a 8,834.76-for-one stock split effective on March 9, 1998
The accompanying notes are an integral part of this financial statement. F-12 VACATION PROPERTIES INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS 1. GENERAL: Vacation Properties International, Inc., a Delaware Corporation, ("VPI" or the "Company"), was founded in September 1997 to create a leading single provider of vacation property rental, management and real estate services. VPI intends to acquire substantially all of the assets of fourteen companies (the "Founding Companies") (the "Combinations") and complete an initial public offering (the "Offering") of its common stock. VPI has not conducted any operations, and all activities to date have related to the Offering and the Combinations. Cash of $200 was provided from the initial capitalization of the Company (see Note 2). All other expenditures will be funded by VPI Funding, LLC, a Delaware limited liability company whose member managers are owners of the Company. Accordingly, statements of operations, changes in stockholders' equity and cash flows for this period would not provide meaningful information and have been omitted. As of December 31, 1997 costs of approximately $244,000 have been incurred by VPI Funding, LLC in connection with the Offering. The Company is dependent upon the Offering to execute the pending Combinations. There is no assurance that the pending Combinations will be completed or that VPI will be able to generate future operating revenues. 2. STOCKHOLDERS' EQUITY: Common Stock and Preferred Stock In connection with the organization and initial capitalization of VPI, the Company issued 300 shares of common stock at $.01 per share to Capstone Partners, LLC ("Capstone"), Alpine Consolidated II, LLC ("Alpine") and certain other stockholders. On March 1, 1998 Capstone and Alpine contributed 28.297 shares of Common Stock to VPI Funding, LLC. VPI effected a 8,834.76-for-one |stock split on March 9, 1998 for each share of common stock (the Company "Common Stock") then outstanding. In addition, the Company increased the number of authorized shares of Common Stock to 50,000,000 and authorized 10,000,000 shares of $.01 par value preferred stock. The effects of Common Stock split and the increase in the shares of authorized Common Stock have been retroactively reflected in the balance sheet and the accompanying notes. Restricted Common Stock In March, 1998, the stockholders exchanged 2,650,428 shares of Common Stock for an equal number of shares of restricted voting common stock ("Restricted Common Stock"). The Common Stock and the Restricted Common Stock are identical except that the holders of Restricted Common Stock are only entitled to one-half of one vote for each share on all matters. Long-Term Incentive Plan In March 1998, the Board of Directors and the Company's stockholders approved the Company's 1998 Long-Term Incentive Plan (the "Plan"). The purpose of the Plan is to provide a means by which the Company can attract and retain executive officers, employee directors, other key employees, non-employee and advisory directors and consultants of and other service providers to the Company and its subsidiaries and to compensate such persons in a way that provides additional incentives and enables such persons to acquire or increase a proprietary interest in the Company. Individual awards under the Plan may take the form of one or more of: (i) either incentive stock options ("ISOs") or non-qualified stock options ("NQSOs"); (ii) stock appreciation rights ("SARs"); (iii) restricted or deferred stock; (iv) dividend equivalents; (v) bonus shares and awards in lieu of Company obligations to pay cash compensation; (vi) non-employee directors' deferred shares; and (vii) other awards the value of which is based in whole or in part upon the value of the Common Stock. F-13 VACATION PROPERTIES INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS- (CONTINUED) The Company has reserved 1,814,000 shares of Common Stock for use in connection with the Plan. The maximum number of shares of Common Stock that may be subject to outstanding awards under the Plan will not exceed 12% of the aggregate number of shares of Common Stock outstanding, minus the number of shares previously issued pursuant to awards granted under the Plan. Shares of Common Stock which are attributable to awards which have expired, terminated or been canceled or forfeited are available for issuance or use in connection with future awards. In connection with the Offering, options in the form of NQSOs to purchase a total of 400,000 shares of Common Stock of the Company will be granted to management of the Company. Each of the foregoing option grants will have an exercise price equal to the initial public offering price per share in the Offering, and will vest at a rate of 25% per year. The options generally will expire on the earlier of 10 years after the date of grant or three months after termination of employment (immediately in the event of a termination for cause), unless otherwise determined by the Committee. The Plan will remain in effect until terminated by the Board of Directors. 3. STOCK BASED COMPENSATION Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," allows entities to choose between a new fair value based method of accounting for employee stock options or similar equity instruments and the current intrinsic, value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"). Companies electing to remain with the accounting in APB Opinion No. 25 must make pro forma disclosure of net income and earnings per share as if the fair value method of accounting had been applied. The Company will provide pro forma disclosure of net income and net income per share, as applicable, in the notes to future consolidated financial statements. In February 1997, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). For the Company, SFAS No. 128 was effective for the year ended December 31, 1997. SFAS No. 128 simplified the standards required under previous accounting rules for computing earnings per share and replaced the presentation of primary earnings per share and fully diluted earnings per share with a presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS excludes dilution and is determined by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock. F-14 VACATION PROPERTIES INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS- (CONTINUED) 4. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED) VPI has signed definitive agreements to acquire all of the Common Stock and ownership interests of Founding Companies to be consummated simultaneously with the closing of the Offering. The companies to be acquired are: Aston Hotels & Resorts Brindley & Brindley Coastal Resorts Collection of Fine Properties First Resort Houston and O'Leary Jupiter Property Management Maui Condominium and Home The Maury People Priscilla Murphy Realty Resort Property Management Telluride Resort Accommodations Trupp-Hodnett Enterprises Whistler Chalets The aggregate consideration that will be paid by VPI to acquire the Founding Companies is, subject to certain working capital adjustments, approximately $61.8 million in cash (including debt to be retired) and 6,173,703 shares of Common Stock. In March, 1998, VPI filed a registration statement on Form S-1 for the sale of its Common Stock. An investment in shares of Common Stock offered by this Prospectus involves a high degree of risks, including, among others, absence of a combined operating history, risks relating to the Company's acquisition strategy, risks relating to acquisition financing, reliance on key personnel and a substantial portion of the proceeds from the offering payable to affiliates of the Founding Companies. See "Risk Factors" included elsewhere in this Prospectus. In the first quarter of 1998, the Company issued a total of 484,202 shares of Common Stock to management of the Company. As a result, the Company will record for financial statement purposes a non-recurring non-cash compensation charge in 1998. F-15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Hotel Corporation of the Pacific, Inc.: We have audited the accompanying balance sheets of Hotel Corporation of the Pacific, Inc. (a Hawaii corporation), as of December 31, 1996 and 1997, and the related statements of operations, changes in stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hotel Corporation of the Pacific, Inc., as of December 31, 1996 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas February 6, 1998 F-16 HOTEL CORPORATION OF THE PACIFIC, INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, --------------------- 1996 1997 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents ........................................... $ 2,118 $ 1,632 Accounts receivable, less allowance of $97 and $75 for doubtful accounts .......................................................... 1,448 1,195 Inventories ......................................................... 41 46 Prepaid expenses and other assets ................................... 102 83 ------- ------- Total current assets .............................................. 3,709 2,956 ADVANCES TO STOCKHOLDER .............................................. 7,611 7,735 ADVANCES TO AFFILIATES, net .......................................... -- 1,799 SECURITY DEPOSITS .................................................... 712 641 PREPAID EXPENSES AND OTHER ASSETS .................................... 178 155 PROPERTY AND EQUIPMENT, net .......................................... 1,186 1,776 NET ASSETS OF DISCONTINUED OPERATIONS ................................ 74 -- ------- ------- Total assets ...................................................... $13,470 $15,062 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of notes payable .................................... $ 61 $ 12 Current portion of capital lease obligations ........................ 260 409 Current portion of other long-term obligations ...................... 591 585 Accounts payable and accrued liabilities ............................ 4,730 6,538 ------- ------- Total current liabilities ......................................... 5,642 7,544 SECURITY DEPOSITS .................................................... 326 270 EXCESS OF LOSSES OVER INVESTMENT IN PARTNERSHIP ...................... 346 -- ADVANCES FROM AFFILIATES ............................................. 1,235 -- NOTES PAYABLE ........................................................ 2,816 2,804 CAPITAL LEASE OBLIGATIONS ............................................ 882 1,325 OTHER LONG-TERM OBLIGATIONS .......................................... 2,118 1,611 NET LIABILITIES OF DISCONTINUED OPERATIONS ........................... -- 1,403 ------- ------- Total liabilities ................................................. 13,365 14,957 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $10 par value, 100,000 shares authorized, 10,000 shares outstanding ....................................................... 100 100 Paid-in surplus ..................................................... 5 5 Retained earnings ................................................... -- -- ------- ------- Total stockholders' equity ........................................ 105 105 ------- ------- Total liabilities and stockholders' equity ........................ $13,470 $15,062 ======= =======
The accompanying notes are an integral part of these financial statements. F-17 HOTEL CORPORATION OF THE PACIFIC, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------- 1995 1996 1997 --------- --------- ----------- REVENUES: Property management fees ................... $ 7,036 $ 7,540 $ 8,079 Service fees ............................... 8,896 8,442 8,338 Other ...................................... 3,116 3,478 3,137 ------- ------- -------- Total revenues .......................... 19,048 19,460 19,554 OPERATING EXPENSES .......................... 10,550 10,401 8,908 ------- ------- -------- GROSS PROFIT ................................ 8,498 9,059 10,646 GENERAL AND ADMINISTRATIVE EXPENSES ......... 5,434 5,574 5,475 ------- ------- -------- Income from operations .................. 3,064 3,485 5,171 OTHER INCOME (EXPENSE): Interest expense, net ...................... (406) (736) (763) Gain on sales of assets .................... -- 394 677 Arbitration expense ........................ (365) -- -- ------- ------- -------- Total other income (expense) ............... (771) (342) (86) ------- ------- -------- INCOME FROM CONTINUING OPERATIONS ........... 2,293 3,143 5,085 INCOME (LOSS) FROM DISCONTINUED OPERA- TIONS ...................................... (32) 455 (1,328) LOSS ON DISPOSAL OF DISCONTINUED OPERA- TIONS ...................................... -- -- (166) ------- ------- -------- NET INCOME .................................. $ 2,261 $ 3,598 $ 3,591 ======= ======= ========
The accompanying notes are an integral part of these financial statements. F-18 HOTEL CORPORATION OF THE PACIFIC, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK RETAINED -------------------- PAID-IN EARNINGS SHARES AMOUNT SURPLUS (DEFICIT) TOTAL --------- -------- --------- ---------- ---------- BALANCE, December 31, 1994 ......... 100,000 $100 $ 5 $ (500) $ (395) Net income ........................ -- -- -- 2,261 2,261 Distributions ..................... -- -- -- (2,261) (2,261) ------- ---- --- -------- -------- BALANCE, December 31, 1995 ......... 100,000 100 5 (500) (395) Net income ........................ -- -- -- 3,598 3,598 Distributions ..................... -- -- -- (3,098) (3,098) ------- ---- --- -------- -------- BALANCE, December 31, 1996 ......... 100,000 100 5 -- 105 Net income ........................ -- -- -- 3,591 3,591 Distributions ..................... -- -- -- (3,591) (3,591) ------- ---- --- -------- -------- BALANCE, December 31, 1997 ......... 100,000 $100 $ 5 $ -- $ 105 ======= ==== === ======== ========
The accompanying notes are an integral part of these financial statements. F-19 HOTEL CORPORATION OF THE PACIFIC, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------------- 1995 1996 1997 ------------ ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................... $ 2,261 $ 3,598 $ 3,591 (Income) loss from discontinued operations ........................ 32 (455) 1,328 Loss on disposal of discontinued operations ....................... -- -- 166 -------- -------- -------- Income from continuing operations ................................ 2,293 3,143 5,085 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization ..................................... 257 326 394 Deferred rent expense ............................................. (7) (7) (14) Gain on sale of fixed assets ...................................... -- (394) -- Gain on sale of principal asset of partnership .................... -- -- (677) Loss (gain) of investment in partnership .......................... (7) 45 -- Changes in operating assets and liabilities- Accounts receivable ............................................... (334) (236) 253 Prepaid expenses and other assets ................................. (309) 258 37 Accounts payable and accrued liabilities .......................... 648 258 923 Reservation and security deposits ................................. 245 (459) (56) --------- --------- -------- Cash provided by continuing operations ........................... 2,786 2,934 5,945 Cash flows from discontinued operations ............................. 249 (253) (17) --------- --------- -------- Net cash from operating activities ............................... 3,035 2,681 5,928 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase in advances) proceeds from repayment of advances to affiliates ..................................................... (430) 3,625 (2,144) Proceeds from sale of principal asset of partnership .............. -- -- 331 Increase in advances to stockholder ............................... (1,572) (886) (124) Increase in distributions payable to stockholder .................. -- 465 64 Proceeds from sale of property and equipment ...................... -- 398 -- Purchase of property and equipment ................................ -- -- (56) Increase in security deposits ..................................... (618) (94) 71 --------- --------- -------- Net cash (used in) provided by investing activities .............. (2,620) 3,508 (1,858) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to stockholders ..................................... (2,261) (3,098) (3,591) Repayment of notes and mortgage payable ........................... (283) (637) (61) Increase (payment) of other long-term obligations ................. 305 (1,160) (744) Principal payments under capital leases ........................... (111) (241) (160) Proceeds from notes payable ....................................... 3,000 -- -- --------- --------- -------- Net cash provided by (used in) financing activities .............. 650 (5,136) (4,556) --------- --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,065 1,053 (486) CASH AND CASH EQUIVALENTS, beginning of year ......................... -- 1,065 2,118 --------- --------- -------- CASH AND CASH EQUIVALENTS, end of year ............................... $ 1,065 $ 2,118 $ 1,632 ========= ========= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest .............................................. $ 339 $ 556 $ 628 ========= ========= ======== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FI- NANCING ACTIVITIES: Capital lease obligations ......................................... $ 388 $ 912 $ 928 ========= ========= ========
The accompanying notes are an integral part of these financial statements. F-20 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Hotel Corporation of the Pacific, Inc. (the Company), is a Hawaii corporation which does business under the trade names "Aston Hotels & Resorts," "Aston Property Management" and "Aston." The Company provides hotel and resort management and condominium association management services in the state of Hawaii. Hotel and resort management services are provided to either individual condominium unit owners, owners of multiple units within single condominium projects (resort rental programs), or single-owner projects or hotel properties. Condominium association management services are provided to associations of apartment owners. In many instances, the Company manages both the condominium association and a resort rental program within the same project. The Company maintains a portfolio of approximately 5,000 units in its rental program. Hotel and resort condominium rental program management services include centralized sales and marketing, reservations, accounting, human resources, electronic data processing, telephone equipment support and management of on-site personnel. The Company also operates food and beverage facilities located in two resorts managed by the Company. As of December 31, 1996 and 1997, the Company provided resort and hotel management services to 28 and 29 condominium resorts or hotels, respectively, and provided condominium management services to 17 and 16 condominium associations, respectively. The Company also leases and operates hotel properties. The Company has begun to implement its plan to discontinue the leasing of the leased properties during the second quarter of 1998 as discussed in Note 5, "Discontinued Operations and Disposition of Assets and Liabilities." Consequently, the financial statements present the net assets (liabilities), results of operations and cash flows of these leased properties as discontinued operations. The Company had a working capital deficit at December 31, 1997. The Company has funded operations with cash flows from operations and short-term borrowings from lenders. Management expects that operations will generate sufficient cash flows from operations to meet the Company's working capital needs during 1998. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. (VPI), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the Offering) of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental and management fees on the accrual basis of accounting ratably over the term of guest stays, as earned. Other revenues include food and beverage sales of $2,302,000, $2,185,000 and $2,271,000 for the years 1995, 1996 and 1997 respectively. Operating Expenses Operating expenses include expenses related to reservations, marketing and advertising, accounting and other costs associated with rental and management. Operating expenses also include food and beverage cost of sales and operating expenses as follows (in thousands):
YEAR ENDED DECEMBER 31, --------------------------------- 1995 1996 1997 --------- --------- --------- Reservations, marketing, accounting and other expenses ......... $ 8,382 $ 8,289 $6,956 Food and beverage cost of sales and operating expenses ......... 2,168 2,112 1,952 ------- ------- ------ Total operating expenses .................................... $10,550 $10,401 $8,908 ------- ------- ------
F-21 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Inventories Inventories consist primarily of food and beverage items and are stated at the lower of cost (first-in, first-out method) or market. Property and Equipment Property and equipment are stated at cost or, in the case of equipment acquired under capital leases, the present value of future lease payments. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease terms. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments which extend the useful lives of existing equipment are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of operations. Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state purposes. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. Concentration of Financial Instrument Assets Concentrations of financial instrument assets primarily consist of cash deposits and accounts receivable. The Company's policy is to deposit its cash with high-quality financial institutions. At December 31, 1996 and 1997, the Company's cash was deposited in demand and short-term interest-bearing accounts with three of the larger banks in Hawaii. Advertising Costs All advertising and promotion costs are expensed as incurred. Investment in Partnership The Company was a 5 percent general partner in a limited partnership whose principal asset was a commercial shopping mall. The Company's principal stockholder was the other general partner and held a 45% partnership interest. The Company used the equity method to account for its interest in the partnership. At December 31, 1996, the excess of the Company's cumulative equity in net losses over its investment is reflected as a noncurrent liability. The partnership's investment in the mall was sold during 1997. The Company's proceeds resulted in a gain on the sale of $677,000. The partnership is expected to be liquidated with no anticipated loss to the Company. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-22 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) Concentration of Risk The Company's operations are exclusively located in the state of Hawaii and are subject to negative events that affect travel patterns of visitors. 3. ADVANCES TO AFFILIATES: Advances to affiliates represent advances to companies controlled by the Company's principal stockholder. The advances have no scheduled repayment, and the Company suspended the accrual of interest. In 1996, one affiliate made a $2,000,000 repayment, $112,500 of which was recognized as previously unrecorded interest. The remaining receivable balance has been guaranteed by the Company's principal stockholder. 4. ADVANCES TO STOCKHOLDER: Advances to stockholder relate to advances to the Company's principal stockholder. Such advances have largely been utilized relative to the stockholder's investment in two hotels managed by the Company. The advances are noninterest-bearing and have no scheduled repayments. 5. DISCONTINUED OPERATIONS: The Company has decided that it will no longer continue or enter into leasing arrangements for lodging facilities, has terminated certain leases, and has a plan in place to dispose of its other existing leased properties during the second quarter of 1998. This plan will eliminate the Company's future obligation to make lease payments to owners of these facilities. The Company plans to primarily focus its' efforts on renting and managing condominiums, hotel rooms and homes for the owners on a fee basis. Accordingly, for all periods presented in the accompanying financial statements, the financial position, results of operations and cash flows of the leased assets are reflected as discontinued operations. Summarized financial information of the discontinued operations is presented in the following tables. Net assets (liabilities) of discontinued operations are as follows (in thousands): DECEMBER 31, ----------------------- 1996 1997 ----------- ----------- Current assets ...................... $ 2,857 $ 2,955 Advances to affiliates .............. 1,304 1 Other assets ........................ 202 193 Property and equipment .............. 418 197 -------- -------- Total assets ....................... 4,781 3,346 Current liabilities ................. (3,412) (4,119) Capital lease obligations ........... (247) (53) Other long-term obligations ......... (1,048) (577) -------- -------- Net assets (liabilities) ............ $ 74 $ (1,403) ======== ======== F-23 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) Income (loss) from discontinued operations are as follows (in thousands):
YEAR ENDED DECEMBER 31, ---------------------------------------- 1995 1996 1997 ------------ ---------- ------------ Revenue ........................................ $4,911 $29,945 $ 30,848 Operating expenses ............................. 3,609 22,833 24,826 General and administrative expenses ............ 1,326 6,631 7,317 ------ ------- -------- Operating income (loss) ....................... (24) 481 (1,295) Other expense .................................. (8) (26) (33) -------- ------- -------- Net income (loss) from discontinued operations . $ (32) $ 455 $ (1,328) ======= ======= ========
In addition to the loss from discontinued operations, the Company's operating results for the year ended December 31, 1997, include a charge of $166,000 for expected loss resulting from the disposal of discontinued operations. 6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Accounts receivable consisted of the following (in thousands): DECEMBER 31, --------------------- 1996 1997 --------- --------- Receivables from managed properties ........... $1,007 $ 610 Other ......................................... 538 660 ------ ------ 1,545 1,270 Less- Allowance for doubtful accounts ......... (97) (75) ------ ------ $1,448 $1,195 ====== ====== Property and equipment consist of the following (in thousands):
ESTIMATED DECEMBER 31, USEFUL LIFE ---------------------- IN YEARS 1996 1997 ------------ ---------- ----------- Leasehold interests ..................................... 3-7 $ 49 $ 91 Furniture, fixtures and equipment ....................... 3-10 842 938 Leased property ......................................... 3-7 1,255 2,305 ------ -------- 2,146 3,334 Less- Accumulated depreciation and amortization ......... (960) (1,558) ------ -------- Property and equipment, net ........................... $1,186 $ 1,776 ====== ========
Accounts payable and accrued liabilities consisted of the following (in thousands):
DECEMBER 31, --------------------- 1996 1997 --------- --------- Accounts payable ......................................... $2,616 $3,311 Accrued payroll .......................................... 1,289 1,214 Other accrued liabilities ................................ 825 2,013 ------ ------ Total accounts payable and accrued liabilities ......... $4,730 $6,538 ====== ======
F-24 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 7. NOTES PAYABLE: At December 31, 1996 and 1997, notes payable consist of the following (in thousands):
1996 1997 --------- --------- Notes payable, collateralized by 586 shares of the principal stockholder's 7,500 com- mon shares and real property in San Francisco, California, owned by the stockholder- Interest only payable monthly at 10%, due May 11, 1999 ................................ $1,000 $1,000 Interest only payable monthly at 7.5% through February 1996, and at 15% thereafter, due January 31, 1999(1) ............................................................. 500 500 Note payable, interest only payable monthly at 7.5% through February 1996 and at 15% thereafter, due January 31, 1999, guaranteed by principal stockholder(1) .......... 500 500 Note payable, interest only payable monthly at 20% plus contingent interest, as defined, commencing May 31, 1996, due May 31, 2000, secured by lease deposit in same amount(2).............................................................................. 500 500 Notes payable to spouse of principal stockholder, unsecured- Interest only payable quarterly at 10% and 12%, due February 28, 1999 ................. 285 285 Note payable to bank in monthly installments of $1,242 including interest at 10.25% adjusted annually, due May 4, 2000 .................................................... 42 31 Note payable, interest at 12%, payable upon demand, collateralized by certain fixtures and equipment ......................................................................... 50 -- ------ ------ Total ............................................................................... 2,877 2,816 Less- Current portion .................................................................. (61) (12) ------ ------ Noncurrent portion .................................................................. $2,816 $2,804 ====== ======
Annual maturities of long-term debt are as follows (in thousands): 1998 ................... $ 12 1999 ................... 2,299 2000 ................... 505 ------ Total ................ $2,816 ====== - ---------- (1) In addition to the stated interest on two of the notes described above, the Company is required to pay additional interest on each note equal to the lesser of 10 percent of distributable income (as defined in the agreement) of one of the leased hotels or $50. Such additional interest amounted to $92 and $100 for the years ended December 31, 1996 and 1997, respectively. (2) No contingent interest was accrued in 1996 or 1997. F-25 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 8. OTHER LONG-TERM OBLIGATIONS: At December 31, 1996 and 1997, other long-term obligations consisted of the following (in thousands):
1996 1997 --------- --------- Distributions payable to stockholder (Note 11) ...................................... $ 465 $ 529 Severance payable to former senior executives and employees, at present value with imputed interest rates ranging between 8.50% and 10.25% (unamortized imputed interest of $62 and $42) ........................................................... 593 347 Termination payable to the owners of a hotel managed prior to 1992, interest at prime rate (8.50% at December 31, 1997) .................................................. 850 500 Other accrued liabilities (Note 9) .................................................. 801 820 ------ ------ Total ............................................................................ $2,709 $2,196 Less- Current portion ............................................................... (591) (585) ------ ------ Noncurrent portion ............................................................... $2,118 $1,611 ====== ======
Future annual payments of severance and termination payables are as follows (in thousands): 1998 ........... $585 1999 ........... 262 ---- $847 ==== 9. LEASES: Operating Leases The Company leases its principal offices under an operating lease with the initial term expiring in July 31, 2002, and with two five-year options to extend the agreement. The lease provides for an initial period of free rent and also specifies scheduled rent increases over the lease term. Effective February 1, 1996, the Company entered into a noncancelable operating lease for a hotel property on Maui with terms extending through January 31, 1999. The lease provides for scheduled rent and security deposits that increase over the term. In conjunction with this lease, the Company is obligated to pay an annual retainer fee and a business referral and marketing fee to an unrelated party who arranged the lease. The retainer fee is payable in quarterly installments. Under the terms of the business referral and marketing agreement, the Company is required to pay a percentage of the net profits derived from the hotel property. The Company accrued $239,000 and $196,000 for these fees for the periods ended December 31, 1996 and 1997, respectively. This lease is included in the discontinued operations. Both the Maui hotel property lease and the office lease aggregate rental payments over the life of the lease are being recognized as rent expense on a straight-line basis over the terms of the leases. Accruals representing prorated future payments under the leases are included in other long-term obligations as of December 31, 1996 and 1997. The Company is obligated under a noncancelable operating lease for a resort facility on Maui with terms extending through December 31, 2000. Under terms of the lease, the Company pays annual rent equivalent to the net operating profits, as defined, of the facility up to a defined amount per year. No rent was incurred in 1995 or 1996. In 1997, rent of $231,000 was incurred. This lease is included in discontinued operations. In addition to operating leases for office space and hotel properties, the Company has entered into certain noncancelable operating leases for equipment and operating space and for individual condominium units within its managed properties. The terms of these condominium leases usually coincide with the man- F-26 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) agement agreements under which the Company manages rental pools within the respective condominium projects. Under the terms of the front desk and operating space leases, the Company pays the respective apartment owners association a percentage of the room revenue generated from the rental pool. Under the terms of the condominium leases, the Company pays individual condominium owners a fixed monthly lease rent and, in return, is allowed to place the unit into the respective rental pool. At December 31, 1997, future minimum lease commitments under all noncancelable operating leases are as follows (in thousands): CONTINUING DISCONTINUED OPERATIONS OPERATIONS ------------ ------------- 1998 ...................... $ 823 $2,620 1999 ...................... 844 328 2000 ...................... 844 120 2001 ...................... 795 -- Thereafter ................ 332 -- ------ ------ Total ..................... $3,638 $3,068 ====== ====== Under terms of the leases, the Company is generally required to pay all taxes, insurance and maintenance. Rent expense for the years ended December 31, 1995, 1996 and 1997, aggregated approximately $2,300,000, $4,750,000 and $5,300,000, respectively. Capital Leases Capital leases consist principally of leases for office furnishings and equipment and for automotive equipment. Future minimum lease payments for assets under capital leases at December 31, 1997, are as follows (in thousands): CONTINUING DISCONTINUED OPERATIONS OPERATIONS ------------ ------------- 1998 ................................... $ 583 $ 58 1999 ................................... 508 41 2000 ................................... 447 16 2001 ................................... 337 -- Thereafter ............................. 285 -- ------ ----- Total minimum lease payments ........... 2,160 115 Less- Amount representing interest ..... (416) (10) ------ ----- Present value of minimum lease payment (current portion of $471) ........... $1,744 $ 105 ====== ===== The capitalized cost of leased equipment totaled $1,975,000 and $2,610,000 at December 31, 1996 and 1997, respectively. The related accumulated depreciation totaled $604,000 and $921,000 at December 31, 1996 and 1997, respectively. As an accommodation to certain of the managed properties, the Company assists in obtaining leases of operating equipment. In some instances, this assistance includes entering into the leases as the technical lessee. The managed properties perform all obligations under the leases, including the making of lease payments and the provision of insurance coverage. The Company remains contingently liable under the leases until completion of the lease terms. Because the Company undertakes the role of a technical lessee simply as an accommodation to the managed properties and because the leased equipment is used only for and by the managed properties, these leases have not been recorded on the Company's books. F-27 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 10. COMMITMENTS AND CONTINGENCIES: Guarantees The Company's principal stockholder has personally guaranteed certain of the Company's debt and capital lease obligations. As of December 31, 1997, the guaranteed obligations totaled $2,789,000. The Company has provided guarantees for, or is the cosigner on, personal debts of its principal stockholder. At December 31, 1997, these personal debts totaled $17,374,000. The Company's management agreements are obtained through negotiations with the respective owners and are impacted by the normal market pressures of a highly competitive industry. Contract clauses as to the management fees and reimbursements received by the Company vary greatly. Certain of the Company's management agreements contain provisions for guaranteed levels of returns to owners. These agreements also contain force majeure clauses to protect the Company from forces or occurrences beyond the control of management. During 1995, 1996 and 1997, the Company made payments in excess of the management fees earned on these guaranteed agreements of $620,000, $643,000 and $793,000, respectively. Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying financial statements. Benefit Plans The Company has a 401(k) profit-sharing plan for its employees and for the employees of certain of its managed resort rental and hotel properties. Under the terms of the plan, any nonunion employee with one year of service and 1,000 credited hours of service is eligible to participate. Managed property employees may participate as approved by the owners of the individual managed properties. Employees of managed properties are considered employees of the Company only for purposes of participation in the 401(k) plan. Participating employees may defer up to 15 percent of their eligible compensation. During 1997, the employer, either the Company or the managed property, provided a matching contribution ranging from 37.5 percent to 50.0 percent of the employee's contribution up to the first 6 percent of the eligible compensation. During 1996, the employer, either the Company or the managed property, provided a matching contribution ranging from 25 percent to 50 percent of the employee's contribution up to the first 6 percent of eligible compensation. In 1995, the employer, either the Company or the managed property, provided a matching contribution of 25 percent of the employee's contribution up to 5 percent of the eligible compensation. Company contributions to the 401(k) plan were $53,000, $107,000 and $184,000 in 1995, 1996 and 1997, respectively. The Company has applied for qualification of a second 401(k) profit-sharing plan for employees at one of the leased hotels with the same qualifications as the first plan. F-28 HOTEL CORPORATION OF THE PACIFIC, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) 11. RELATED-PARTY TRANSACTIONS: The Company manages two hotels owned by its principal stockholder. Centralized services (cooperative sales and marketing, reservations, accounting services and other reimbursements) and management fees charged to these two hotels approximated $501,000 and $506,000 in 1996 and 1997, respectively. The Company leases certain office space and parking spaces in one of these hotels. Rent expense approximated $14,000 in 1996 and 1997 for these spaces. The Company also paid HCP, Inc., a company that is wholly owned by the Company's principal stockholder, $481,000 and $476,000 in 1996 and 1997, respectively, for sales representation and related accounting services. The Company was named as a party in an arbitration related to certain hotel properties managed by AHCP, Inc., prior to 1991. The Company incurred legal fees and other expenses totaling $365,000 in 1995 related to the arbitration which was resolved favorably for the Company during 1995. The Company leased storage space from a limited partnership in which the Company was a 5 percent general partner and the Company's principal stockholder was the other general partner. During 1995, 1996 and 1997, the Company incurred $128,000, $114,000 and $110,000, respectively, in lease rent related to this space. The building within which such space is located was sold to an related third party in 1997. The Company has unwritten consulting agreements with family members of the Company's principal stockholder. Consulting services include assistance in community and governmental affairs. During 1995, 1996 and 1997, the Company incurred $229,000, $221,000 and $232,000, respectively, relative to these consulting arrangements. The Company also provides certain management and clerical personnel for a development company owned by the Company's principal stockholder. During 1995, 1996 and 1997, the Company incurred $125,000, $125,000 and $126,000, respectively, in salaries and benefits costs relative to this development company. In return, the Company receives certain consulting and support services. At December 31, 1997, the Company was obligated to the spouse of the principal stockholder on notes payable due February 28, 1999, totaling $285,000 (see Note 7). 12. SUBSEQUENT EVENTS (UNAUDITED): Effective February 1, 1998, the Company's management agreement with a hotel in Waikiki was terminated due to the sale of the property. Management fees earned on this property were approximately $330,000 during 1997. On February 1, 1998, the Company entered into a new management contract with a hotel property in downtown Honolulu. 13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): On February 28, 1998, the Company's lease arrangement with a hotel in Waikiki was terminated due to the sale of the property. The hotel had gross revenues of approximately $5,347,000 and net income of approximately $371,000 during 1997. The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, certain liabilities will be retained by one of the stockholders. In connection with the Offering, one stockholder has agreed to reductions in salary and benefits which would have reduced general and administrative expenses by $380,000, $282,000 and $282,000 for 1995, 1996 and 1997, respectively. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Brindley & Brindley Realty Development, Inc. and B&B On The Beach Inc.: We have audited the accompanying combined balance sheets of Brindley & Brindley consisting of Brindley & Brindley Realty and Development, Inc., and B&B On The Beach Inc., both North Carolina corporations, as of December 31, 1997, and the related combined statements of operations, changes in stockholders' equity and cash flows for the year then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Brindley & Brindley, as of December 31, 1997, and the results of their operations and their cash flows for the year ended December 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-30 BRINDLEY & BRINDLEY COMBINED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA) DECEMBER 31, 1997 ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ............................... $ 24 Cash held in trust ...................................... 3,895 Accounts receivable ..................................... 62 Prepaid expenses and other current assets ............... 37 ------ Total current assets ................................. 4,018 PROPERTY AND EQUIPMENT, net .............................. 125 ------ Total assets ......................................... $4,143 ====== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt ....................... $ 19 Customer deposits and deferred revenue .................. 3,895 Accounts payable and accrued liabilities ................ 108 ------ Total current liabilities ............................ 4,022 LONG-TERM DEBT, net of current maturities ................ 22 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1 par; 200,000 shares authorized; 200 shares outstanding .................................... -- Retained earnings ....................................... 99 ------ Total stockholders' equity ........................... 99 ------ Total liabilities and stockholders' equity ........... $4,143 ====== The accompanying notes are an integral part of this financial statement. F-31 BRINDLEY & BRINDLEY COMBINED STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1997 ------------- REVENUES: Property rental fees ..................... $2,642 Service fees ............................. 978 Real estate commissions, net ............. 401 ------ Total revenues ........................ 4,021 OPERATING EXPENSES ........................ 3,028 ------ Gross profit .......................... 993 GENERAL AND ADMINISTRATIVE EXPENSE ........ 482 ------ Income from operations ................ 511 OTHER INCOME: Interest income, net ..................... 42 ------ NET INCOME ................................ $ 553 ====== The accompanying notes are an integral part of this financial statement. F-32 BRINDLEY & BRINDLEY COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) COMMON STOCK ------------------- RETAINED SHARES AMOUNT EARNINGS TOTAL -------- -------- --------- --------- BALANCE, December 31, 1996 ......... 200 $ -- $ 73 $ 73 Net income ........................ -- -- 553 553 Distributions ..................... -- -- (527) (527) --- ---- ------ ------ BALANCE, December 31, 1997 ......... 200 $ -- $ 99 $ 99 === ==== ====== ====== The accompanying notes are an integral part of this financial statement. F-33 BRINDLEY & BRINDLEY COMBINED STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................... $ 553 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation ................................................ 87 Changes in operating assets and liabilities- Accounts receivable ......................................... (33) Prepaid expenses and other current assets ................... (30) Accounts payable and accrued liabilities .................... 4 ------ Net cash provided by operating activities .................. 581 ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ............................ (83) ------ Net cash used in investing activities ...................... (83) ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from short-term debt ............................. 19 Distributions to stockholders ................................. (527) ------ Net cash used in financing activities ...................... (508) ------ NET DECREASE IN CASH AND CASH EQUIVALENTS ...................... (10) CASH AND CASH EQUIVALENTS, beginning of period ................. 34 ------ CASH AND CASH EQUIVALENTS, end of period ....................... $ 24 ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ..................................... $ 3 ======
The accompanying notes are an integral part of this financial statement. F-34 BRINDLEY & BRINDLEY NOTES TO COMBINED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Brindley & Brindley Realty & Development, Inc. and B&B On The Beach, Inc. (collectively "Brindley & Brindley" or the "Company") both North Carolina companies, are leading providers of beach vacation property rentals, management services and sales in the outer banks of North Carolina. Brindley and Brindley manages approximately 450 rental homes. The Company provides its management services to property owners pursuant to management contracts, which are generally one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. Brindley & Brindley's operations are seasonal, with peaks during the first and fourth quarters of the year. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. The Company requires a deposit equal to 50% of the rental fee at the time reservations are booked and the remaining 50% of the rental fee 30 days prior to the expected arrival date. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying combined financial statements until the guest stay commences. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including housekeeping, reservations and pool services. Commissions on real estate sales are recognized at closing and are recorded net of the related commission expense. The Company recognized commission revenues of $1,189,000 and commission expense of $788,000 in 1997. Operating Expenses Operating expenses include rental agent commissions, employees salaries, marketing and advertising expense, and other costs associated with property sales, rental and management. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the combined statements of operations. F-35 BRINDLEY & BRINDLEY NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state purposes. Under S Corporation status, the stockholders report their shares of the Company's taxable earnings or losses in their personal tax returns. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively in the Corolla, North Carolina area and are subject to significant changes due to weather conditions. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Property and equipment consisted of the following (in thousands): ESTIMATED USEFUL DECEMBER 31, LIVES IN YEARS 1997 -------------- ------------- Buildings and improvements ........ 5-40 $ 7 Office equipment and vehicles ..... 3-7 338 ------ 345 Less - Accumulated depreciation ... (220) ------ Property and equipment, net ...... $ 125 ====== Accounts payable and accrued liabilities consisted of the following (in thousands): DECEMBER 31, 1997 ------------- Accrued compensation and benefits ................... $ 28 Accounts payable and other accrued liabilities ...... 80 ---- Total accounts payable and accrued liabilities ..... $108 ==== At December 31, 1997, maturities of long-term debt were as follows (in thousands): Year ending December 31, 1998 .................. $19 1999 .................. 8 2000 .................. 9 2001 .................. 5 --- $41 === F-36 BRINDLEY & BRINDLEY NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) 4. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's combined financial position or combined results of operations. Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the period presented in the accompanying combined financial statements. Benefit Plans The Company's 401(k) retirement plan is available to substantially all of the Company's full-time salaried employees. The Company's contribution to the plan is based upon a percentage of employee contributions. The cost of this plan to the Company was approximately $14,000 in 1997. 5. RELATED PARTIES: During 1997, the Company paid approximately $104,000 or approximately $8,700 per month to one of the owners for rent of the office building and local warehouse pursuant to two oral agreements, each on a month-to-month basis. Brindley & Brindley entered into two written lease agreements with the Brindleys for these facilities that commenced on January 1, 1998. The terms of these leases expire December 31, 2002, with options to extend for two 5-year periods at the end of the lease periods and provide for aggregate annual rental payments of approximately $133,500. 6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, the owner and certain key employees have agreed to reductions in salary and benefits which would have reduced general and administrative expenses by approximately $69,000 in 1997. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (COMBINED SUCCESSOR COMPANIES REPORT) To the Shareholders of Coastal Resorts Management, Inc. and the Members of Coastal Resorts Realty LLC: We have audited the accompanying combined balance sheets of Coastal Resorts Management, Inc. (a Delaware corporation) and Coastal Resorts Realty LLC (a Delaware limited liability company) (collectively, the "Company") as of December 31, 1996 and 1997, and the related combined statements of operations, changes in stockholders' and members' equity and cash flows for the period December 30, 1996 (inception) to December 31, 1996 and for the year ended December 31, 1997. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Coastal Resorts Management, Inc., and Coastal Resorts Realty LLC as of December 31, 1996 and 1997, and the results of their combined operations and cash flows for the period December 30, 1996 (inception) to December 31, 1996 and for the year ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Washington, D.C. January 29, 1998 F-38 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (COMBINED PREDECESSOR COMPANIES REPORT) To the Shareholders of Interstate Realty Co., Inc. and Sea Colony Management, Inc.: We have audited the accompanying combined statements of operations and cash flows of Interstate Realty Co., Inc. (a Maryland corporation) and Sea Colony Management, Inc. (a Delaware Corporation) (collectively, the "Company") for the period January 1, 1996 through December 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the results of the combined operations and cash flows of Interstate Realty Co., Inc. and Sea Colony Management, Inc. for the period January 1, 1996 through December 30, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Washington D.C. January 29, 1998 F-39 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) COMBINED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, -------------------- 1996 1997 --------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents ........................................ $ 6 $ 203 Cash held in escrow .............................................. 198 442 Accounts receivable .............................................. 143 117 Receivables from related parties ................................. 48 1,130 ------ ------ Total current assets ........................................... 395 1,892 PROPERTY AND EQUIPMENT, net ....................................... 68 278 GOODWILL AND OTHER INTANGIBLE ASSETS, net ......................... 859 718 ------ ------ Total assets ................................................... $1,322 $2,888 ====== ====== LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY CURRENT LIABILITIES: Customer deposits and deferred revenue ........................... $ 163 $ 212 Payable to property owners ....................................... 163 258 Accounts payable and accrued liabilities ......................... 196 395 Accounts payable and accrued liabilities-related parties ......... -- 47 ------ ------ Total current liabilities ...................................... 522 912 NOTE PAYABLE TO RELATED PARTY ..................................... 675 715 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' AND MEMBERS' EQUITY: Common stock, $0.01 par; 100,000 shares authorized; .............. 25,000 issued and outstanding .................................... -- -- Capital in excess of par value ................................... 25 25 Members' equity .................................................. 100 100 Retained earnings ................................................ -- 1,136 ------ ------ Total stockholders' and members' equity ........................ 125 1,261 ------ ------ Total liabilities and stockholders' and members' equity ........ $1,322 $2,888 ====== ======
The accompanying notes are an integral part of these financial statements. F-40 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
COMBINED PREDECESSOR COMBINED SUCCESSOR COMPANIES COMPANIES ---------------------- ------------------- PERIOD JANUARY 1, YEAR 1996 THROUGH ENDED DECEMBER 30, 1996 DECEMBER 31, 1997 ---------------------- ------------------- REVENUES: Property rental fees ....................... $ 630 $ 908 Real estate commissions, net ............... 1,058 1,905 Water plant ................................ -- 462 Service fees ............................... 229 340 ------ ------ Total revenues ........................... 1,917 3,615 OPERATING EXPENSES .......................... 837 1,788 ------ ------ Gross profit ............................. 1,080 1,827 GENERAL AND ADMINISTRATIVE EXPENSES ......... 477 644 ------ ------ Income from operations ................... 603 1,183 INTEREST INCOME (EXPENSE) ................... 121 (47) ------ ------ Income before income taxes ............... 724 1,136 PROVISION FOR INCOME TAXES .................. 304 -- ------ ------ NET INCOME .................................. $ 420 $1,136 ====== ======
The accompanying notes are an integral part of these financial statements. F-41 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) STATEMENTS OF CHANGES IN STOCKHOLDERS' AND MEMBERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL ----------------- PAID-IN MEMBERS' RETAINED SHARES AMOUNT CAPITAL EQUITY EARNINGS TOTAL -------- -------- ----------- ---------- --------- -------- Initial Capitalization -- CRR, December 30, 1996 ................. -- $ -- $ -- $100 $ -- $ 100 Initial Capitalization -- CRM, December 30, 1996 ................. 25,000 -- 25 -- -- 25 Net Income ...................... -- -- -- -- -- -- ------ ---- ---- ---- ------ ------ BALANCE, December 31, 1996 ......... 25,000 -- 25 100 -- 125 Net Income ...................... -- -- -- -- 1,136 1,136 ------ ---- ---- ---- ------ ------ BALANCE, December 31, 1997 ......... 25,000 $ -- $ 25 $100 $1,136 $1,261 ====== ==== ==== ==== ====== ======
The accompanying notes are an integral part of these financial statements. F-42 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
COMBINED PREDECESSOR COMPANIES COMBINED SUCCESSOR COMPANIES -------------- ------------------------------ JANUARY 1 - INCEPTION - JANUARY 1 - DECEMBER 30, DECEMBER 31, DECEMBER 31, 1996 1996 1997 -------------- -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ....................................... $ 420 $ -- $ 1,136 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization .................. 28 -- 85 Gain on sale of assets ......................... -- -- (8) Changes in operating assets and liabilities-- Escrow accounts .................................. 102 -- (244) Accounts receivable .............................. (32) -- 26 Commission receivable ............................ (71) -- -- Receivables from related parties ................. -- -- (1,082) Due to/from related party ........................ (334) -- -- Prepaid insurance and income taxes ............... 63 -- -- Customer deposits and deferred revenue ........... (127) -- 49 Payable to property owners ....................... -- -- 95 Accounts payable and accrued liabilities ......... (16) -- 199 Accounts payable and accrued liabilities -- re- lated parties .................................. -- -- 47 ------ ---- --------- Net cash provided by operating activities ......... 33 -- 303 ------ ---- ---------
The accompanying notes are an integral part of these financial statements. F-43 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) COMBINED STATEMENTS OF CASH FLOWS -- (CONTINUED) (IN THOUSANDS)
COMBINED PREDECESSOR COMPANIES COMBINED SUCCESSOR COMPANIES -------------- ------------------------------ JANUARY 1 - INCEPTION - JANUARY 1 - DECEMBER 30, DECEMBER 31, DECEMBER 31, 1996 1996 1997 -------------- -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of businesses, net of cash acquired ..... $ -- $ (119) $ -- Purchase of property and equipment ............... (33) -- (261) Proceeds from sale of assets ..................... -- -- 115 ------- ------- ------ Net cash used in investing activities .......... (33) (119) (146) ------- ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable to related party ...... -- -- 200 Payments on note payable to related party ........ -- -- (160) Capital contributions ............................ -- 125 -- ------- ------- ------ Net cash provided by financing activities ...... -- 125 40 ------- ------- ------ NET INCREASE IN CASH AND CASH EQUIVA- LENTS ............................................ -- 6 197 CASH AND CASH EQUIVALENTS, beginning of period ........................................... 6 -- 6 ------- ------- ------ CASH AND CASH EQUIVALENTS, end of period........... $ 6 $ 6 $ 203 ======= ======= ====== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Fair value of assets acquired, net of cash ....... $ -- $ 885 $ -- Less: Cash paid .................................. -- 119 -- Seller provided financing ........................ -- 675 -- Liabilities incurred ............................. -- 91 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ........................... $ -- $ -- $ -- ======= ======= ====== Cash paid for taxes .............................. $25,500 $ -- $ -- ======= ======= ======
The accompanying notes are an integral part of these financial statements. F-44 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Coastal Resorts Management, Inc. ("CRM"), incorporated on September 26, 1996, and Coastal Resorts Realty LLC ("CRR"), formed on August 28, 1996, (collectively the "Companies" or the "Company") are a Delaware corporation and a Delaware limited liability company, respectively. CRM provides property management services to homeowner associations as well as other related service companies. CRR provides property rental services to owners of vacation properties and acts as an agent for sales of new and used vacation properties. The Company manages approximately 550 rental units in Bethany Beach, Delaware. CRR and CRM purchased their operations from Interstate Realty Co., Inc. ("Interstate") and Sea Colony Management, Inc. ("SCM"), respectively, on December 30, 1996 (See Note 4). The Company provides its management services to property owners pursuant to management contracts, which range in length from one to five years. The majority of such contracts allow property owners to terminate the contract only for cause. The Company's operations are seasonal, with peaks during the second and third quarters of the year. The Companies and their stockholders and members intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Companies will be exchanged for shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Combination and Financial Statement Presentation The accompanying financial statements of CRM and CRR (the "Successor Companies") have been prepared on a combined basis as the Companies are under common control and are expected to be the subject of a consolidation with and into VPI. The accompanying financial statements of Interstate and SCM (the "Predecessor Companies") have been prepared on a combined basis as the Predecessor Companies were under common control and were the subject of an acquisition by the Successor Companies. The financial statements of the Predecessor Companies are presented for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. The combined statement of operations of the Companies for the period from December 30, 1996 (inception) to December 31, 1996, has not been presented due to the nominal level of operations. Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. The Company requires a deposit equal to 33% of the rental fee 10 days after the reservation is booked. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying combined financial statements. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including processing and inspection fees. F-45 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Commissions on real estate sales are recognized at closing and are recorded net of the related commission expense. The Company recognized commission revenues of $1,507,000 and $3,002,000 for the years 1996 and 1997 and commission expense of $449,000 and $1,097,000 for the years 1996 and 1997. Operating Expenses Operating expenses include rental agent commissions, salaries, marketing and advertising expense, and other costs associated with sales, rental and management. Cash and Cash Equivalents For purposes of the balance sheets and statements of cash flows, the Company considers all cash held and investments held with maturities of less than 3 months as cash and cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Income Taxes CRM has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state tax purposes. Under S Corporation status, the stockholders report their share of CRM's taxable earnings or losses in their personal tax returns. CRR is a Limited Liability Company and is taxed as a Partnership. Accordingly, the Company is not subject to taxation for federal or state purposes. The members report their share of CRR's taxable earnings or losses in their personal tax returns. The Predecessor Companies were C Corporations and accounted for their income taxes under the provisions of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, the current provision for income taxes represents actual or estimated amounts payable or refundable on tax returns filed or to be filed for each year. Deferred tax assets and liabilities are recorded for estimated future tax effects of: (a) temporary differences between the tax bases of assets and liabilities and amounts reported in the consolidated balance sheets, and (b) operating loss and tax credit carry forwards. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of the enactment. The measurement of deferred tax assets may be reduced by a valuation allowance based on judgmental assessment of available evidence if deemed more likely than not that some or all of the deferred tax assets will not be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-46 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Concentration of Risk The Companies' operations are exclusively in the Bethany Beach, Delaware area and are subject to significant changes due to weather conditions. In 1997, 26 percent of gross revenues were attributable to commissions on new homes sales which were built by Sea Colony Development Corporation, Inc., a related party. 3. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following (in thousands): ESTIMATED DECEMBER 31, USEFUL LIVES --------------- IN YEARS 1996 1997 ------------- ------ ------- Computer equipment ................... 5 $60 $ 88 Furniture and fixtures ............... 7 8 241 Total ............................. 68 329 Less -- Accumulated depreciation ..... -- (51) --- ----- Property and equipment, net .......... $68 $ 278 === ===== 4. PURCHASE: On December 30, 1996, CRR entered into an agreement to purchase the assets and assume certain liabilities of Interstate (a related party) for the purchase price of $759,000. CRR borrowed $600,000 from a related party entity to finance the purchase. The fair value of the net assets purchased totaled $2,000, resulting in the recognition of goodwill of $642,000 and a trademark of $115,000. The trademark was sold in 1997 (see Note 6). On December 30, 1996, CRM entered into an agreement to purchase the common stock of SCM (a related party) for the purchase price of $132,000. CRM borrowed $75,000 from a related party entity to finance the purchase. The fair value of the net assets purchased totaled $30,000, resulting in the recognition of intangible assets, totaling $102,000. F-47 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The goodwill is being amortized over a period of 40 years. The trademark was subsequently sold to another related party for approximately $115,000 pursuant to an agreement effective December 31, 1997. The trademark was being amortized over a period of 15 years. The intangible assets associated with the purchase of SCM are being amortized over a period of 10 years. 5. COMMITMENTS AND CONTINGENCIES: Litigation The Companies are involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Companies' combined financial position or results of operations. Insurance Through policies secured by a related party, the Companies are covered by a broad range of insurance policies, including general and business auto liability, commercial property, workers' compensation and a general umbrella. The cost of these policies has not been allocated to the Companies in the accompanying financial statements. The Companies expect to incur insurance expense in future years. Benefit Plans A related party's 401(k) retirement plan (the "Plan") is available to substantially all of the Company's employees. The Plan is 100% employee funded and the Companies have no current or future obligations related to the Plan. The Companies currently pay a fee for the related administration costs. Future Minimum Lease Payments The Company rents office space and equipment under operating leases. Rental expense related to these leases was approximately $69,000 and $111,000 in 1996 and 1997, respectively. Rental expense related to leases with related parties was approximately $69,000 and $77,000 in 1996 and 1997, respectively. Minimum future lease payments under these noncancelable operating leases in effect as of December 31, 1997 are as follows (in thousands): YEAR AMOUNT - ----------------------- ------- 1998 ................ $132 1999 ................ 107 2000 ................ 85 2001 ................ 90 2002 ................ 38 ---- Total ............... $452 ==== 6. RELATED PARTIES: Related Party Agreements Effective June 1, 1996, one of the Predecessor Entities entered into an agreement with CMF Fitness, Inc., a related party. The agreement appointed the Predecessor Entity as the manager of, and exclusive agent for, the Sea Colony Fitness Center located in Bethany Beach, Delaware. The agreement is effective from June 1, 1996 until December 31 of the calendar year in which the last new home in the Sea Colony community is sold, but in no event later than December 31, 2005. F-48 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) CRM receives a management fee of approximately $6,000 per month for its services. CRM and the Predecessor Entity earned approximately $41,000 and $70,000 in 1996 and 1997, respectively, in relation to this management agreement. Effective January 1, 1997, CRM entered into an agreement with Sea Colony Water Company, L.L.C., ("SCWC"), a related party. The agreement appointed CRM as the manager of and exclusive agent for the Sea Colony Water Plant located in Bethany Beach, Delaware. The agreement is effective from January 1, 1997 until December 31, 2001 or the sale of the property. CRM is entitled to retain all revenue collected by the water plant, less the following: (1) an annual payment to SCWC of $100,000, (2) an annual payment to SCWC equal to 12.5% of the cumulative value of capital improvements made to the water plant after January 1, 1997, and (3) all costs and expenses associated with the operation of the property except capital improvements and expenditures, costs of compliance with laws and regulations, and costs of insurance. CRM earned approximately $463,000 in revenue from the operation of the water plant in 1997. Operating expenses plus the additional costs described above incurred by CRM related to the water plant were approximately $319,000. Effective January 1, 1997, CRR entered into an agreement with Sea Colony Development Corporation, Inc. ("SCDC"), a related party. The agreement requires CRR to develop a marketing plan to promote new homes in the Sea Colony community. The agreement also appointed CRR as the sole and exclusive agent for sale of new homes at Sea Colony from January 1, 1997 until December 31, 1999. The agreement states that CRR shall receive a commission of 6.5% of the full purchase price on all new homes sold at Sea Colony. CRR earned approximately $1,244,000 in new home sales commissions under this agreement in 1997. At December 31, 1997, in connection with this agreement the Company has a net receivable of approximately $674,000 from SCDC consisting of a receivable of approximately $1,244,000 for commissions on new home sales in 1997 and a related payable of approximately $570,000 for commissions, marketing and advertising expenses paid by SCDC on behalf of CRR. Effective January 1, 1997, the Companies entered into an agreement with CMF Paymaster, Inc., a related party, to receive administrative services relating to payroll and other employee matters. The agreement is effective from January 1, 1997 through December 31, 1999, and requires the Companies to pay $2.00 per pay period per employee of the Companies. The trademark purchased on December 30, 1996 for $115,000 was sold to SCDC pursuant to an agreement effective December 31, 1997. As of December 31, 1997, the Company has recorded a receivable from SCDC for $115,000 related to this sale. A gain of $4,000 was recognized on the sale and is included in other revenues. Note Payable to Related Party In connection with the purchase of Interstate and SCM on December 30, 1996 the Companies borrowed $675,000 from a related party. The loan has an effective interest rate of 7.25% and is due December 31, 2001. During 1997 the Companies received additional advances of $200,000 and made principal payments of $160,000. Accrued interest payable at December 31, 1997, was $46,888. The assets of the Company have been pledged as collateral for the note. Related Party Leases The Company leases office space under three separate leases with a related party. In aggregate, the Company paid approximately $69,000 and $77,000 in 1996 and 1997, respectively. F-49 COASTAL RESORTS MANAGEMENT, INC. AND COASTAL RESORTS REALTY LLC (COMBINED SUCCESSOR COMPANIES) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Capital Contribution On January 13, 1998, the owners of the Companies made a capital contribution of approximately $762,000. On the same day, this amount was used to repay the Companies' related party debt of $715,000 and the related accrued interest. 7. INCOME TAXES: The provision for income taxes consists of the following for the period January 1 through December 30, 1996 (in thousands): CURRENT: Federal ........................... $ 280 State ............................. 64 ----- Total current provision ......... 344 DEFERRED: Federal ........................... (27) State ............................. (13) ----- Total deferred benefit: ......... (40) ----- Provision for income taxes ......... $ 304 ===== A reconciliation of the statutory income tax rate to the provision for income taxes included in the statement of operations of the Predecessor Companies for the period January 1 through December 30, 1996 is as follows (in thousands): Federal income tax at statutory rate ......... 253 State income taxes, net ...................... 51 --- Income tax provision ......................... $304 ==== 8. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Companies and their stockholders and members have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock and membership interest of the Companies will be acquired by VPI. In addition, the stockholders and members will retain goodwill and other intangible assets that will be excluded from the Combinations. F-50 INDEPENDENT AUDITOR'S REPORT To Collection of Fine Properties, Inc.: We have audited the accompanying consolidated balance sheets of Collection of Fine Properties, Inc. as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the three years ended December 31, 1997, 1996 and 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Collection of Fine Properties, Inc. as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the three years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. MORRISON, BROWN, ARGIZ AND COMPANY Denver, Colorado January 23, 1998 F-51 COLLECTION OF FINE PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
DECEMBER 31, --------------------- 1996 1997 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents ................................... $2,664 $2,713 Marketable securities ....................................... 103 -- Accounts receivable ......................................... 100 67 Receivables from affiliates and stockholders ................ 213 634 Prepaid expenses and other current assets ................... 312 434 ------ ------ Total current assets ...................................... 3,392 3,848 ------ ------ PROPERTY AND EQUIPMENT, net .................................. 1,903 1,964 ------ ------ OTHER ASSETS ................................................. 98 54 ------ ------ Total assets .............................................. $5,393 $5,866 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of credit .............................................. $ -- $ 97 Current portion of long-term debt ........................... 397 28 Current portion of capital lease obligations ................ 51 55 Customer deposits and deferred revenue ...................... 3,287 3,336 Payable to affiliates ....................................... 42 28 Accounts payable and accrued liabilities .................... 938 1,175 ------ ------ Total current liabilities ................................. 4,715 4,719 ------ ------ LONG-TERM DEBT, net of current maturities .................... 188 299 ------ ------ CAPITAL LEASE OBLIGATIONS, net of current maturities ......... 70 15 ------ ------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, no par value, 10,000 shares authorized, issued and outstanding ........................................... 788 788 Retained earnings (deficit) ................................. (368) 45 ------ ------ Total stockholders' equity ................................ 420 833 ------ ------ Total liabilities and stockholders' equity ................ $5,393 $5,866 ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-52 COLLECTION OF FINE PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, --------------------------------- 1995 1996 1997 --------- --------- --------- REVENUES: Property rental fees ................. $2,734 $3,273 $3,513 Service fees ......................... 266 273 243 Other ................................ 500 595 547 ------ ------ ------ Total revenues ...................... 3,500 4,141 4,303 OPERATING EXPENSES ..................... 2,621 2,777 2,830 ------ ------ ------ Gross profit .......................... 879 1,364 1,473 GENERAL AND ADMINISTRATIVE EXPENSES .... 923 948 893 ------ ------ ------ Income (loss) from operations ......... (44) 416 580 OTHER INCOME (EXPENSE): Interest income, net ................. 21 31 58 Other ................................ (34) 85 75 ------ ------ ------ NET INCOME (LOSS) ................... $ (57) $ 532 $ 713 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-53 COLLECTION OF FINE PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK RETAINED ------------------ EARNINGS SHARES AMOUNT (DEFICIT) TOTAL -------- -------- ----------- -------- BALANCE, January 1, 1995 ........... 10,000 $788 $ (443) $ 345 Net loss .......................... -- -- (57) (57) Distributions ..................... -- -- (100) (100) ------ ---- ------ ------ BALANCE, December 31, 1995 ......... 10,000 788 (600) 188 Net income ........................ -- -- 532 532 Distributions ..................... -- -- (300) (300) ------ ---- ------ ------ BALANCE, December 31, 1996 ......... 10,000 788 (368) 420 Net income ........................ -- -- 713 713 Distributions ..................... -- -- (300) (300) ------ ---- ------ ------ BALANCE, December 31, 1997 ......... 10,000 $788 $ 45 $ 833 ====== ==== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-54 COLLECTION OF FINE PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1995 1996 1997 --------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ....................................... $ (57) $ 532 $ 713 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization .......................... 379 367 307 Gain on sale of assets ................................. -- (9) -- Changes in operating assets and liabilities: Accounts receivable .................................... (21) 1 33 Receivable from affiliates and stockholders ............ 27 (105) (421) Prepaid expenses and other current assets .............. 66 (21) (122) Customer deposits and deferred revenue ................. 188 568 49 Payable to affiliates .................................. 74 (363) (13) Accounts payable and accrued expenses .................. 186 (96) 237 ------ ------- ------ Net cash provided by operating activities ............ 842 874 783 ------ ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from loan receivable ........................... -- 160 -- Advances to stockholders ................................ -- (16) -- Purchases of property and equipment ..................... (360) (288) (284) Proceeds from sale of property and equipment ............ -- 46 8 Other assets ............................................ 19 (10) 37 Sales and (purchases) of marketable securities .......... -- (103) 103 Proceeds from sale of land held for development ......... -- 67 -- ------ ------- ------ Net cash used in investing activities ................ (341) (144) (136) ------ ------- ------
The accompanying notes are an integral part of these consolidated financial statements. F-55 COLLECTION OF FINE PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1995 1996 1997 --------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Advances on line of credit ......................... 514 -- 752 Repayments on line of credit ....................... (724) (90) (655) Proceeds from notes payable ........................ 149 -- -- Payments on notes payable .......................... (123) (26) (344) Payments on note payable to related parties ........ -- (154) -- Payments on capital leases ......................... (50) (54) (51) Distributions to stockholders ...................... -- (400) (300) ---- ---- ---- Net cash used in financing activities ............. (234) (724) (598) ---- ---- ---- NET INCREASE IN CASH AND CASH EQUIVA- LENTS .............................................. 267 6 49 CASH AND CASH EQUIVALENTS, beginning of year.......... 2,391 2,658 2,664 ----- ----- ----- CASH AND CASH EQUIVALENTS, end of year ............... $2,658 $2,664 $2,713 ====== ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid ....................................... $ 75 $ 100 $ 79 ====== ====== ====== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets under capitalized leases ..... $ -- $ -- $ 86 ====== ====== ====== Write-off of fully depreciated fixed assets ........ $ -- $ -- $ 362 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-56 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Collection of Fine Properties, Inc. and its subsidiary Peak Ski Rental, Ltd. ("Subsidiary", collectively the "Company"), a Colorado S-Corporation, provides vacation property rental and management services for properties owned by third parties and located in the Breckenridge, Colorado area. The properties are primarily condominium rental units which are owned by third parties. The Company manages approximately 470 rental units. The Company's subsidiary is engaged in the rental of ski equipment. On January 1, 1995, Tyra Management, Inc., Colorado Mountain Lodging, Inc., and River Mountain Lodge, Inc. formed a business combination accounted for as a pooling of interests. All of the assets and liabilities of those companies were transferred to Collection of Fine Properties, Inc. The stockholders of the combined companies received 10,000 shares of common stock of Collection of Fine Properties, Inc. in exchange for their stock in Tyra Management, Inc., Colorado Mountain Lodging, Inc. and River Mountain Lodge, Inc. All existing basis in the assets and liabilities of the combined companies was transferred to the Company. As a result of this combination, the Company acquired 100% ownership of Subsidiary, which prior to the combination, was owned one-third by each of the combining companies. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of consolidation The consolidated financial statements include the accounts of Collection of Fine Properties, Inc. and Peak Ski Rental, Ltd. All significant intercompany accounts and transactions have been eliminated. Revenue recognition The Company records property rental and management fees on the accrual basis of accounting ratably over the term of guest stays, as earned. Certain other linen and maintenance fees are charged periodically. The Company provides all marketing, management, housekeeping and minor maintenance. The Company requires a non-refundable deposit equal to 100% of the rental amount 60 days prior to the actual stay, recorded as Customer Deposits within the accompanying consolidated balance sheets. Revenue from cancellations is recognized when received. Operating expenses Operating expenses include travel agent commissions, salaries, communications, advertising, credit card fees and other costs associated with managing properties. Cash and cash equivalents The Company considers all short-term investments purchased with an original maturity of three months or less to be cash equivalents. Marketable securities Marketable securities consist of corporate bonds and are classified as held to maturity. The fair market value of the securities approximates the cost. F-57 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Held to maturity securities are securities which the Company has the positive intent and ability to hold to maturity. Amounts are reported at amortized cost, adjusted for the amortization of premiums and accretion of discounts. Inventories Inventories consist of ski lift tickets, merchandise, uniforms, supplies and parts used for the repair and service of the owners' units. Inventories are stated at cost, determined on a first-in, first-out (FIFO) method. Inventories are included in prepaid expenses and other current assets on the balance sheets. Land held for development Land held for development consists of raw land purchased for future development. Cost includes original acquisition costs and costs incurred specific to the property. During 1996, this property was sold to a related party at cost. Property and equipment Property and equipment are recorded at cost. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of operations. Income taxes The Company has S-Corporation status as defined by the Internal Revenue Code. Under S-Corporation status, the stockholders report their shares of the Company's taxable earnings or losses in their personal tax returns. Management estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at December 31, 1997 and 1996 and revenues and expenses during the three years ended December 31, 1997, 1996 and 1995. The actual outcome of these estimates could differ from the estimates made in the preparation of the financial statements. Concentration of credit risk At December 31, 1997 and 1996, the Company had cash deposits in a financial institution of approximately $2,341,000 and $2,085,000, respectively, in excess of the federal insured limit of $100,000. The Company is economically dependent upon the tourism trade and changes in weather conditions in the Breckenridge, Colorado area. The operations are seasonal, with peaks during the first and fourth quarters of the year. Reclassifications Certain items in the 1995 and 1996 financial statements have been reclassified to conform with the 1997 presentation. F-58 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Fair value of financial instruments Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure regarding the fair value of financial instruments for which it is practical to estimate that value. The carrying value of cash and cash equivalents, approximates the fair value due to the short-term nature of these instruments. The fair value of the Company's long-term debt is estimated to approximate carrying value as the pricing and terms are indicative of current rates and credit risk. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Inventories consisted of the following (in thousands): DECEMBER 31, ---------------- 1996 1997 ------ ------- Merchandise ................ $ 31 $ 35 Parts and supplies ......... 27 31 Uniforms ................... 9 13 Ski lift tickets ........... 94 78 ---- ---- $161 $157 ==== ==== Property and equipment consisted of the following (in thousands):
ESTIMATED DECEMBER 31, USEFUL LIVES --------------------- IN YEARS 1996 1997 ------------- --------- --------- Buildings ......................................... 31-39 $1,206 $1,230 Property held for investment ...................... 31-39 330 332 Furniture and equipment ........................... 3-7 962 806 Transportation equipment .......................... 5 104 203 Equipment under capital leases .................... lease term 262 242 Leasehold improvements ............................ 39 52 59 Linens ............................................ 4 216 259 3,132 3,131 Less accumulated depreciation and amortization..... 1,229 1,167 ------ ------ Property and equipment, net ...................... $1,903 $1,964 ====== ======
Accounts payable and accrued liabilities consisted of the following (in thousands): 1996 1997 ------ --------- Trade payable .................................. $703 $ 915 Payroll and payroll taxes ...................... 101 111 Sales tax ...................................... 134 149 ---- ------ Total accounts payable and accrued liabilities $938 $1,175 ==== ====== 4. PROPERTY HELD UNDER CAPITAL LEASES: The Company is subject to leases for telephone and computer equipment under arrangements, which are accounted for as capital leases. The leases are amortized over an estimated useful life of 5 years. Amortization on equipment under capital leases for the years ended December 31, 1997, 1996 and 1995 was approximately $49,000. F-59 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The following is a schedule of future minimum payments due under the capital leases and the present value of the net minimum lease payments (in thousands): Year ending December 31, 1998 .......................................................... $ 58 1999 .......................................................... 15 ----- Total minimum lease payments ................................... 73 Less amount representing interest .............................. 3 ----- Present value of net minimum obligations under capital leases .. 70 Less current maturities ........................................ 55 ----- $ 15 ===== 5. RELATED PARTIES: The related party balances consisted of the following (in thousands): DECEMBER 31, ---------------- 1996 1997 ------ ------- Receivable from affiliates ........... $162 $583 Receivable from stockholders ......... 51 51 ---- ---- $213 $634 ==== ==== Payable to affiliates ................ $ 42 28 ==== ==== Related party receivables are unsecured, non-interest bearing and are expected to be collected in the subsequent year. The Company has a mortgage note payable with an affiliate (Note 7). During 1996 and 1995, the Company incurred management fees to a related party of approximately $100,000 and $118,000, respectively, for administrative services. No management fees were incurred during 1997. During 1997, 1996 and 1995, the Company received expense reimbursements from a related party of approximately $75,000, $57,000 and $60,000, respectively. Loan receivable Tyra Management, Inc. sold property to a related party at its cost basis of approximately $323,000. Tyra Management, Inc. received a note from that related entity. At January 1, 1995, when Tyra Management, Inc. was combined into the Company, the note had been paid down to approximately $151,000, which included accrued interest. The note was transferred to the Company as part of the combination. No additional payments were made by the related entity during 1995. Interest, which accrues at the rate of 6% per annum ($9,000) was added to the balance at December 31, 1995. The loan was paid off during 1996. 6. LINE OF CREDIT: The Company has a $750,000 line of credit from a bank. During 1997, the maximum balance outstanding under the line of credit was approximately $502,000 and the minimum was zero. The line is secured by certain real estate, furniture, fixtures, equipment and inventory. The principal shareholders of the Company are additional parties to the note. The interest charged is the New York prime rate, which was 8.5% and 8.25% at December 31, 1997 and 1996, respectively. These interest rates approximate the weighted average rates during the respective years. F-60 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) 7. LONG-TERM DEBT: Long-term debt consisted of the following (in thousands):
DECEMBER 31, ---------------- 1996 1997 ------ ------- Mortgage note, payable in monthly principal installments of $500 plus interest at the prime rate (8.5% and 8.25% at December 31, 1997 and 1996, respectively). The note is secured by property and matures July, 2000, at which time a balloon payment is due. Certain shareholders are guarantors of the note.. $131 $125 Mortgage note, payable in monthly installments of $600 including interest at the prime rate (8.5% and 8.25% at December 31, 1997 and 1996, respectively). The note is secured by property and matures January, 2003, at which time a balloon payment is due.................................................................. 72 71 Mortgage note, payable in monthly installments of $3.6, including interest at 9%. The note is secured by property and matured August, 1997, at which time a balloon payment was due......................................................... 319 -- Mortgage note, payable in monthly installments of $.5 to a related party including interest at 8%. The note is secured by property and matures through November, 2023.................................................................. 63 62 Loan payable for purchase of vehicles, payments of $2.1, including principal and interest ....................................................................... -- 69 ---- ---- $585 $327 ==== ====
The aggregate maturities of long-term debt at December 31, 1997 are as follows (in thousands): Year ending December 31, 1998 ............................ $ 28 1999 ............................ 30 2000 ............................ 140 2001 ............................ 5 2002 ............................ 3 Thereafter ...................... 121 ---- 327 Less current maturities ......... 28 ---- $299 ==== 8. BENEFIT PLAN: The Company instituted a 401(K) Profit Sharing Plan during September, 1996. Employer contributions to the plan during 1997 and 1996 were approximately $20,000 and $6,000, respectively. F-61 COLLECTION OF FINE PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) 9. SUBSEQUENT EVENT: During January, 1998, the Company distributed $300,000 to its stockholders. 10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, an owner has agreed to reductions in salary and benefits which would have reduced general and administrative expenses by approximately $64,000, $74,000 and $94,000 for 1995, 1996, and 1997, respectively. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-62 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To First Resort Software, Inc.: We have audited the accompanying balance sheet of First Resort Software, Inc. (a Colorado corporation) as of December 31, 1997, and the related statements of operations, changes in stockholders' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Resort Software, Inc., as of December 31, 1997, and the results of its operations and its cash flows for the year ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-63 FIRST RESORT SOFTWARE, INC. BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1997 ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ....................................... $ 126 Accounts receivable ............................................. 274 Notes receivable ................................................ 152 Prepaid expenses and other current assets ....................... 45 ----- Total current assets .......................................... 597 PROPERTY AND EQUIPMENT, net ...................................... 275 ----- Total assets .................................................. $ 872 ===== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Deferred revenue ................................................ $ 506 Accounts payable and accrued liabilities ........................ 130 ----- Total current liabilities ..................................... 636 LONG-TERM OBLIGATIONS ............................................ 125 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1 par; 50,000 shares authorized; 3,000 shares out- standing ...................................................... 3 Additional paid in capital ...................................... 13 Retained earnings ............................................... 95 ----- Total stockholders' equity .................................... 111 ----- Total liabilities and stockholders' equity .................... $ 872 =====
The accompanying notes are an integral part of this financial statement. F-64 FIRST RESORT SOFTWARE, INC. STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1997 ------------- REVENUES: Software sales ........................... $1,318 Service contracts ........................ 1,390 Other .................................... 156 ------ Total revenues ......................... 2,864 OPERATING EXPENSES ........................ 1,704 ------ Gross profit ............................. 1,160 GENERAL AND ADMINISTRATIVE EXPENSES ....... 417 ------ Income from operations ................... 743 OTHER INCOME: Interest income .......................... 25 ------ NET INCOME ................................ $ 768 ====== The accompanying notes are an integral part of this financial statement. F-65 FIRST RESORT SOFTWARE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL RETAINED ------------------- PAID IN EARNINGS SHARES AMOUNT CAPITAL (DEFICIT) TOTAL -------- -------- ------------ ---------- ---------- BALANCE, December 31, 1996 ......... 3,000 $ 3 $13 $ (106) $ (90) Net income ........................ -- -- -- 768 768 Distributions ..................... -- -- -- (567) (567) ----- --- --- ------ ------ BALANCE, December 31, 1997 ......... 3,000 $ 3 $13 $ 95 $ 111 ===== === === ====== ======
The accompanying notes are an integral part of this financial statement. F-66 FIRST RESORT SOFTWARE, INC. STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................ $ 768 Adjustments to reconcile net income to net cash provided by op- erating activities-- Depreciation .................................................... 45 Changes in operating assets and liabilities-- Accounts receivable ............................................. (44) Notes receivable ................................................ (25) Prepaid expenses and other current assets ....................... 29 Deferred revenue ................................................ 49 Accounts payable and accrued liabilities ........................ (17) ------ Net cash provided by operating activities ...................... 805 ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ................................ (183) ------ Net cash used in investing activities .......................... (183) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on line of credit ........................................ (39) Distributions to stockholders ..................................... (567) ------ Net cash used in financing activities .......................... (606) ------ NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 16 CASH AND CASH EQUIVALENTS, beginning of year ....................... 110 ------ CASH AND CASH EQUIVALENTS, end of year ............................. $ 126 ======
The accompanying notes are an integral part of this financial statement. F-67 FIRST RESORT SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: First Resort Software, Inc. (the "Company") is a Colorado corporation. The Company was founded and began operations in 1985. The Company develops, markets and distributes property management computer software applications and provides its licensees with implementation services and ongoing support. The Company has a client base of over 650 companies located in the United States, Canada and the Caribbean. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records revenue from software sales when the software is successfully installed on the client's system. The Company's revenue recognition policies conform to accounting principles for software revenue recognition issued by the American Institute of Certified Public Accountants ("AICPA"). For customer arrangements that include multiple elements (i.e., additional software products, postcontract customer support, or services) the contract price is generally allocated to the various elements based on Company--specific objective evidence of fair values. Revenue related to software maintenance agreements, which are generally one year in duration, is generally billed in advance and recognized ratably over the term of the maintenance contract. Customer deposits received and amounts invoiced but not yet recognized as revenue are reflected as deferred revenue in the accompanying balance sheet. These amounts are included in revenue when the relevant recognition criteria are met. Revenues related to service elements are generally recognized as the services are provided. Should the Company enter into arrangements with customers that require significant production, modification or customization of software, the entire arrangement will be accounted for using progress to completion accounting methods prescribed by the AICPA. Operating Expenses Operating expenses include salaries, benefits, communications, marketing, postage and shipping, and other costs associated with developing, servicing and marketing software. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight--line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. F-68 FIRST RESORT SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Research and Development Research and development costs, except as discussed below, are expensed as incurred. These costs consist primarily of salaries relating to the development of new products and technologies. Generally accepted accounting principles provide that costs incurred to produce software for external sale or lease should be capitalized. Costs eligible for capitalization are those incurred after the product's technological feasibility has been established and before the product is ready for general release. The establishment of technological feasibility and the ongoing assessment of the recoverability of capitalized costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future product revenues, estimated economic life and changes in software and hardware technology. The Company incurred costs through December 31, 1997 which satisfy the above criteria of approximately $149,000 and therefore these software development costs have been capitalized by the Company. Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code, whereby the Company is not subject to taxation. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. PROPERTY AND EQUIPMENT: Property and equipment consisted of the following (in thousands):
ESTIMATED USEFUL DECEMBER 31, LIVES IN YEARS 1997 ------------------ ------------- Furniture, fixtures and equipment ....... 5 $ 255 Leasehold improvements .................. 5 9 Computer software ....................... 5 149 413 Less - Accumulated depreciation ......... (138) ------ Property and equipment, net ............ $ 275 ======
4. LINE OF CREDIT: The Company has a loan agreement with a bank providing a line of credit ("LOC") credit facility of $150,000, which is subject to renewal and review on an annual basis. The LOC bears interest at prime plus 1.75% and matures March 25, 1998. At December 31, 1997, there was no outstanding balance on this LOC. The owners of the Company have guaranteed the obligations and liabilities of the Company in connection with the LOC pursuant to a continuing guaranty dated March 25, 1994. F-69 FIRST RESORT SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) 5. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in certain legal actions arising from the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, workers' compensation and an error and omissions policy. The Company has not incurred significant claims or losses on any of its insurance policies during the period presented in the accompanying financial statements. Benefit Plans The Company's 401(k) retirement plan is available to substantially all of the Company's employees. The Company's contribution to the plan is based upon a percentage of employee contributions, as defined by the plan. The cost of this plan was approximately $18,000 in 1997. 6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering the stockholders have agreed to increases in salary and benefits which would have increased general and administrative expenses by $42,000 in 1997. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-70 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Houston and O'Leary Company: We have audited the accompanying balance sheet of Houston and O'Leary Company (a Colorado corporation) as of December 31, 1997, and the related statements of operations, changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Houston and O'Leary Company, as of December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-71 HOUSTON AND O'LEARY COMPANY BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1997 ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ...................................... $259 Accounts receivable ............................................ 5 Receivables from stockholders .................................. 274 Prepaid expenses and other current assets ...................... 45 ---- Total current assets ......................................... 583 PROPERTY AND EQUIPMENT, net ..................................... 157 ---- Total assets ................................................. $740 ==== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt ................................................ $164 Customer deposits and deferred revenue ......................... 255 Capital lease obligations ...................................... 50 Accounts payable and accrued liabilities ....................... 86 ---- Total current liabilities .................................... 555 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1 par; 10,000 shares authorized; 200 shares out- standing ..................................................... -- Retained earnings .............................................. 185 ---- Total stockholders' equity ................................... 185 ---- Total liabilities and stockholders' equity ................... $740 ====
The accompanying notes are an integral part of this financial statement. F-72 HOUSTON AND O'LEARY COMPANY STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1997 ------------- REVENUES: Real estate commissions .................. $1,170 Property rental fees ..................... 298 Other .................................... 128 ------ Total revenues ......................... 1,596 OPERATING EXPENSES ........................ 494 ------ Gross profit ........................... 1,102 GENERAL AND ADMINISTRATIVE EXPENSES ....... 322 ------ Income from operations ................. 780 OTHER INCOME: Interest income, net ..................... (15) ------ NET INCOME ................................ $ 765 ====== The accompanying notes are an integral part of this financial statement. F-73 HOUSTON AND O'LEARY COMPANY STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ------------------- RETAINED SHARES AMOUNT EARNINGS TOTAL -------- -------- --------- --------- BALANCE, December 31, 1996 ......... 200 $-- $ 49 $ 49 Net income ........................ -- -- 765 765 Distributions ..................... -- -- (629) (629) --- --- ------ ------ BALANCE, December 31, 1997 ......... 200 $-- $ 185 $ 185 === === ====== ======
The accompanying notes are an integral part of this financial statement. F-74 HOUSTON AND O'LEARY COMPANY STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................... $ 765 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation ................................................ 48 Changes in operating assets and liabilities-- Payable to property owners .................................. 20 Prepaid expenses and other current assets ................... 3 Deferred revenue ............................................ 21 Accounts payable and accrued liabilities .................... (46) ------ Net cash provided by operating activities .................. 811 ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ............................ (57) ------ Net cash used in investing activities ...................... (57) ------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt .................................... (43) Distributions to stockholders ................................. (629) ------ Net cash used in financing activities ...................... (672) ------ NET INCREASE IN CASH AND CASH EQUIVALENTS ...................... 82 CASH AND CASH EQUIVALENTS, beginning of year ................... 177 ------ CASH AND CASH EQUIVALENTS, end of year ......................... $ 259 ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA- TION: Cash paid for interest ........................................ $ 15 ======
The accompanying notes are an integral part of this financial statement. F-75 HOUSTON AND O'LEARY COMPANY NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Houston and O'Leary Company (the "Company"), a Colorado corporation, provides luxury vacation property rentals and sales in Aspen, Colorado and provides non-exclusive rental services for approximately 130 rental units. The Company provides its management services to property owners pursuant to management contracts, which are generally one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. The Company requires a deposit equal to 100% of the rental fee 45 days prior to the expected arrival date. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying financial statements until the guest stay commences. The Company records revenue for cancellations as they occur. Commissions on real estate sales are recognized at closing. Operating Expenses Operating expenses include broker commissions, salaries, communications, advertising, credit card fees and other costs associated with rental and sales of properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby, the Company is not subject to taxation for federal or state purposes. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. F-76 HOUSTON AND O'LEARY COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively in the Aspen, Colorado area and are subject to significant changes due to weather conditions. 3. PROPERTY AND EQUIPMENT: Property and equipment consisted of the following (in thousands):
ESTIMATED USEFUL DECEMBER 31, LIVES IN YEARS 1997 ------------------ ------------- Furniture, fixtures and equipment ......... 5 $ 89 Artwork ................................... -- 20 Airplane .................................. 5 159 ------ 268 Less - Accumulated depreciation ........... (111) ------ Property and equipment, net .............. $ 157 ======
4. SHORT-TERM DEBT: Short-term debt consisted of the following:
DECEMBER 31, 1997 ------------- Term note payable to bank, interest at 1% over the prime rate as disclosed in the Wall Street Journal; collateralized by Airplane and guaranteed by shareholders; payable in monthly installments of $1,059, including interest, through March 5, 2000 at which time the remaining principal becomes payable .............................................. $ 65 Revolving note payable to bank ......................................... 99 ---- $164 ====
Under the revolving note payable to a bank, the bank will provide a revolving line of credit up to $100,000 to finance the Company's working capital needs. At December 31, 1997, the Company had $99,000 outstanding on the line of credit. Interest is payable monthly based upon the prime rate (9.50% at December 31, 1997). The note is collateralized by the assets of the Company. Subsequent to year end, the note payable to a bank was assigned and assumed by one of the stockholders. 5. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. F-77 HOUSTON AND O'LEARY COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the period presented in the accompanying financial statements. 6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, certain non-operating assets and related liabilities with a net asset value of $257,000 will be retained by one of the stockholders. If this transaction had been recorded at December 31, 1997, the effect on the accompanying balance sheet would be a decrease in assets of $357,000, and a decrease in liabilities of $100,000 and a decrease in stockholders' equity of $257,000. The stockholders and key management have agreed to reductions in salary and benefits which would have reduced general and administrative expenses by $58,000 in 1997. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-78 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Maury People, Inc.: We have audited the accompanying balance sheet of The Maury People, Inc. (a Massachusetts corporation) as of December 31, 1997, and the related statements of operations, changes in stockholder's equity(deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Maury People, Inc., as of December 31, 1997, and the results of its operations and its cash flows for the year ended December 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-79 THE MAURY PEOPLE, INC. BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1997 ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ........................................... $ 297 Cash held in escrow ................................................. 553 Prepaid expenses and other current assets ........................... 19 ----- Total current assets .............................................. 869 PROPERTY AND EQUIPMENT, net .......................................... 99 ----- Total assets ...................................................... $ 968 ===== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Escrow deposits on real estate sales ................................ $ 553 Payable to property owners .......................................... 103 Accounts payable and accrued liabilities ............................ 224 ----- Total current liabilities ......................................... 880 COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: Common Stock, no par; 1,000 shares authorized; 200 shares issued 1 Retained earnings ................................................... 87 ----- Total stockholder's equity ........................................ 88 ----- Total liabilities and stockholder's equity ........................ $ 968 =====
The accompanying notes are an integral part of this financial statement. F-80 THE MAURY PEOPLE, INC. STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1997 ------------- REVENUES: Real estate commissions, net ............. $ 829 Property rental fees, net ................ 354 ------ Total revenues ......................... 1,183 OPERATING EXPENSES ........................ 211 ------ Gross profit ............................. 972 GENERAL AND ADMINISTRATIVE EXPENSES ....... 682 ------ Income from operations ................... 290 OTHER INCOME: Interest income, net ...................... 28 ------ NET INCOME ............................... $ 318 ====== The accompanying notes are an integral part of this financial statement. F-81 THE MAURY PEOPLE, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK RETAINED TOTAL ------------------- EARNINGS ---------- SHARES AMOUNT (DEFICIT) -------- -------- ---------- BALANCE, December 31, 1996 ......... 200 $ 1 $ (84) $ (83) Net income ........................ -- -- 318 318 Distributions ..................... -- -- (147) (147) --- --- ------ ------ BALANCE, December 31, 1997 ......... 200 $ 1 $ 87 $ 88 === === ====== ======
The accompanying notes are an integral part of this financial statement. F-82 THE MAURY PEOPLE, INC. STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ...................................................................... $ 318 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation .................................................................. 28 Changes in operating assets and liabilities- Cash held in escrow ........................................................... (184) Escrow deposits on real estate sales .......................................... 184 Prepaid expenses and other current assets ..................................... (6) Due to property owners ........................................................ 32 Accounts payable and accrued liabilities ...................................... 1 ------- Net cash provided by operating activities .................................... 373 ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment .............................................. (77) ------- Net cash used in investing activities ........................................ (77) ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable ...................................................... 50 Payments on note payable ........................................................ (50) Distributions to stockholders ................................................... (147) ------- Net cash used in financing activities ........................................ (147) ------- NET INCREASE IN CASH AND CASH EQUIVALENTS ........................................ 149 CASH AND CASH EQUIVALENTS, beginning of period ................................... 148 ------- CASH AND CASH EQUIVALENTS, end of period ......................................... $ 297 =======
The accompanying notes are an integral part of this financial statement. F-83 THE MAURY PEOPLE, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: The Maury People, Inc. (the "Company") is a Massachusetts corporation which provides vacation property rentals and sales on the island of Nantucket off the coast of Massachusetts. The Company provides non-exclusive rental services for approximately 1200 rental units. The Company's property rental operations are seasonal, with peaks during the first and fourth quarters of the year. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental fees upon the receipt of customer deposits. The Company requires a deposit equal to 100% of the rental fee 45 days prior to the expected arrival date. Since these Company's deposits are non-refundable, the Company records its fees and a payable to property owners in the accompanying financial statements. The Company records revenue for cancellations as they occur. Commissions on real estate sales are recognized at closing and are recorded net of the related commission expense to unaffiliated brokers. The Company recognized commission revenues of $1,949,000 and commission expense of $1,120,000 to affiliated brokers for the year 1997. Operating Expenses Operating expenses include agent commissions, salaries, communications, advertising, and other costs associated with managing and selling properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state purposes. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. F-84 THE MAURY PEOPLE, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively on Nantucket Island. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: At December 31, 1997, the Company had restricted cash totaling $553,000 in real estate sales escrow. Property and equipment consisted of the following (in thousands): ESTIMATED USEFUL LIVES DECEMBER 31, IN YEARS 1997 -------------- ------------- Leasehold improvements .................. 10 $ 56 Office equipment ........................ 5 152 ------ 208 Less - Accumulated depreciation ......... (109) ------ Property and equipment, net ........... $ 99 ====== Accounts payable and accrued liabilities consisted of the following (in thousands): DECEMBER 31, 1997 ------------- Accrued rental commissions ............................. $ 66 Accrued sales commissions .............................. 51 Accounts payable and other accrued liabilities ......... 107 ---- Total accounts payable and accrued liabilities ......... $224 ==== 4. COMMITMENTS AND CONTINGENCIES: Lease Obligation The Company leases equipment and office space under noncancelable operating leases expiring at various times through 2004. Rental expense for the year ended December 31, 1997 was approximately $166,000. The minimum future rental payments under noncancelable operating leases are as follows (exclusive of certain pass through expenses such as real estate taxes and common area maintenance expenses and exclusive of Consumer Price Index Adjustments): Year ending December 31, 1998 ..................... $ 164 1999 ..................... 204 2000 ..................... 197 2001 ..................... 195 2002 ..................... 188 Thereafter ............... 232 ------- $ 1,180 ======= F-85 THE MAURY PEOPLE, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Litigation The Company is involved in certain legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, including multiperil, workers' compensation and an error and omissions policy. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying financial statements. Benefit Plan For all eligible employees, the Company sponsors a defined benefit pension plan. Plan benefits are based on years of service and compensation. The Company's funding policy is to make contributions at a minimum in accordance with the requirements of applicable laws an regulations, but no more than the amount deductible for income tax purposes. The components of net pension expense for the Company's retirement plan for the year ended December 31, 1997 are presented below: Service cost ........................... $ 1,459 Interest cost .......................... 39,420 Actual return on plan assets ........... (95,338) Net amortization and deferral .......... 75,875 --------- Net periodic pension expense ......... $ 21,416 ========= The funded status of the Company's retirement plan and amounts included in the Company's balance sheet at December 31, 1997 are set forth in the following table: Actuarial present value of benefit obligations: Accumulated benefit obligation .............................. $ 602,557 ========= Projected benefit obligation ................................ $ 602,557 Plan assets at fair value ................................... 635,448 --------- Plan assets in excess of projected benefit obligations ...... 32,891 Unrecognized net gain ....................................... (70,894) Unrecognized net transition obligation ...................... 38,637 --------- Prepaid pension asset ..................................... $ 634 ========= The weighted average discount rate used in determining the actuarial present value of the projected benefit obligations was 7.0 percent. The expected long-term rate of return on assets was 5.0 percent. 5. RELATED PARTIES: At present, the Company intends to transfer its offices to facilities owned by a trust of which the owner is the primary beneficiary upon expiration of its existing lease on March 31, 1999. The new lease term extends through March 2004, with a five year extension option. Annual rent payments begin at $185,400 and increase based on increases in the Consumer Price Index subject to a 6% annual ceiling on increases. 6. NOTE PAYABLE: During 1997, the Company had a $50,000 note payable to a bank, due in one payment consisting of principal and interest. The note bore interest at 6.35%. The note was secured by a security interest in a deposit account. The note was paid in full during 1997. F-86 THE MAURY PEOPLE, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) 7. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholder has entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, the owner has agreed to reductions in salary and benefits which would have reduced general and administrative expenses by approximately $142,000 for 1997. In addition, the stockholder will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-87 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (SUCCESSOR COMPANY REPORT) To Howey Acquisition, Inc.: We have audited the accompanying consolidated balance sheet of Howey Acquisition, Inc. (a Florida corporation) as of December 31, 1997, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the period from January 3, 1997 (inception) through December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Howey Acquisition, Inc., as of December 31, 1997, and the results of their operations and their cash flows for the period from January 3, 1997 (inception) through December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-88 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (PREDECESSOR COMPANY REPORT) To Priscilla Murphy Realty, Inc.: We have audited the accompanying balance sheet of Priscilla Murphy Realty, Inc. (a Florida corporation) as of December 31, 1996, and the related statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 1995 and 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Priscilla Murphy Realty, Inc., as of December 31, 1996, and the results of its operations and its cash flows for the years ended December 31, 1995 and 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-89 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
PREDECESSOR COMPANY ------------- ---------- DECEMBER 31, -------------------------- 1996 1997 ------------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents ............................... $1,672 $ 904 Cash held in trust ...................................... 3,736 4,479 Advances to property owners ............................. 23 39 Prepaid expenses and other current assets ............... 3 60 ------ ------- Total current assest .................................. 5,434 5,482 PROPERTY AND EQUIPMENT, net .............................. 148 102 GOODWILL, net ............................................ -- 5,436 OTHER ASSETS, net ........................................ 181 187 ------ ------- Total assets .......................................... $5,763 $11,207 ====== ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt .................... $ 100 $ 803 Customer deposits and deferred revenue .................. 3,736 4,479 Accounts payable and accrued liabilities ................ 45 242 ------ ------- Total current liabilities ............................. 3,881 5,524 LONG-TERM DEBT, net of current maturities ................ 100 3,925 STOCKHOLDERS' EQUITY: Class A Common stock, $.50 par value 40,000 shares authorized and outstanding ............................ 1 20 Class B Common stock, non-voting, $.50 par value, 160,000 shares authorized and outstanding ..................... -- 80 Additional paid-in capital .............................. -- 150 Retained earnings ....................................... 1,781 1,508 ------ ------- Total stockholders' equity ............................ 1,782 1,758 ------ ------- Total liabilities and stockholders' equity ............ $5,763 $11,207 ====== =======
The accompanying notes are an integral part of these financial statements. F-90 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR COMPANY ------------------- -------------------------- YEAR ENDED DECEMBER 31, ------------------- PERIOD JANUARY 3, 1997 1995 1996 THROUGH DECEMBER 31, 1997 --------- --------- -------------------------- REVENUES: Property rental fees ....................... $2,347 $2,402 $ 2,514 Real estate commissions, net ............... 1,326 1,630 1,473 Service fees ............................... 643 689 753 ------ ------ ------- Total revenues ........................... 4,316 4,721 4,740 OPERATING EXPENSES .......................... 1,319 1,314 1,184 ------ ------ ------- Gross profit ............................... 2,997 3,407 3,556 GENERAL AND ADMINISTRATIVE EXPENSES ......... 2,257 2,125 1,866 ------ ------ ------- Income from operations ..................... 740 1,282 1,690 OTHER INCOME (EXPENSE): Interest income (expense), net ............. 112 121 (182) ------ ------ ------- NET INCOME .................................. $ 852 $1,403 $ 1,508 ====== ====== =======
The accompanying notes are an integral part of these financial statements. F-91 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
CLASS A CLASS B COMMON STOCK COMMON STOCK ADDITIONAL ------------------- ------------------- PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL ---------- -------- ---------- -------- ----------- ----------- ---------- Predecessor: BALANCE, December 31, 1994 ........... 992 $ 1 -- $ -- $ -- $ 1,412 $ 1,413 Net income .......................... -- -- -- -- -- 852 852 Distributions ....................... -- -- -- -- -- (740) (740) --- --- -- ---- ---- -------- -------- BALANCE, December 31, 1995 ........... 992 1 -- -- -- 1,524 1,525 Net income .......................... -- -- -- -- -- 1,403 1,403 Distributions ....................... (257) -- -- -- -- (1,146) (1,146) ---- --- -- ---- ---- -------- -------- BALANCE, December 31, 1996 ........... 735 $ 1 -- $ -- $ -- $ 1,781 $ 1,782 ==== === === ==== ==== ======== ======== Company : Capitalization Company (Note 1) ..... 40,000 $20 160,000 $ 80 $150 $ -- $ 250 Net income .......................... -- -- -- -- -- 1,508 1,508 ------ --- ------- ---- ---- -------- -------- BALANCE, December 31, 1997 ........... 40,000 $20 160,000 $ 80 $150 $ 1,508 $ 1,758 ====== === ======= ==== ==== ======== ========
The accompanying notes are an integral part of these financial statements. F-92 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR COMPANY ------------------------- ----------------------- YEAR ENDED DECEMBER 31, PERIOD JANUARY 3, 1997 ------------------------- THROUGH 1995 1996 DECEMBER 31, 1997 ----------- ------------- ----------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................. $ 852 $ 1,403 $ 1,508 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization ............................ 239 95 203 Gain on sale of assets ................................... 4 -- -- Changes in operating assets and liabilities ................. -- Cash held in trust ........................................ (491) (946) (743) Advances to property owners ............................... 2 (39) Prepaid expenses and other current assets ................. (56) (15) (60) Customer deposits and deferred revenue .................... 491 946 743 Accounts payable and accrued liabilities .................. (33) 46 242 ------- -------- -------- Net cash provided by operating activities .............. 1,006 1,531 1,854 ------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net assets acquired (excluding cash) ........................ -- -- (225) Purchase of property and equipment .......................... (108) (4) -- Proceeds from sale of office equipment and vehicles ......... 4 -- -- Excess of purchase price over net assets acquired ........... -- -- (5,575) ------- --------- -------- Net cash used in investing activities .................. (104) (4) (5,800) ------- ---------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt ................................ -- -- 5,750 Payments on long-term debt .................................. (231) (135) (1,150) Distributions to stockholders ............................... (740) (878) -- Net proceeds from stock issuance ............................ -- -- 250 ------- --------- -------- Net cash provided by (used in) financing activities . (971) (1,013) 4,850 ------- --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................................. (69) 514 904 CASH AND CASH EQUIVALENTS, beginning of year ................. 1,227 1,158 -- ------- --------- -------- CASH AND CASH EQUIVALENTS, end of year ....................... $ 1,158 $ 1,672 $ 904 ======= ========= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest .................................... $ 80 $ 70 $ 211 ======= ========= ========
The accompanying notes are an integral part of these financial statements. F-93 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED) (IN THOUSANDS) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: During 1996, the Company distributed certain fixed assets and liabilities of the Company to a shareholder as follows: Net book value of assets ........... $ 774 Debt assumed ....................... (506) ------ Distributed to Stockholder ......... $ 268 ====== On January 3, 1998, the Company acquired assets as follows: Net assests acquired .......... $ 225 Goodwill ...................... 5,575 ------- Total assets acquired ......... $ 5,800 ======= The entire purchase price was financed via third party borrowings. The accompanying notes are an integral part of these financial statements. F-94 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Howey Acquisition, Inc. ("HAI") dba, Priscilla Murphy Realty, Inc. and its wholly-owned subsidiaries, Priscilla Murphy Realty, Inc. ("PMR") and Realty Consultants, Inc., collectively the "Company", are Florida corporations. The Company provides vacation property rentals and sales on the Florida Islands of Sanibel and Captiva for approximately 900 rental units. The Company provides its management services to property owners pursuant to management contracts which are generally one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. The Company's operations are seasonal, with a peak during the first quarter of the year. On January 3, 1998, HAI entered into an agreement to purchase the assets and assume certain liabilities of PMR. HAI borrowed $5,800,000 from a bank and a stockholder to finance the purchase transaction. The fair value of the net assets purchased totaled $225,000, resulting in the recognition of goodwill of $5,575,000. The goodwill is being amortized using a 40-year estimated life. Additionally, the Company executed a non-compete agreement with the former shareholder valued at $200,000. The non-compete agreement is for a period of ten years and is payable in installments of approximately $3,000 per month for 5 years. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Combination and Financial Statement Presentation The consolidated financial statements include the accounts of HAI its wholly-owned subsidiary, PMR collectively, the "Company." All intercompany items and transactions have been eliminated. The financial statements of the PMR (the "Predecessor Company") are presented for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. The Predecessor Company had only one class of common stock and is included in Class A common stock for presentation purposes in the accompanying consolidated financial statements. The consolidated statements of operations of the Companies for the period from January 1, 1997 to January 3, 1997 (inception), has not been presented due to the nominal level of operations. Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. The Company requires a deposit equal to 100% of the rental fee 45 days prior to the expected arrival date. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying financial statements until the guest stay commences. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including cleaning income, repair and maintenance and service charges. Commissions on real estate sales are recognized at closing and are recorded net of the related commission expense. The Company recognized commission revenues of $4,360,000, $5,221,000 and $5,440,000 for the years 1995 and 1996 and the period ending December 31, 1997, and commission expense of $3,034,000, $3,591,000 and $3,967,000 for the years 1995 and 1996 and the period ending December 31, 1997, respectively. F-95 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) Operating Expenses Operating expenses include travel agent commissions, salaries, communications, advertising, credit card fees and other costs associated with managing and selling properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state tax purposes. Under S Corporation status, the stockholders' report their shares of the Company's taxable earnings or losses in their personal tax returns. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Companies operations are exclusively in the Fort Myers/Sanibel and Captiva Islands, Florida area and are subject to significant changes due to weather conditions. 3. OTHER ASSETS Other assets consist of a non-compete agreement between the Company and the prior owner. The total consideration for the agreement was $200,000 and is being amortized over the term of the agreement, 10 years. The Company signed a five year note payable for this agreement. F-96 HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED ) 4. DEBT Long-term debt as of December 31, 1997 and 1996, consist of the following (in thousands):
1996 1997 --------- ---------- Note payable to a bank, bearing interest at 7.50%; monthly payments of $58 through maturity in January 2002. Secured by assets of the Company and guaranteed by stockholder. ........................................................................ $ -- $ 2,350 Note payable to an affiliate, bearing interest at 7.95%; subordinate to bank note pay- able; no payment may be made until bank note is paid in full. ....................... -- 2,063 Note payable to a stockholder, bearing interest at 7.95%; subordinate to bank note payable; no payment may be made until bank note is paid in full. .................... -- 155 Note payable, monthly payments of $3 through maturity in January 2002; interest im- puted at 7.50% unsecured. ........................................................... -- 160 Note payable to a bank, bearing interest at 7.70%; quarterly payments of $25 through maturity in December 1998; unsecured. ............................................... 200 -- ------ ------- 200 4,728 Less current maturities .............................................................. (100) (803) ------ ------- $ 100 $ 3,925 ====== =======
5. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation, error and ommission, and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying financial statements. Benefit Plans The Company's 401(k) retirement plan is available to substantially all of the Company's employees. The Company's contribution to the plan is based upon a percentage of employee contributions. The cost of this plan was approximately $9,000 in 1995, $12,000 in 1996 and $9,000 in 1997. 6. RELATED PARTIES: The Company has leased office space under three separate agreements since August 1997 from trusts affiliated with an owner. In aggregate, rents paid to these affiliated trusts were approximately $45,000. Subsequent to year end, the Company entered a fourth lease for an additional $12,000 per year. 7. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, stockholders have agreed to reductions in salary and benefits which would have reduced general and administrative expenses by $250,000, $320,000 and $31,000 for 1995, 1996 and 1997, respectively. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-97 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Resort Property Management, Inc.: We have audited the accompanying balance sheet of Resort Property Management, Inc. (a Utah corporation) as of September 30, 1997, and the related statements of operations, changes in stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Resort Property Management, Inc., as of September 30, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-98 RESORT PROPERTY MANAGEMENT, INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31, 1997 1997 --------------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents ............................. $ 186 $1,291 Due from property owners .............................. 60 -- Receivable from stockholders .......................... 10 -- Prepaid expenses and other current assets ............. 22 70 ------ ------ Total current assets ................................ 278 1,361 NOTE RECEIVABLE ........................................ 54 54 PROPERTY AND EQUIPMENT, net ............................ 203 326 ------ ------ Total assets ........................................ $ 535 $1,741 ====== ====== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Current portion of long-term debt ..................... $ 171 $ 31 Customers deposits and deferred revenue ............... 233 1,306 Payable to property owners ............................ 36 352 Accounts payable and accrued liabilities .............. 32 264 ------ ------ Total current liabilities ........................... 472 1,953 DEFERRED TAXES ......................................... 3 3 LONG-TERM DEBT, net of current portion ................. 310 130 ------ ------ Total liabilities ................................... 785 2,086 ------ ------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT: Common stock, no par; 100,000 shares authorized; 51,000 shares outstanding .................................. 26 26 Retained deficit ...................................... (276) (371) ------ ------ Total stockholders' deficit ......................... (250) (345) ------ ------ Total liabilities and stockholders' deficit ......... $ 535 $1,741 ====== ======
The accompanying notes are an integral part of these financial statements. F-99 RESORT PROPERTY MANAGEMENT, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ----------------------- 1997 1996 1997 -------------- --------- ----------- (UNAUDITED) REVENUES: Property rental fees ....................... $1,930 $ 320 $ 370 Service fees ............................... 365 116 93 ------ ------ ------ Total revenues ........................... 2,295 436 463 OPERATING EXPENSES .......................... 1,560 375 343 ------ ------ ------ Gross profit ............................. 735 61 120 GENERAL AND ADMINISTRATIVE EXPENSES ......... 627 175 256 ------ ------ ------ Income (loss) from operations ............ 108 (114) (136) OTHER INCOME (EXPENSE): Interest income (expense), net ............. 7 -- (4) Gain on sale of land ....................... 210 -- -- ------ ------ ------- Income (loss) before taxes ............... 325 (114) (140) PROVISION (BENEFIT) FOR INCOME TAX .......... 75 (39) (45) ------ ------ ------- NET INCOME (LOSS) ........................... $ 250 $ (75) $ (95) ====== ====== =======
The accompanying notes are an integral part of these financial statements. F-100 RESORT PROPERTY MANAGEMENT, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK TOTAL ------------------- RETAINED STOCKHOLDERS' SHARES AMOUNT DEFICIT DEFICIT -------- -------- ---------- -------------- BALANCE, September 30, 1996 .................... 51 $26 $ (526) $ (500) Net income .................................... -- -- 250 250 -- --- ------ ------ BALANCE, September 30, 1997 .................... 51 26 (276) (250) Net loss (unaudited) .......................... -- -- (95) (95) -- --- ------ ------ BALANCE, December 31, 1997 (unaudited) ......... 51 $26 $ (371) $ (345) == === ====== ======
The accompanying notes are an integral part of these financial statements. F-101 RESORT PROPERTY MANAGEMENT, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------ 1997 1996 1997 -------------- ------------ --------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ................................................. $ 250 $ (75) $ (95) Adjustments to reconcile net income (loss) to net cash provided by operating activities-- Depreciation .................................................... 36 10 11 Gain on sale of land ............................................ (210) -- -- Changes in operating assets and liabilities-- Due from property owners ........................................ (24) 35 60 Payment on receivables from stockholders ........................ (10) -- 10 Prepaid expenses and other current assets ....................... (3) (8) (48) Customer deposits and deferred revenue .......................... (50) 1,594 1,073 Payable to property owners ...................................... 16 311 316 Deferred tax liability .......................................... 3 -- -- Accounts payable and accrued liabilities ........................ 28 99 232 ------- ------- ------ Net cash provided by operating activities ...................... 36 1,966 1,559 ------- ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Note receivable ................................................... (54) -- -- Purchase of property and equipment ................................ (179) (127) (134) Proceeds from sale of office equipment, vehicles and land ......... 335 -- -- ------- ------- ------ Net cash used in investing activities .......................... 102 (127) (134) ------- ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt ...................................... 493 -- -- Payments on long-term debt ........................................ (451) (365) (320) ------- ------- ------ Net cash used in financing activities .......................... 42 (365) (320) ------- ------- ------ NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 180 1,474 1,105 CASH AND CASH EQUIVALENTS, beginning of period ..................... 6 6 186 ------- ------- ------ CASH AND CASH EQUIVALENTS, end of period ........................... $ 186 $1,480 $1,291 ======= ======= ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW: Cash paid for interest ............................................ $ 25 $ 5 $ 7 ======= ======= ======
The accompanying notes are an integral part of these financial statements. F-102 RESORT PROPERTY MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Resort Property Management, Inc. (the "Company"), a Utah corporation, provides property rentals and management services for properties owned by third parties and located within the Park City, Utah region. The Company manages approximately 330 total rental units. The Company provides its management services to property owners pursuant to management contracts, which are generally one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. The Company's operations are seasonal, with a peak during the second quarter of the fiscal year. The Company had working capital deficits at September 30, 1997 and December 31, 1997. The Company has funded its operations with cash flows from operations and short-term borrowings from lenders. Management expects that operations will generate sufficient cash flows from operations to meet the Company's working capital needs in 1998. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Interim Unaudited Financial Information The interim financial statements as of September 30, 1997, and for the three months ended December 31, 1996 and 1997, are unaudited, and certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been omitted. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the financial position and results of operations for the interim financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. During peak periods, the Company requires a deposit equal to 100% of the rental fee 30 days prior to the expected arrival date. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying combined financial statements until the guest stay commences. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including housekeeping, phone service and rentals. Operating Expenses Operating expenses include travel agent commissions, salaries, communications, advertising, credit card fees and other costs associated with managing and renting the properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. F-103 RESORT PROPERTY MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Income Taxes The company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, the current provision for income taxes represents actual or estimated amounts payable or refundable on tax returns filed or to be filed for each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of: (a) temporary differences between the tax bases of assets and liabilities and amounts reported in the consolidated balance sheets, and (b) operating loss and tax credit carryforwards. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment. The measurement of deferred tax assets may be reduced by a valuation allowance based on judgemental assessment of available evidence if deemed more likely than not that some or all of the deferred tax assets will not be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively in the Park City, Utah area and are subject to significant changes in weather conditions. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Property and equipment consisted of the following (in thousands): ESTIMATED USEFUL SEPTEMBER 30, LIFE IN YEARS 1997 ------------------ -------------- Leasehold improvements ............... 12 $ 21 Office equipment and other ........... 5 236 Vehicles ............................. 5 128 ------ 385 Less - Accumulated depreciation ...... (182) ------ Property and equipment, net .......... $ 203 ====== At September 30, 1997, maturities of long-term debt were as follows (in thousands): Year ending September 30, 1998 ................... $171 1999 ................... 17 F-104 RESORT PROPERTY MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) 2000 ............... 19 2001 ............... 21 2002 ............... 3 -- $231 ==== In addition to the debt disclosed above, the Company has a revolving line of credit with a bank. The line of credit has an interest rate of 10.25%, a maximum limit of $250,000 and is secured by personal property of the Company's owners. As of September 30, 1997, the line of credit was fully drawn, and is included in long-term debt in the accompanying financial statements. 4. INCOME TAXES: The provision for income taxes consists of the following for the year ended September 30, 1997 (in thousands): Current .......... $ 6 Deferred ......... 69 --- $75 === The provision for income taxes differs from the amount computed by applying the U.S. Federal income tax statutory rate of 34% for the following reasons: U.S. corporate income tax provision at statutory rate ......... $ 111 Utilization of NOL carryforwards .............................. (36) ----- $ 75 ===== 5. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying financial statements. 6. RELATED PARTIES: During 1997, the Company paid rental payments to the owners in exchange for use of the housekeeping facility in the amount of approximately $18,000. The Company plans to enter a lease agreement with the owners in June 1998 for an initial term of 10 years and two options to extend the lease for 5 additional years. The lease agreement to be finalized prior to the Offering will have estimated annual payments of $100,000, and annual increases of Consumer Price Index. F-105 RESORT PROPERTY MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Leases The Company has entered into various leases for housekeeping and laundry facilities, and for their corporate office. The following is a schedule of future minimum rental payments which are required under operating leases that have lease terms in excess of one year as of September 30, 1997: 1998 .............. $ 61,793 1999 .............. 21,408 2000 .............. 14,517 2001 .............. 15,246 -------- $112,964 ======== 5. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, the owner and certain key employees have agreed to reductions in salary and benefits which would have reduced general and administrative expenses by approximately $186,000 for the year ended September 30, 1997. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-106 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Telluride Resort Accommodations, Inc.: We have audited the accompanying balance sheet of Telluride Resort Accommodations, Inc. (a Colorado corporation) as of December 31, 1997, and the related statements of operations, changes in stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Telluride Resort Accommodations, Inc., as of December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 30, 1998 F-107 TELLURIDE RESORT ACCOMMODATIONS, INC. BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1997 ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ....................................... $2,103 Accounts receivable ............................................. 392 Due from property owners ........................................ 152 Prepaid expenses and other current assets ....................... 12 ------ Total current assets .......................................... 2,659 PROPERTY AND EQUIPMENT, net ...................................... 62 ------ Total assets .................................................. $2,721 ====== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Line of credit .................................................. $ 194 Customer deposits and deferred revenue .......................... 2,096 Payable to property owners ...................................... 640 Accounts payable and accrued liabilities ........................ 209 ------ Total current liabilities ..................................... 3,139 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT: Common Stock, no par; 1,000,000 shares authorized; 15,000 shares outstanding ................................................... 216 Retained deficit ................................................ (634) ------ Total stockholders' deficit ................................... (418) ------ Total liabilities and stockholders' deficit ................... $2,721 ======
The accompanying notes are an integral part of this financial statement. F-108 TELLURIDE RESORT ACCOMMODATIONS, INC. STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1997 ------------- REVENUES: Property rental fees ..................... $3,204 Service fees ............................. 1,109 ------ Total revenues ......................... 4,313 OPERATING EXPENSES ........................ 3,037 ------ Gross profit ........................... 1,276 GENERAL AND ADMINISTRATIVE EXPENSES ....... 1,030 ------ Income from operations ................. 246 OTHER INCOME: Interest income, net ..................... 31 ------ NET INCOME ................................ $ 277 ====== The accompanying notes are an integral part of this financial statement. F-109 TELLURIDE RESORT ACCOMMODATIONS, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ------------------- RETAINED SHARES AMOUNT DEFICIT TOTAL -------- -------- --------- ---------- BALANCE, December 31, 1996 ......... 15,000 $216 $ (611) $ (395) Net income ........................ -- -- 277 277 Distributions ..................... -- -- (300) (300) ------ ---- ------ ------ BALANCE, December 31, 1997 ......... 15,000 $216 $ (634) $ (418) ====== ==== ====== ======
The accompanying notes are an integral part of this financial statement. F-110 TELLURIDE RESORT ACCOMMODATIONS, INC. STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................ $ 277 Adjustments to reconcile net income to net cash provided by op- erating activities .............................................. - Depreciation ...................................................... 48 Changes in operating assets and liabilities ....................... - Accounts receivable ............................................. 35 Prepaid expenses and other current assets ....................... 15 Payable to property owners, net ................................. 19 Customer deposits and deferred revenue .......................... 28 Accounts payable and accrued liabilities ........................ 299 ------ Net cash provided by operating activities ...................... 721 ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ................................ (25) ------ Net cash used in investing activities .......................... (25) ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from line of credit .................................. 93 Distributions to stockholders ..................................... (300) ------ Net cash used in financing activities .......................... (207) ------ NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 489 CASH AND CASH EQUIVALENTS, beginning of year ....................... 1,614 ------ CASH AND CASH EQUIVALENTS, end of year ............................. $2,103 ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA- TION: Cash paid for interest ............................................ $ 5 ======
The accompanying notes are an integral part of this financial statement. F-111 TELLURIDE RESORT ACCOMMODATIONS, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Telluride Resort Accommodations, Inc. (the "Company"), a Colorado corporation, provides property rentals and management services in Telluride, Colorado and manages approximately 450 total rental units. The Company provides its management services to property owners pursuant to management contracts, which are generally one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. The Company's operations are seasonal, with a peak during the first quarter of the year. The Company had a working capital deficit at December 31, 1997. The Company has funded its operations with cash flows from operations and short-term borrowings from lenders. Management expects that operations will generate sufficient cash flows from operations to meet the Company's working capital needs during 1998. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the Company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. During peak periods, the Company requires a deposit equal to 100% of the rental fee 45 days prior to the expected arrival date. These deposits are non-refundable and are recorded as customer deposits and deferred revenue in the accompanying financial statements until the guest stay commences. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including spring and fall cleaning, unit maintenance and housekeeping. Operating Expenses Operating expenses include travel agent commissions, salaries, maintenance, housekeeping, communications, advertising, credit card fees and other costs associated with management of the properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful life of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. F-112 TELLURIDE RESORT ACCOMMODATIONS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Income Taxes The Company has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby the Company is not subject to taxation for federal or state tax purposes. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively in the Telluride, Colorado area and are subject to significant changes due to weather conditions. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Property and equipment consisted of the following (in thousands): ESTIMATED USEFUL DECEMBER 31, LIVES IN YEARS 1997 ---------------- ------------ Furniture, fixtures and equipment ...... 5 $ 580 Leasehold improvement .................. 5 79 Vehicles and other ..................... 5 65 ------ 724 Less - Accumulated depreciation ........ (662) ------ Property and equipment, net ............ $ 62 ====== Accounts payable and accrued liabilities as of December 31, 1997, consisted of the following (in thousands): DECEMBER 31, 1997 ------------- Sales tax payable ............................. $127 Accounts payable and other accrued liabilities 82 ---- Total accounts payable and accrued liabilities $209 ==== 4. LINES OF CREDIT: The Company has lines of credit with a bank. The first line of credit matures June 1998 and provides a revolving line of credit up to $200,000 to finance working capital needs. At December 31, 1997, the Company had $194,000 outstanding on this line of credit. Interest is payable monthly at 1.75% over the Wall Street Journal Base Rate (8.5% at December 31, 1997). The second line of credit in the amount of $90,000, matures August 31, 1998 and can be drawn upon only in the event that certain guaranteed load factors aboard aircraft into the Telluride area are not met. Interest is payable monthly at 2.00% over the Wall Street Journal Base Rate (8.5% at December 31, 1997). There was no outstanding balance on this line of credit at December 31, 1997. F-113 TELLURIDE RESORT ACCOMMODATIONS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) 5. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's financial position or results of operations. Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying financial statement. Benefit Plans The Company's 401(k) retirement plan is available to substantially all of the Company's employees. The Plan allows the Company to make discretionary contributions to the Plan. The Company has made no such contribution to the Plan in 1997. 6. RELATED PARTIES: During 1997, the Company paid certain stockholders $32,000 in consulting fees. In addition, the Company rented office space from stockholders totaling $36,000. 7. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-114 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Trupp-Hodnett Enterprises, Inc. and THE Management Company: We have audited the accompanying combined balance sheets of Trupp Hodnett Company, consisting of Trupp-Hodnett Enterprises, Inc. and THE Management Company (both Georgia corporations) (collectively "Trupp Hodnett Company" or the "Company") as of December 31, 1996 and 1997, and the related combined statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 1996 and 1997. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Trupp Hodnett Company, as of December 31, 1996 and 1997, and the results of their combined operations and their cash flows for the years then ended December 31, 1996 and 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas January 16, 1998 F-115 TRUPP HODNETT COMPANY COMBINED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, --------------------- 1996 1997 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents ............................ $ 144 $ 293 Cash held in trust ................................... 321 347 Accounts receivable .................................. 69 100 Receivables from stockholders and employees .......... 111 32 Prepaid expenses and other current assets ............ 17 31 ------ ------ Total current assets ............................... 662 803 PROPERTY AND EQUIPMENT, net ........................... 245 259 OTHER ASSETS .......................................... 305 -- ------ ------ Total assets ....................................... $1,212 $1,062 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt ...................................... $ 345 $ -- Customer deposits and deferred revenue ............... 290 331 Payable to property owners ........................... 31 16 Accounts payable and accrued liabilities ............. 130 191 ------ ------ Total current liabilities .......................... 796 538 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, no par; 2,000 shares authorized; 200 shares outstanding ................. 17 17 Retained earnings .................................... 399 507 ------ ------ Total stockholders' equity ......................... 416 524 ------ ------ Total liabilities and stockholders' equity ......... $1,212 $1,062 ====== ======
The accompanying notes are an integral part of these financial statements. F-116 TRUPP HODNETT COMPANY COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------ 1996 1997 --------- ------------ REVENUES: Property rental fees ....................... $2,508 $2,809 Real estate commissions, net ............... 673 892 Service fees ............................... 250 360 ------ ------ Total revenues ........................... 3,431 4,061 OPERATING EXPENSES .......................... 1,652 1,838 ------ ------ Gross profit ............................. 1,779 2,223 GENERAL AND ADMINISTRATIVE EXPENSES ......... 1,653 2,024 ------ ------ Income from operations ................... 126 199 OTHER INCOME (EXPENSE): Interest expense, net ...................... (19) (5) Gain on sale of assets ..................... -- 52 ------ ------- Income before income taxes ............... 107 246 PROVISION FOR INCOME TAXES .................. 12 60 ------ ------- NET INCOME .................................. $ 95 $ 186 ====== =======
The accompanying notes are an integral part of these financial statements. F-117 TRUPP HODNETT COMPANY COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ------------------- RETAINED SHARES AMOUNT EARNINGS TOTAL -------- -------- --------- -------- BALANCE, December 31, 1995 ........ 200 $17 $ 304 $ 321 Net income ....................... -- -- 95 95 --- --- ----- ----- BALANCE, December 31, 1996 ........ 200 17 399 416 Net income ....................... -- -- 186 186 Distributions .................... -- -- (78) (78) --- --- ----- ----- BALANCE, December 31, 1997 ........ 200 $17 $ 507 $ 524 === === ===== =====
The accompanying notes are an integral part of these financial statements. F-118 TRUPP HODNETT COMPANY COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------- 1996 1997 ----------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................ $ 95 $ 186 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation ........................................... 83 85 Gain on sale of assets ................................. -- (52) Changes in operating assets and liabilities-- Cash held in trust ...................................... (321) (26) Accounts receivable ..................................... (17) (31) Receivables from stockholder and employees .............. (8) 79 Prepaid expenses and other current assets ............... (7) (14) Customer deposits and deferred revenue .................. 290 41 Payable to property owners .............................. 31 (15) Accounts payable and accrued liabilities ................ 50 61 ------- ----- Net cash provided by operating activities .............. 196 314 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ........................ (58) (99) Purchase of other assets .................................. (40) (80) Proceeds from sale of other assets ........................ -- 105 ------- ----- Net cash used in investing activities .................. (98) (74) ------- ----- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term debt ............................. -- 84 Payments on short-term debt ............................... (73) (97) Distributions to stockholders ............................. -- (78) ------- ----- Net cash used in financing activities .................. (73) (91) ------- ----- NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 25 149 CASH AND CASH EQUIVALENTS, beginning of year ............... 119 144 ------- ----- CASH AND CASH EQUIVALENTS, end of year ..................... $ 144 $ 293 ======= ===== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest .................................... $ 35 $ 18 ======= ===== Cash paid for income taxes ................................ $ 8 $ 1 ======= =====
The accompanying notes are an integral part of these financial statements. F-119 TRUPP HODNETT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) (IN THOUSANDS) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: In 1997, the Company sold certain fixed assets of the Company to a third party as follows: Net book value of assets ......... $ 385 Debt assumed ..................... (332) ------ Net assets sold .................. $ 53 ====== F-120 TRUPP HODNETT COMPANY NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: The Management Company ("TMC"), an S Corporation, and Trupp-Hodnett Enterprises, Inc. ("THE"), a C Corporation, (collectively "Trupp Hodnett" or the "Company"), both Georgia corporations, are leading providers of vacation property rentals, management services and sales in the St. Simons Island, Georgia. Trupp Hodnett manages approximately 400 total rental units. The Company provides its management services to property owners pursuant to management contracts, which generally are one year in length. The majority of such contracts contain automatic renewal provisions but also allow property owners to terminate the contract at any time. The Company's operations are seasonal, with peaks during the second and third quarters of the year. The Company and its stockholders intend to enter into a definitive agreement with Vacation Properties International, Inc. ("VPI"), pursuant to which all of the outstanding stock of the company will be exchanged for cash and shares of VPI common stock concurrent with the consummation of the initial public offering (the "Offering") of the common stock of VPI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company records property rental fees on the accrual basis of accounting, ratably over the term of guest stays, as earned. For weekly and monthly stays in homes and cottages the Company requires a deposit equal to 50% of the rental fee 60 days prior to the expected arrival date. These deposits are refundable with 60 days notice of cancellation. Daily and weekly stays in "condo hotels" use a credit card to guarantee arrival. All deposits are recorded as customer deposits and deferred revenue in the accompanying combined financial statements until the guest stay commences. Advance deposits are recorded as payable to property owners, ratably over the term of guest stays, as earned. The Company records revenue for cancellations as they occur. Service fees are recorded for a variety of services and are recognized as the service is provided, including management fees. Commissions on real estate sales are recognized at closing and are recorded net of the related commission expense. The Company recognized commission revenues of $1,308,000 and $1,621,000 for the years 1996 and 1997 and commission expense of $635,000 and $729,000 for the years 1996 and 1997. Operating Expenses Operating expenses include travel agent commissions, salaries, communications, advertising, credit card fees and other costs associated with managing and selling properties. Cash and Cash Equivalents For the purposes of the balance sheets and statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the combined statements of operations. F-121 TRUPP HODNETT COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Other Assets As of December 31, 1996, other assets is comprised of properties held for resale. Income Taxes TMC has elected S Corporation status as defined by the Internal Revenue Code and state tax statutes, whereby, TMC is not subject to taxation for federal or state tax purposes. Under S Corporation status, the stockholders report their share of the Company's taxable earnings or losses in their personal tax returns. THE is a regular C Corporation and as such is subject to taxation for federal and state purposes. THE accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, the current provision for income taxes represents actual or estimated amounts payable or refundable on tax returns filed or to be filed for each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of: (a) temporary differences between the tax bases of assets and liabilities and amounts reported in the consolidated balance sheets, and (b) operating loss and tax credit carryforwards. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment. The measurement of deferred tax assets may be reduced by a valuation allowance based on judgemental assessment of available evidence if deemed more likely than not that some or all of the deferred tax assets will not be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk The Company's operations are exclusively in the St. Simons Island area and are subject to significant changes due to weather conditions. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS: Property and equipment consisted of the following (in thousands):
ESTIMATED DECEMBER 31, USEFUL LIVES --------------------- IN YEARS 1996 1997 ------------- --------- --------- Leasehold improvements .................. 31 $ 31 $ 40 Office equipment and vehicles ........... 3-7 551 635 ------ ------ 582 675 Less - Accumulated depreciation ......... (337) (416) ------ ------ Property and equipment, net ............ $ 245 $ 259 ====== ======
F-122 TRUPP HODNETT COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Accounts payable and accrued liabilities consisted of the following (in thousands): DECEMBER 31, ---------------- 1996 1997 ------ ------- Accrued compensation and benefits .................. $ 31 $ 36 Accounts payable and other accrued liabilities ..... 99 155 ---- ---- Total accounts payable and accrued liabilities..... $130 $191 ==== ==== 4. SHORT-TERM DEBT: As of December 31, 1996, the Company's short-term debt was comprised of $263,000 of notes payable and $82,000 of outstanding lines of credit. The Company repaid all of its notes payable and lines of credit in 1997. As of December 31, 1997, the Company had two outstanding unused, unsecured lines of credit with banks. The Company's $100,000 line of credit bears interest at the Chase Manhattan Bank prime rate plus 1.0% and matures December 1, 1998. The Company's $30,000 line of credit bears interest at the Wall Street Journal's bank prime rate plus 2.0% and matures June 1, 1998. 5. SALE OF OTHER ASSETS: During 1997, the Company sold other assets (comprised of land and a building) with a book value totaling $250,000 and the related note payable of $208,000 to a third-party for $94,000. The Company recorded a gain of $52,000, which is included in other income. Additionally, a sale to a related party was consummated (see Note 7). 6. INCOME TAXES: The provision for income taxes consists of the following (in thousands): DECEMBER 31, -------------- 1996 1997 ------ ----- Current ......... $12 $60 === === The provision for income taxes differs from the amount computed by applying the U.S. Federal income tax statutory rate of 34% for the following reasons: DECEMBER 31, ------------------- 1996 1997 -------- -------- U.S. corporate income tax provision at statutory rate .......................................... $ 36 $ 84 State income taxes ............................. 4 9 S Corporation income ........................... (28) (33) ----- ----- $ 12 $ 60 ===== ===== 7. COMMITMENTS AND CONTINGENCIES: Litigation The Company is involved in various legal actions arising in the ordinary course of business. Management does not believe that the outcome of such legal actions will have a material adverse effect on the Company's combined financial position or results of operations. F-123 TRUPP HODNETT COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED ) Insurance The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers' compensation and a general umbrella policy. The Company is self-insured for employee medical with a stop-loss policy beginning at $7,500. The Company has not incurred significant claims or losses on any of its insurance policies during the periods presented in the accompanying combined financial statements. Benefit Plans The Company began a 401(k) retirement plan in April of 1997 which is available to substantially all of the Company's employees. The Company is obligated to match the employee's contribution up to 5%. The cost of this plan to the Company was approximately $9,000 in 1997. 8. RELATED PARTIES: The Company's revenues include approximately $132,000 and $187,000 in 1996 and 1997, respectively for fees earned from properties in which the Company's stockholders have an ownership interest. In 1997, the Company sold a building, the related land (total book value of $135,000) and the related $124,000 mortgage note payable to the Company's stockholders for $11,000 in cash. In 1995, the Company advanced the stockholders $75,000 as a note receivable at an annual interest rate of 6%. As of December 31, 1996, the $75,000 note balance and the related accrued interest of $9,000 was included in receivables from stockholders and employees. The Company recorded interest income on this note of $4,500 and $4,000 in 1996 and 1997, respectively. The stockholders repaid the note in 1997. The Company has agreements to lease office space from the stockholders and the minimum lease payments are as follows (in thousands): 1998 ...................... $ 112 1999 ...................... 117 2000 ...................... 122 2001 ...................... 126 2002 ...................... 131 Thereafter ................ 967 ------ $1,575 ====== During 1996 and 1997, the Company recorded rental expense of $93,000 and $110,000, respectively, relating to the above leases. 9. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED): The Company and its stockholders have entered into a definitive agreement with VPI pursuant to which all of the outstanding stock of the Company will be acquired by VPI. In connection with the Offering, the owner and certain key employees have agreed to reductions in salary and benefits which would have reduced general and administrative expenses by approximately $850,000 and $1.1 million for 1996 and 1997, respectively. In addition, certain stockholders will retain non-operating assets and assume or retire certain liabilities that will be excluded from the Combinations. F-124 ====================================== ====================================== NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN SHARES AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH VACATION PROPERTIES AN OFFER OR SOLICITATION WOULD BE INTERNATIONAL, INC. UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED COMMON STOCK HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. -------------------------- TABLE OF CONTENTS [LOGO] PAGE ---- Prospectus Summary ............... 3 Risk Factors ..................... 11 The Company ...................... 17 Use of Proceeds .................. 21 Dividend Policy .................. 21 ----------------- Capitalization ................... 22 Dilution ......................... 23 Selected Financial Data .......... 24 Management's Discussion and PROSPECTUS Analysis of Financial Condition and Results of Operations ..... 26 Business ......................... 35 Management ....................... 45 , 1998 Certain Transactions ............. 51 Principal Stockholders ........... 58 Description of Capital Stock ..... 59 Shares Eligible for Future Sale .. 62 ----------------- Underwriting ..................... 64 Legal Matters .................... 65 Experts .......................... 65 Additional Information ........... 66 Index to Financial Statements .... F-1 UNTIL ___, 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS SALOMON SMITH BARNEY EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO NATIONSBANC MONTGOMERY DELIVER A PROSPECTUS. THIS IS IN SECURITIES LLC ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. FURMAN SELZ ====================================== ====================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1) The following table sets forth the expenses (other than underwriting compensation expected to be incurred) in connection with the Offering. All of such amounts (except the SEC Registration Fee and the NASD Filing Fee) are estimated. SEC Registration Fee ................................... $ New York Stock Exchange Listing Fee .................... NASD Filing Fee ........................................ Accounting Fees and Expenses ........................... Printing Costs ......................................... Legal Fees and Expenses ................................ Transfer Agent and Registrar Fees and Expenses ......... Miscellaneous .......................................... Total ............................................... $ ======= - ---------- (1} The amounts set forth, except for the SEC and NASD fees, are in each case estimated. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subsection (a) of Section 145 of the General Corporation Law of the State of Delaware (the "DGCL") empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation ) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been made to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Court of Chancery or such other court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; that indemnification provided for by Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has II-1 ceased to be a director, officer, employee or agent and shall inure to the benefit of such person's heirs, executors and administrators; and empowers the corporation to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit. Articles Seventh and Eighth of the Company's Certificate of Incorporation, as amended, states that: "No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability: (1) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (3) under Section 174 of the DGCL; or (4) for any transaction from which the director derived an improper personal benefit, The Corporation shall, to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto. In addition, Article II of the Company's Bylaws further provides that the Company shall indemnify its officers, directors and employees to the fullest extent permitted by law. The Company intends to enter into indemnification agreements with each of its executive officers and directors which indemnifies such person to the fullest extent permitted by its Amended and Restated Certificate of Incorporation, its Bylaws and the DGCL. The Company also intends to obtain directors and officers liability insurance. Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, the Underwriters have agreed to indemnify, under certain conditions, the Company against certain liabilities. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The following information relates to all securities of the Company issued or sold by the Company within the past three years which were not registered under the Securities Act. (a) VPI was organized in September 1997 and issued 98 and 196 shares of its Common Stock to its Founders, Capstone Partners, LLC and Alpine Consolidated II, LLC, respectively, at a per share price of $.01. The offer and sale of these shares was exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) thereof because the offers and sales were made to sophisticated investors who had access to information about VPI and were able to bear the risk of loss of their investment. In November and December of 1997 and the first quarter of 1998, VPI issued 62 shares of its Common Stock to 18 individuals, including its executive officers, at a per share price of $.01. The offer and sale of these shares was exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) thereof because the offers and sales were made to sophisticated investors who had access to information about VPI and were able to bear the risk of loss of their investment. On March 9, 1998, the number of these shares were increased by a 8,834.76- for-one stock split. (b) See "Certain Transactions" for a discussion of the issuance of shares of Common Stock and options to purchase shares of Common Stock in connection with the Combinations. Each of these transactions was effected or will be effected without registration of the relevant security under the Securities Act in reliance upon the exemption provided by Section 4(2) of the Securities Act. II-2 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits EXHIBIT NUMBER - -------- *1.1 -- Form of Underwriting Agreement. 2.1 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., HCP Acquisition Corp., and Hotel Corporation of the Pacific, Inc. and Andre S. Tatibouet. 2.2 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., B&B Acquisition Corp., Brindley Acquisition Corp., B&B On The Beach, Inc., Brindley and Brindley Realty and Development, Inc., Douglas R. Brindley and Betty Shotton Brindley. 2.3 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Coastal Realty Acquisition LLC, Coastal Management Acquisition Corp. and Coastal Resorts Realty LLC, Coastal Resorts Management, Inc., Joshua M. Freeman, T. Michael McNally and CMF Coastal Resorts, L.L.C. 2.4 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc. and Collection of Fine Properties, Inc., Ten Mile Holdings, Ltd., Luis Alonso, Domingo R. Moreira, Brenda M. Lopez Ibanez and Ana Maria Moreira. 2.5 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc. and Houston and O'Leary Company and Heidi O'Leary Houston. 2.6 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Jupiter Acquisition Corp. and Jupiter Property Management at Park City, Inc. and Jon R. Brinton. 2.7 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Maui Acquisition Corp. and Maui Condominium and Home Realty, Inc., Daniel C. Blair and Paul T. Dobson. 2.8 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Maury Acquisition Corp. and The Maury People, Inc. and Sharon Benson Doucette. 2.9 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Priscilla Acquisition Corp., Realty Consultants Acquisition Corp., Realty Consultants, Inc., and Howey Acquisition, Inc., Charles O. Howey and Dolores C. Howey. 2.10 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., RPM Acquisition Corp. and Resort Property Management, Inc., Daniel L. Meehan, Kimberlie C. Meehan and Nancy Hess. 2.11 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Telluride Acquisition Corp., and Telluride Resort Accommodations, Inc. and Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw, Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D. Allred, A.J. Wells, Forrest Faulconer, Thomas McNamara, Donald J. Peterson, Nancy McNamara, Charles E. Cobb, Jr., Sue M. Cobb, Stephen A. Martori, Anthony F. Martori, Arthur John Matori and Alan Miskin. 2.12 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Trupp Acquisition Corp., Management Acquisition Corp. and Trupp-Hodnett Enterprises, Inc., THE Management Company, Hans F. Trupp, Roy K. Hodnett, Pat Hodnett Cooper and Austin Trupp. 2.13 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Whistler Holding Corp. and Whistler Chalets Ltd. and J. Patrick McCurdy. 2.14 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., FRS Acquisition Corp and First Resort Software, Inc., Thomas A. Leddy, Evan H. Gull and Daniel Patrick Curry. 3.1 -- Certificate of Incorporation, as amended. 3.2 -- Bylaws. *4.1 -- Specimen Common Stock Certificate. II-3 EXHIBIT NUMBER - ---------- *5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to the legality of the securities being registered. 10.1 -- Form of 1998 Long-Term Incentive Plan of the Company. *10.2 -- Employment and Non-Competition Agreement between the Company and David M. Sullivan. *10.3 -- Employment and Non-Competition Agreement between the Company and Jeffery M. Jarvis. *10.4 -- Employment and Non-Competition Agreement between the Company and W. Michael Murphy. *10.5 -- Employment and Non-Competition Agreement between the Company and Jules S. Sowder. 10.6 -- Employment and Non-Competition Agreement between the Company and Luis Alonso. 10.7 -- Employment Agreement between the Company and Douglas R. Brindley. 10.8 -- Employment Agreement between the Company and Paul T. Dobson. 10.9 -- Employment Agreement between the Company and Sharon Benson Doucette. 10.10 -- Employment Agreement between the Company and Evan H. Gull. 10.11 -- Employment Agreement between the Company and Heidi O'Leary Houston. 10.12 -- Employment Agreement between the Company and Daniel L. Meehan. 10.13 -- Management Services Agreement between the Company and J. Patrick McCurdy. 10.14 -- Employment Agreement between the Company and Andre S. Tatibouet. 10.15 -- Employment Agreement between the Company and Hans F. Trupp. *10.16 -- Form of Officer and Director Indemnification Agreement. *10.17 -- Consulting Agreement between the Company and Park Brady. 10.18 -- Promissory Note. 23.1 -- Consent of Arthur Andersen LLP. 23.2 -- Consent of Arthur Andersen LLP. 23.3 -- Consent of Morrison, Brown, Argiz and Company. *23.4 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (contained in Exhibit 5.1). 23.5 -- Consents to become directors. 24 -- Powers of Attorney (included on signature page). 27 -- Financial Data Schedule. - ---------- * To be filed by amendment. (b) Financial Statement Schedules None ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes as follows: (1) The undersigned will provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. (2) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance on Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it is declared effective. (3) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be the initial bona fide offering thereof. II-4 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Washington, District of Columbia, on the 12th day of March, 1998. VACATION PROPERTIES INTERNATIONAL, INC. By: /s/ Elan J. Blutinger ---------------------------------------- Elan J. Blutinger President POWERS OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Elan J. Blutinger, Leonard A. Potter and D. Fraser Bullock, and each of them, with full power to act without the other, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement, any and all amendments thereto (including post-effective amendments), any subsequent Registration Statements pursuant to Rule 462 of the Securities Act of 1933, as amended, and any amendments thereto and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated. VACATION PROPERTIES INTERNATIONAL, INC. SIGNATURE TITLE DATE - -------------------------------- -------------------------- -------------- /s/ Elan J. Blutinger President, Director March 12, 1998 - --------------------------- Elan J. Blutinger (Principal Executive Officer) /s/ D. Fraser Bullock Vice President, Director March 12, 1998 - --------------------------- D. Fraser Bullock (Principal Financial and Accounting Officer) II-6 EXHIBIT INDEX EXHIBIT NUMBER - -------- *1.1 -- Form of Underwriting Agreement. 2.1 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., HCP Acquisition Corp., and Hotel Corporation of the Pacific, Inc. and Andre S. Tatibouet. 2.2 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., B&B Acquisition Corp., Brindley Acquisition Corp., B&B On The Beach, Inc., Brindley and Brindley Realty and Development, Inc., Douglas R. Brindley and Betty Shotton Brindley. 2.3 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Coastal Realty Acquisition LLC, Coastal Management Acquisition Corp. and Coastal Resorts Realty LLC, Coastal Resorts Management, Inc., Joshua M. Freeman, T. Michael McNally and CMF Coastal Resorts, L.L.C. 2.4 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc. and Collection of Fine Properties, Inc., Ten Mile Holdings, Ltd., Luis Alonso, Domingo R. Moreira, Brenda M. Lopez Ibanez and Ana Maria Moreira. 2.5 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc. and Houston and O'Leary Company and Heidi O'Leary Houston. 2.6 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Jupiter Acquisition Corp. and Jupiter Property Management at Park City, Inc. and Jon R. Brinton. 2.7 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Maui Acquisition Corp. and Maui Condominium and Home Realty, Inc., Daniel C. Blair and Paul T. Dobson. 2.8 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Maury Acquisition Corp. and The Maury People, Inc. and Sharon Benson Doucette. 2.9 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Priscilla Acquisition Corp., Realty Consultants Acquisition Corp., Realty Consultants, Inc., and Howey Acquisition, Inc., Charles O. Howey and Dolores C. Howey. 2.10 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., RPM Acquisition Corp. and Resort Property Management, Inc., Daniel L. Meehan, Kimberlie C. Meehan and Nancy Hess. 2.11 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Telluride Acquisition Corp., and Telluride Resort Accommodations, Inc. and Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw, Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D. Allred, A.J. Wells, Forrest Faulconer, Thomas McNamara, Donald J. Peterson, Nancy McNamara, Charles E. Cobb, Jr., Sue M. Cobb, Stephen A. Martori, Anthony F. Martori, Arthur John Matori and Alan Miskin. 2.12 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Trupp Acquisition Corp., Management Acquisition Corp. and Trupp-Hodnett Enterprises, Inc., THE Management Company, Hans F. Trupp, Roy K. Hodnett, Pat Hodnett Cooper and Austin Trupp. 2.13 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., Whistler Holding Corp. and Whistler Chalets Ltd. and J. Patrick McCurdy. 2.14 -- Agreement and Plan of Organization, dated as of March 11, 1998, by and among Vacation Properties International, Inc., FRS Acquisition Corp and First Resort Software, Inc., Thomas A. Leddy, Evan H. Gull and Daniel Patrick Curry. 3.1 -- Certificate of Incorporation, as amended. 3.2 -- Bylaws. *4.1 -- Specimen Common Stock Certificate. EXHIBIT NUMBER - ---------- *5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to the legality of the securities being registered. 10.1 -- Form of 1998 Long-Term Incentive Plan of the Company. *10.2 -- Employment and Non-Competition Agreement between the Company and David M. Sullivan. *10.3 -- Employment and Non-Competition Agreement between the Company and Jeffery M. Jarvis. *10.4 -- Employment and Non-Competition Agreement between the Company and W. Michael Murphy. *10.5 -- Employment and Non-Competition Agreement between the Company and Jules S. Sowder. 10.6 -- Employment and Non-Competition Agreement between the Company and Luis Alonso. 10.7 -- Employment Agreement between the Company and Douglas R. Brindley. 10.8 -- Employment Agreement between the Company and Paul T. Dobson. 10.9 -- Employment Agreement between the Company and Sharon Benson Doucette. 10.10 -- Employment Agreement between the Company and Evan H. Gull. 10.11 -- Employment Agreement between the Company and Heidi O'Leary Houston. 10.12 -- Employment Agreement between the Company and Daniel L. Meehan. 10.13 -- Management Services Agreement between the Company and J. Patrick McCurdy. 10.14 -- Employment Agreement between the Company and Andre S. Tatibouet. 10.15 -- Employment Agreement between the Company and Hans F. Trupp. *10.16 -- Form of Officer and Director Indemnification Agreement. *10.17 -- Consulting Agreement between the Company and Park Brady. 10.18 -- Promissory Note. 23.1 -- Consent of Arthur Andersen LLP. 23.2 -- Consent of Arthur Andersen LLP. 23.3 -- Consent of Morrison, Brown, Argiz and Company. *23.4 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (contained in Exhibit 5.1). 23.5 -- Consents to become directors. 24 -- Powers of Attorney (included on signature page). 27 -- Financial Data Schedule. - ---------- * To be filed by amendment. EX-1.1 2 EXHIBIT 1.1 [_______________] SHARES VACATION PROPERTIES INTERNATIONAL, INC. COMMON STOCK UNDERWRITING AGREEMENT DATED [_______________ ___, 1998] Table of Contents
Underwriting Agreement 1 Introductory 1 Section 1. Representations and Warranties of the Company 2 Compliance With Registration Requirements 2 Offering Materials Furnished To Underwriters 3 Distribution of Offering Material By the Company 3 The Underwriting Agreement 3 Authorization of the Common Shares 3 No Applicable Registration or Other Similar Rights 3 No Material Adverse Change 3 Independent Accountants 4 Preparation of the Financial Statements 4 Incorporation and Good Standing of the Company and Its Subsidiaries 5 Capitalization and Other Capital Stock Matters 5 Stock Exchange Listing 5 Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required 6 No Material Actions or Proceedings 6 Intellectual Property Rights 7 All Necessary Permits, Etc 7 Title To Properties 7 Tax Law Compliance 7 Company Not An Investment Company 7 Insurance 8 No Price Stabilization or Manipulation 8 Related Party Transactions 8 No Unlawful Contributions or Other Payments 8 Company's Accounting System 8 Compliance With Environmental Laws 9 ERISA Compliance 10 Combination Agreements 10 Representations in Combination Agreements 10 Section 2. Purchase, Sale and Delivery of Common Shares 11 The Firm Common Shares 11 The First Closing Date 11 The Optional Common Shares; The Second Closing Date 11 Public Offering of the Common Shares 12 Payment for the Common Shares 12 Delivery of the Common Shares 12 Delivery of Prospectus to the Underwriters 12 Section 3. Additional Covenants of the Company 13 Representatives' Review of Proposed Amendments and Supplements 13 Securities Act Compliance 13 Amendments and Supplements to the Prospectus and Other Securities Act Matters 13 Copies of Any Amendments and Supplements to the Prospectus 14 Blue Sky Compliance 14 Use of Proceeds 14 Transfer Agent 14 Earnings Statement 14 Periodic Reporting Obligations 14 Agreement Not To Offer or Sell Additional Securities 14 Future Reports to the Representatives 15 Satisfaction of Founding Company Combination Conditions 15 Section 4. Payment of Expenses 15 Section 5. Conditions of the Obligations of the Underwriters 16 Accountants' Comfort Letter 16 Compliance With Registration Requirements; No Stop Order, No Objection From NASD 16 No Material Adverse Change 17 Opinion of Counsel for the Company 17 Opinion of Counsel for the Underwriters 17 Officers' Certificate 17 Bring-Down Comfort Letter 18 Combination Closings 18 Combination Agreements 18 Lock-Up Agreement from Certain Stockholders of the Company 19 Termination of Profit Sharing Agreements 19 Additional Documents 19 Section 6. Reimbursement of Underwriters' Expenses 19 Section 7. Effectiveness of this Agreement 20 Section 8. Indemnification 20 Indemnification of the Underwriters 20 Indemnification of the Company, its Directors and Officers 21 Notifications and Other Indemnification Procedures 22 Settlements 23 Section 9. Contribution 23 Section 10. Default of One or More of the Several Underwriters 25 Section 11. Termination of this Agreement 25 Section 12. Representations and Indemnities To Survive Delivery 26 Section 13. Notices 26 Section 14. Successors 27 Section 15. Partial Unenforceability 27 Section 16. Governing Law Provisions 28 Section 17. General Provisions 28
UNDERWRITING AGREEMENT [_____________ __, 1998] SMITH BARNEY INC. NATIONSBANC MONTGOMERY SECURITIES LLC FURMAN SELZ LLC, As Representatives of the Several Underwriters c/o SMITH BARNEY INC. 388 Greenwich Street New York, NY 10013 Ladies and Gentlemen: Introductory. Vacation Properties International, Inc., a Delaware corporation (the "Company), proposes to issue and sell to the several underwriters named on Schedule A hereto (the "Underwriters") an aggregate of [___] shares (the "Firm Common Shares") of its Common Stock, par value $.01 per share (the "Common Stock"). In addition, the Company has granted to the Underwriters an option to purchase up to an additional [___] shares (the "Optional Common Shares") of Common Stock, as provided in Section 2. The Firm Common Shares and, if and to the extent such option is exercised, the Optional Common Shares are collectively called the "Common Shares." Smith Barney Inc. ("SB"), NationsBanc Montgomery Securities LLC and Furman Selz LLC have agreed to act as representatives of the several Underwriters (in such capacity, collectively, the "Representatives") in connection with the offering and sale of the Common Shares. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 (File No. 333-[___]), which contains a form of prospectus to be used in connection with the public offering and sale of the Common Shares. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto, in the form in which it was declared effective by the Commission under the Securities Act of 1933 and the rules and regulations promulgated thereunder (collectively, the "Securities Act"), including any information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434 under the Securities Act, is called the "Registration Statement." Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b) Registration Statement," and from and after the date and time of filing of the Rule 462(b) Registration Statement the term "Registration Statement" shall include the Rule 462(b) Registration Statement. Such prospectus, in the form first used by the Underwriters to confirm sales of the Common Shares, is called the "Prospectus"; provided, however, if the Company has, with the consent of SB, elected to rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean the Company's prospectus subject to completion (each, a "preliminary prospectus") dated [_______ __, 1998] (such preliminary prospectus, together with the applicable term sheet (the "Term Sheet") prepared and filed by the Company with the Commission under Rules 434 and 424(b) under the Securities Act is called the "Rule 434 preliminary prospectus") and all references in this underwriting agreement (this "Agreement") to the date of the Prospectus shall mean the date of the Term Sheet. All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). The Company hereby confirms its agreements with the Underwriters as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. A. Representations and Warranties of the Company. The Company hereby represents, warrants and covenants to each Underwriter as follows: (a) Compliance with Registration Requirements. The Registration Statement and any Rule 462(b) Registration Statement have been declared effective by the Commission under the Securities Act. The Company has complied to the Commission's satisfaction with all requests of the Commission for additional or supplemental information. No stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission. Each preliminary prospectus and the Prospectus when filed complied in all material respects with the Securities Act and, if filed by electronic transmission pursuant to EDGAR (except as may be permitted by Regulation S-T under the Securities Act), was identical to the copy thereof delivered to the Underwriters for use in connection with the offer and sale of the Common Shares. Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto, at the time it became effective and at all subsequent times, complied and will comply in all material respects with the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as amended or supplemented, as of its date and at all subsequent times, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by the Representatives expressly for use therein. There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement which have not been described or filed as required. (b) Offering Materials Furnished to Underwriters. The Company has delivered to the Representatives three complete manually signed copies of the Registration Statement and of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and preliminary prospectuses and the Prospectus, as amended or supplemented, in such quantities and at such places as the Representatives have reasonably requested for each of the Underwriters. (c) Distribution of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the later of the Second Closing Date (as defined below) and the completion of the Underwriters' distribution of the Common Shares, any offering material in connection with the offering and sale of the Common Shares other than a preliminary prospectus, the Prospectus or the Registration Statement. (d) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (e) Authorization of the Common Shares. The Common Shares to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement, will be validly issued, fully paid and nonassessable. (f) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as have been duly waived. (g) No Material Adverse Change. Except as otherwise disclosed in the Prospectus, subsequent to the respective dates as of which information is given in the Prospectus: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, and Hotel Corporation of the Pacific, Inc., Brindley & Brindley Realty and Development, Inc., B&B On the Beach Inc., Coastal Resorts Realty L.L.C., Coastal Resorts Management, Inc., Collection of Fine Properties, Inc., Ten Mile Holdings, Ltd., Houston and O'Leary Company, Jupiter Property Management at Park City, Inc., Maui Condominium and Home Realty, Inc., The Maury People, Inc., Priscilla Murphy Realty, Inc., Realty Consultants Inc., Resort Property Management, Inc., Telluride Resort Accommodations, Inc.,Trupp Hodnett Enterprises, Inc., THE Management Company, Whistler Chalets Limited and First Resort Software, Inc. (together with their respective subsidiaries, collectively, the "Founding Companies") considered as one entity (any such change is called a "Material Adverse Change"); (ii) none of the Company, its subsidiaries and the Founding Companies has incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business or entered into any material transaction or agreement not in the ordinary course of business; (iii) there has been no adverse change with respect to the goodwill and other intangible assets of the Company and the Founding Companies (collectively, the "Intangible Assets") such that, as of the date hereof, the Intangible Assets, net of accumulated amortization, do not have a value at least equal to the value reflected in the combined financial statements of the Company and the Founding Companies and no part of the Intangible Assets are required to be written down in conformity with generally accepted accounting principles applied on a basis consistent with prior periods; and (iv) there has been no dividend or distribution of any kind declared, paid or made by the Company or any Founding Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company, any of its subsidiaries or any Founding Company of any class of capital stock. (h) Independent Accountants. Arthur Andersen LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes and schedules thereto) filed with the Commission as a part of the Registration Statement and included in the Prospectus, are independent public or certified public accountants with respect to the Company and each of the Founding Companies as required by the Securities Act. (i) Preparation of the Financial Statements. The financial statements of the Company, the separate financial statements of each of the Founding Companies and the combined financial statements of the Company and the Founding Companies, in each case together with related notes and schedules, filed with the Commission as a part of the Registration Statement and included in the Prospectus, present fairly the financial position, results of operations and cash flows of the Company, of each of such Founding Companies and of the Company and the Founding Companies combined, respectively, on the dates specified and for the periods specified. The supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Such financial statements and supporting schedules have been prepared in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto, and all adjustments necessary for a fair presentation of results for such periods have been made. No other financial statements or supporting schedules are required to be included in the Registration Statement. The financial data set forth in the Prospectus under the captions "Prospectus Summary--Summary Pro Forma Combined Financial Data," "--Summary Individual Founding Company Financial Data," "Selected Financial Data" and "Capitalization" fairly present the information set forth therein on a basis consistent with that of the audited and pro forma financial statements contained in the Registration Statement and the books and records of the Company and the Founding Companies, as applicable. The pro forma combined financial statements of the Company and the Founding Companies together with the related notes thereto included under the captions "Prospectus Summary-- Summary Pro Forma Combined Financial Data", "Selected Financial Data," "Resort Properties International, Inc. and Founding Companies Unaudited Pro Forma Combined Financial Statements" and elsewhere in the Prospectus and in the Registration Statement present fairly the information contained therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly presented on the pro forma bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (j) Incorporation and Good Standing of the Company, its Subsidiaries and the Founding Companies. Each of the Company, its subsidiaries and the Founding Companies has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and, in the case of the Company, to enter into and perform its obligations under this Agreement. Each of the Company, each subsidiary and each Founding Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock of each subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim. As of the First Closing Date (as hereinafter defined), after giving effect to the Founding Company Combinations (as defined in the Registration Statement), all of the outstanding shares of the capital stock of each of the Founding Companies will be owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; and no options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, or agreements or other obligations to issue or other rights to convert any obligations into, shares of capital stock of or ownership interests in any of the Founding Companies are authorized or outstanding. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Registration Statement. (k) Capitalization and Other Capital Stock Matters. The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Capitalization" (other than for subsequent issuances, if any, pursuant to employee benefit plans described in the Prospectus or upon exercise of outstanding options or warrants described in the Prospectus). The Common Stock (including the Common Shares) conforms in all material respects to the description thereof contained in the Prospectus. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. Upon completion of the Founding Company Combinations in the manner described in the Registration Statement, the shares of Common Stock of the Company to be issued in such Founding Company Combinations will be duly authorized, validly issued and fully paid and non-assessable. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, or agreements or other obligations to issue or other rights to convert any obligations into, shares of capital stock of or ownership interests in any of the Company or any of its subsidiaries other than those accurately described in the Prospectus. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. (l) Stock Exchange Listing. The Common Shares have been approved for listing on the New York Stock Exchange (the "NYSE"), subject only to official notice of issuance. (m) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company or any of its subsidiaries nor any of the Founding Companies is in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company or any of its subsidiaries or any Founding Company is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries or any Founding Company is subject (each, an "Existing Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company's execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Prospectus (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any Founding Company, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries or any Founding Company pursuant to, or require the consent of any other part to, any Existing Instrument, except for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary or any Founding Company. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's execution, delivery and performance of this Agreement or any Combination Agreement and consummation of the transactions contemplated hereby or thereby and by the Prospectus, except such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the National Association of Securities Dealers, Inc. (the "NASD"). (n) No Material Actions or Proceedings. There are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's knowledge, threatened (i) against or affecting the Company or any of its subsidiaries or any Founding Company, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or any Founding Company or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary or such Founding Company and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. No material labor dispute with the employees of the Company or any of its subsidiaries or any Founding Company exists or, to the best of the Company's knowledge, is threatened or imminent. (o) Intellectual Property Rights. The Company, its subsidiaries and the Founding Companies own or possess sufficient trademarks, service marks, trade names, patent rights, copyrights, licenses, approvals, trade secrets, technology, product designs, software programs, inventions, methods, processes, systems, know how and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither the Company or any of its subsidiaries nor any of the Founding Companies has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. (p) All Necessary Permits, etc. The Company and each subsidiary and each Founding Company possess such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and neither the Company or any subsidiary nor any of the Founding Companies has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. (q) Title to Properties. The Company, each of its subsidiaries and each Founding Company has good and marketable title to all the properties and assets reflected as owned in the financial statements referred to in Section 1(i) above (or elsewhere in the Prospectus), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary or such Founding Company. The real property, improvements, equipment and personal property held under lease by the Company or any subsidiary or any Founding Company are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or such subsidiary or such Founding Company. (r) Tax Law Compliance. The Company and its subsidiaries and each of the Founding Companies have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them. The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(i) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company, any of its subsidiaries or any Founding Company has not been finally determined. (s) Company Not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and after receipt of payment for the Common Shares will not be, an "investment company" within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. (t) Insurance. Each of the Company and its subsidiaries and the Founding Companies are insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its subsidiaries and the Founding Companies against theft, damage, destruction, acts of vandalism and earthquakes. The Company has no reason to believe that it or any subsidiary or any Founding Company will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. Neither of the Company or any subsidiary nor any Founding Company has been denied any insurance coverage which it has sought or for which it has applied. (u) No Price Stabilization or Manipulation. Neither the Company or any subsidiary nor any Founding Company has taken or will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Shares. (v) Related Party Transactions. There are no business relationships or related-party transactions involving the Company, any subsidiary, any Founding Company or any other person required to be described in the Prospectus which have not been described as required. (w) No Unlawful Contributions or Other Payments. Neither the Company nor any of its subsidiaries nor any Founding Company nor, to the best of the Company's knowledge, any employee or agent of the Company or any subsidiary or any Founding Company, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of the character required to be disclosed in the Prospectus. (x) Company's Accounting System. The Company and each of its subsidiaries and each of the Founding Companies maintain a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) neither the Company nor any of its subsidiaries nor any Founding Company is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environment Concern (collectively, "Environmental Laws"), including, but not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its subsidiaries or the Founding Companies under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its subsidiaries or any Founding Company received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries or any Founding Company is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any of its subsidiaries or any Founding Company has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries or any Founding Company, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's knowledge, threatened against the Company or any of its subsidiaries or any Founding Company or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries or any Founding Company has retained or assumed either contractually or by operation of law; and (iii) to the best of the Company's knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its subsidiaries or any Founding Company or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries or any Founding Company has retained or assumed either contractually or by operation of law. (z) ERISA Compliance. The Company and each of the Founding Companies and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company or any of its subsidiaries, any Founding Company or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "ERISA Affiliate" means, with respect to the Company or a Founding Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company or such Founding Company is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, any Founding Company or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by the Company, any Founding Company or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither the Company, any Founding Company nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, any Founding Company or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (aa) Combination Agreements. The Company has entered into the agreements (the "Combination Agreements"), set forth as Exhibits 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13 and 2.14 to the Registration Statement, pursuant to which the Company will acquire in separate transactions all of the common stock and ownership interests of the Founding Companies. Each of the Combination Agreements is in full force and effect, has been duly and validly authorized, executed and delivered by the parties thereto, and is valid and binding on the parties thereto in accordance with its terms and none of the parties thereto is in default in any respect thereunder. A complete and correct copy of each Combination Agreement (including exhibits and schedules) has been delivered to the Representatives and no changes therein will be made subsequent hereto and prior to the Closing Date. (ab) Representations in Combination Agreements. The representations and warranties made in each Combination Agreement by the Company and by each Founding Company and/or its stockholders are true and correct in all material respects, except for such changes permitted or contemplated by such Combination Agreement. Any certificate signed by an officer of the Company and delivered to the Representatives or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters set forth therein. SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES. The Firm Common Shares. The Company agrees to issue and sell to the several Underwriters the Firm Common Shares upon the terms herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase from the Company the respective number of Firm Common Shares set forth opposite their names on Schedule A hereto. The purchase price per Firm Common Share to be paid by the several Underwriters to the Company shall be $[___] per share. The First Closing Date. Delivery of certificates for the Firm Common Shares to be purchased by the Underwriters and payment therefor shall be made at the offices of SB, 388 Greenwich Street, New York, New York (or such other place as may be agreed to by the Company and the Representatives) at 6:00 a.m. New York time, on [______ __, 1998], or such other time and date not later than 10:30 a.m. New York time, on [______ __, 1998], as the Representatives shall designate by notice to the Company (the time and date of such closing are called the "First Closing Date"). The Company hereby acknowledges that circumstances under which the Representatives may provide notice to postpone the First Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Representatives to recirculate to the public copies of an amended or supplemented Prospectus or a delay as contemplated by the provisions of Section 10 hereof. The Optional Common Shares; the Second Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of [_______] Optional Common Shares from the Company at the purchase price per share to be paid by the Underwriters for the Firm Common Shares. The option granted hereunder is for use by the Underwriters solely in covering any over-allotments in connection with the sale and distribution of the Firm Common Shares. The option granted hereunder may be exercised at any time (but not more than once) upon notice by the Representatives to the Company, which notice may be given at any time within 30 days from the date of this Agreement. Such notice shall set forth (i) the aggregate number of Optional Common Shares as to which the Underwriters are exercising the option, (ii) the names and denominations in which the certificates for the Optional Common Shares are to be registered and (iii) the time, date and place at which such certificates will be delivered (which time and date may be simultaneous with, but not earlier than, the First Closing Date; and in such case the term "First Closing Date" shall refer to the time and date of delivery of certificates for the Firm Common Shares and the Optional Common Shares). Such time and date of delivery, if subsequent to the First Closing Date, is called the "Second Closing Date" and shall be determined by the Representatives and shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. If any Optional Common Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Optional Common Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Optional Common Shares to be purchased as the number of Firm Common Shares set forth on Schedule A opposite the name of such Underwriter bears to the total number of Firm Common Shares. The Representatives may cancel the option at any time prior to its expiration by giving written notice of such cancellation to the Company. Public Offering of the Common Shares. The Representatives hereby advise the Company that the Underwriters intend to offer for sale to the public, as described in the Prospectus, their respective portions of the Common Shares as soon after this Agreement has been executed and the Registration Statement has been declared effective as the Representatives, in their sole judgment, have determined is advisable and practicable. Payment for the Common Shares. Payment for the Common Shares shall be made at the First Closing Date (and, if applicable, at the Second Closing Date) by wire transfer of immediately available funds to the order of the Company. It is understood that the Representatives have been authorized, for their own account and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Common Shares and any Optional Common Shares the Underwriters have agreed to purchase. SB, individually and not as a Representative of the Underwriters, may (but shall not be obligated to) make payment for any Common Shares to be purchased by any Underwriter whose funds shall not have been received by the Representatives by the First Closing Date or the Second Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement. Delivery of the Common Shares. The Company shall deliver, or cause to be delivered, to the Representatives for the accounts of the several Underwriters certificates for the Firm Common Shares at the First Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The Company shall also deliver, or cause to be delivered, to the Representatives for the accounts of the several Underwriters, certificates for the Optional Common Shares the Underwriters have agreed to purchase at the First Closing Date or the Second Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The certificates for the Common Shares shall be in definitive form and registered in such names and denominations as the Representatives shall have requested at least two full business days prior to the First Closing Date (or the Second Closing Date, as the case may be) and shall be made available for inspection on the business day preceding the First Closing Date (or the Second Closing Date, as the case may be) at a location in New York City as the Representatives may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m. on the second business day following the date the Common Shares are released by the Underwriters for sale to the public, the Company shall deliver or cause to be delivered copies of the Prospectus in such quantities and at such places as the Representatives shall request. SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY. The Company further covenants and agrees with each Underwriter as follows: (a) Representatives' Review of Proposed Amendments and Supplements. During such period beginning on the date hereof and ending on the later of the First Closing Date or such date, as in the opinion of counsel for the Underwriters, the Prospectus is no longer required by law to be delivered in connection with sales by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to amending or supplementing the Registration Statement (including any registration statement filed under Rule 462(b) under the Securities Act) or the Prospectus, the Company shall furnish to the Representatives for review a copy of each such proposed amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Representatives reasonably object. (b) Securities Act Compliance. After the date of this Agreement, the Company shall promptly advise the Representatives in writing (i) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any preliminary prospectus or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement becomes effective and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Common Stock from any securities exchange upon which the Common Stock is listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b), 430A and 434, as applicable, under the Securities Act and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) were received in a timely manner by the Commission. (c) Amendments and Supplements to the Prospectus and Other Securities Act Matters. If, during the Prospectus Delivery Period, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if in the opinion of the Representatives or counsel for the Underwriters it is otherwise necessary to amend or supplement the Prospectus to comply with law, the Company agrees to promptly prepare (subject to Section 3(a) hereof), file with the Commission and furnish at its own expense to the Underwriters and to dealers, amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) Copies of any Amendments and Supplements to the Prospectus. The Company agrees to furnish the Representatives, without charge, during the Prospectus Delivery Period, as many copies of the Prospectus and any amendments and supplements thereto as the Representatives may request. (e) Blue Sky Compliance. The Company shall cooperate with the Representatives and counsel for the Underwriters to qualify or register the Common Shares for sale under (or obtain exemptions from the application of) the state securities or blue sky laws or the provincial securities laws of Canada of those jurisdictions designated by the Representatives, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Common Shares. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Representatives promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Common Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment. (f) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Common Shares sold by it in the manner described under the caption "Use of Proceeds" in the Prospectus. (g) Transfer Agent. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock. (h) Earnings Statement. As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement (which need not be audited) covering the twelve-month period ending [_______ __, 1999] that satisfies the provisions of Section 11(a) of the Securities Act. (i) Periodic Reporting Obligations. During the Prospectus Delivery Period the Company shall file, on a timely basis, with the Commission and the NYSE all reports and documents required to be filed under the Exchange Act. (j) Agreement Not To Offer or Sell Additional Securities. During the period of 180 days following the date of the Prospectus, the Company will not, without the prior written consent of SB (which consent may be withheld at the sole discretion of SB), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other than as contemplated by this Agreement with respect to the Common Shares); provided, however, that the Company may issue shares of its Common Stock or options to purchase its Common Stock, or Common Stock upon exercise of options, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Prospectus, but only if the holders of such shares, options, or shares issued upon exercise of such options, agree in writing not to sell, offer, dispose of or otherwise transfer any such shares or options during such 180 day period without the prior written consent of SB (which consent may be withheld at the sole discretion of the SB). (m) Future Reports to the Representatives. During the period of five years after the date of this Agreement the Company will furnish to the Representatives: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock. (n) Satisfaction of Founding Company Combination Conditions. The Company will: (i) use its best efforts to satisfy all conditions to consummation of the Founding Company Combinations as set forth in the Combination Agreements with respect thereto; (ii) use its best efforts to cause each other party to such Combination Agreements to satisfy all conditions to the consummation of the Founding Company Combinations; and (iii) promptly notify the Representatives of the occurrence of any event which may result in the non-consummation of any of the Founding Company Combinations on the First Closing Date. SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby and in connection with the Founding Company Combinations, including without limitation (i) all expenses incident to the issuance and delivery of the Common Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each preliminary prospectus and the Prospectus, and all amendments and supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Common Shares for offer and sale under the state securities or blue sky laws or the provincial securities laws of Canada, and, if requested by the Representatives, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Underwriters of such qualifications, registrations and exemptions, (vii) the filing fees incident to, and the reasonable fees and expenses of counsel for the Underwriters in connection with, the NASD's review and approval of the Underwriters' participation in the offering and distribution of the Common Shares, (viii) the fees and expenses associated with listing the Common Shares on the NYSE, and (ix) all other fees, costs and expenses referred to in Item 14 of Part II of the Registration Statement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel. SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of the several Underwriters to purchase and pay for the Common Shares as provided herein on the First Closing Date and, with respect to the purchase of the Optional Common Shares after the First Closing Date, the Second Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the First Closing Date as though then made and, with respect to the Optional Common Shares, as of the Second Closing Date as though then made, to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions: (a) Accountants' Comfort Letter. On the date hereof, the Representatives shall have received from Arthur Andersen LLP, independent public or certified public accountants for the Company, a letter dated the date hereof addressed to the Underwriters, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountant's "comfort letters" to underwriters, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Prospectus (and the Representatives shall have received an additional [___] conformed copies of such accountants' letter for each of the several Underwriters). The specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the date of this Agreement. (b) Compliance with Registration Requirements; No Stop Order; No Objection from NASD. For the period from and after effectiveness of this Agreement and prior to the First Closing Date and, with respect to the purchase of the Optional Common Shares after the First Closing Date, the Second Closing Date: (i) the Company shall have filed the Prospectus with the Commission (including the information required by Rule 430A under the Securities Act) in the manner and within the time period required by Rule 424(b) under the Securities Act; or the Company shall have filed a post-effective amendment to the Registration Statement containing the information required by such Rule 430A, and such post-effective amendment shall have become effective; or, if the Company elected to rely upon Rule 434 under the Securities Act and obtained the Representatives' consent thereto, the Company shall have filed a Term Sheet with the Commission in the manner and within the time period required by such Rule 424(b); (ii) no stop order suspending the effectiveness of the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment to the Registration Statement, shall be in effect and no proceedings for such purpose shall have been instituted or threatened by the Commission; and (iii) the NASD shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements. (c) No Material Adverse Change. For the period from and after the date of this Agreement and prior to the First Closing Date and, with respect to the purchase of the Optional Common Shares after the First Closing Date, the Second Closing Date, in the judgment of the Representatives there shall not have occurred any Material Adverse Change. (d) Opinion of Counsel for the Company. On each of the First Closing Date and the Second Closing Date the Representatives shall have received the favorable opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Company, dated as of such Closing Date, the form of which is attached hereto as Exhibit A (and the Representatives shall have received an additional [___] conformed copies of such counsel's legal opinion for each of the several Underwriters). (e) Opinion of Counsel for the Underwriters. On each of the First Closing Date and the Second Closing Date the Representatives shall have received the favorable opinion of Kramer, Levin, Naftalis & Frankel, counsel for the Underwriters, dated as of such Closing Date, with respect to the matters set forth in paragraphs (i), (viii), (ix) and (xi) and the next-to-last paragraph of Exhibit A hereto (and the Representatives shall have received an additional [___] conformed copies of such counsel's legal opinion for each of the several Underwriters). (f) Officers' Certificate. On each of the First Closing Date and the Second Closing Date the Representatives shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such Closing Date, to the effect set forth in subsection (b)(ii) of this Section 5, and further to the effect that: (i) for the period from and after the date of this Agreement and prior to such Closing Date, there has not occurred any Material Adverse Change; (ii) the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of such Closing Date; and (iii) the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date. (g) Bring-down Comfort Letter. On each of the First Closing Date and the Second Closing Date the Representatives shall have received from Arthur Andersen LLP, independent public or certified public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Representatives, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the First Closing Date or Second Closing Date, as the case may be (and the Representatives shall have received an additional [___] conformed copies of such accountants' letter for each of the several Underwriters). (h) Combination Closings.With respect to the Founding Company Combinations: (i) Each condition to the obligations of the Company set forth in Section 9 of each of the Combination Agreements shall have been satisfied, without waiver or modification, except as may be approved by the Representatives. (ii) Each certificate delivered to the Company pursuant to each Combination Agreement shall have also been delivered to the Representatives. (iii) Counsel for each of the Founding Companies shall have furnished to the Representatives a letter, in form and substance satisfactory to the Representatives, to the effect that they are entitled to rely on the opinion of such counsel delivered to the Company pursuant to each Combination Agreement as if such opinion were addressed to them. (iv) On the First Closing Date the Representatives shall have received opinions, in form and substance satisfactory to the Representatives, from counsel for the Company and counsel for each of the Founding Companies, to the effect that each Combination pursuant to the applicable, respective Combination Agreement has become effective and that such Combination was consummated in accordance with the provisions of such Combination Agreement, which has been duly authorized by the Company, the respective Founding Company and their respective stockholders, and comply in all respects with applicable law. (i) Combination Agreements. The Combination Agreements shall be in full force and effect and none of the parties thereto shall be in default thereunder. The Representatives shall have received assurances reasonably satisfactory to them that all documents required to be filed in the respective states in order to effectuate the consummation of each Combination shall have been approved for filing by the appropriate authorities in each state and that all of such Combination documents shall be filed substantially concurrently with the consummation of the transactions pursuant to this Agreement. (j) Lock-Up Agreement from Certain Stockholders of the Company. On the date hereof, the Company shall have furnished to the Representatives an agreement in the form of Exhibit B hereto from each director, officer and each beneficial owner of Common Stock (as defined and determined according to Rule 13d-3 under the Exchange Act, except that a one hundred eighty day period shall be used rather than the sixty day period set forth therein), including, without limitation, each person who will receive shares of Common Stock pursuant to the terms of the Combination Agreements, and such agreement shall be in full force and effect on each of the First Closing Date and the Second Closing Date. (k) Termination of Profit-Sharing Agreements. On or before the First Closing Date, the Representatives and counsel for the Underwriters shall have received satisfactory evidence of the termination of all profit or revenue sharing agreements or similar arrangements between any of the Founding Companies and any other party. (l) Additional Documents. On or before each of the First Closing Date and the Second Closing Date, the Representatives and counsel for the Underwriters shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Common Shares as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representatives by notice to the Company at any time on or prior to the First Closing Date and, with respect to the purchase of the Optional Common Shares after the First Closing Date, at any time prior to the Second Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 hereof shall at all times be effective and shall survive such termination. SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is terminated by the Representatives pursuant to Section 5, Section 7, Section 10 or Section 11 hereof, or if the sale to the Underwriters of the Common Shares on the First Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representatives and the other Underwriters (or such Underwriters as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representatives and the Underwriters in connection with the proposed purchase and the offering and sale of the Common Shares, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. SECTION 7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not become effective until the later of (i) the execution of this Agreement by the parties hereto and (ii) notification by the Commission to the Company and the Representatives of the effectiveness of the Registration Statement under the Securities Act. Prior to such effectiveness, this Agreement may be terminated by any party by notice to each of the other parties hereto, and any such termination shall be without liability on the part of (a) the Company to any Underwriter, except that the Company shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Section 4 and Section 6 hereof, (b) of any Underwriter to the Company, or (c) of any party hereto to any other party except that the provisions of Section 8 and Section 9 hereof shall at all times be effective and shall survive such termination. SECTION 8. INDEMNIFICATION. (a) Indemnification of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its officers and employees, and each person, if any, who controls any Underwriter within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, including any information deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) upon any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iv) in whole or in part upon any failure of the Company to perform it obligations hereunder or under law; or (v) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Common Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) or clause (ii) above, provided that the Company shall not be liable under this clause (v) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its bad faith or willful misconduct; and to reimburse each Underwriter and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by SB) as such expenses are reasonably incurred by such Underwriter or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information relating to any Underwriter furnished to the Company by the Representatives expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); and provided, further, that with respect to any preliminary prospectus, the foregoing indemnity agreement shall not inure to the benefit of any Underwriter from whom the person asserting any loss, claim, damage, liability or expense purchased Common Shares, or any person controlling such Underwriter, if copies of the Prospectus were timely delivered to the Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Common Shares to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or expense. The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have. (b) Indemnification of the Company, its Directors and Officers. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including settling, compromising or paying any such loss, claim, damage, liability, expense or action, if such settlement, compromise or payment is effected with the written consent of such Underwriter), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any preliminary prospectus, the Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that the only information that the Underwriters have furnished to the Company expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) are the statements set forth (A) as the last [two] paragraphs on the inside front cover page of the Prospectus concerning stabilization and passive market making by the Underwriters and (B) in the table in the first paragraph and as the [second and [____] paragraphs] under the caption "Underwriting" in the Prospectus; and the Underwriters confirm that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Underwriter may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (SB in the case of Section 8(b) and Section 9 hereof), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 9. CONTRIBUTION. If the indemnification provided for in Section 8 hereof is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Common Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Common Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Common Shares pursuant to this Agreement (before deducting expenses) received by the Company, and the total underwriting discount received by the Underwriters, in each case as set forth on the front cover page of the Prospectus (or, if Rule 434 under the Securities Act is used, the corresponding location on the Term Sheet) bear to the aggregate initial public offering price of the Common Shares as set forth on such cover. The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company, on the one hand, or the Underwriters, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) hereof with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) hereof for purposes of indemnification. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Common Shares underwritten by it and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective underwriting commitments as set forth opposite their names on Schedule A hereto. For purposes of this Section 9, each officer and employee of an Underwriter and each person, if any, who controls an Underwriter within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company with the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on the First Closing Date or the Second Closing Date, as the case may be, any one or more of the several Underwriters shall fail or refuse to purchase Common Shares that it or they have agreed to purchase hereunder on such date, and the aggregate number of Common Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Common Shares to be purchased on such date, the other Underwriters shall be obligated, severally, in the proportions that the number of Firm Common Shares set forth opposite their respective names on Schedule A hereto bears to the aggregate number of Firm Common Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as may be specified by the Representatives with the consent of the non-defaulting Underwriters, to purchase the Common Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date. If, on the First Closing Date or the Second Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Common Shares and the aggregate number of Common Shares with respect to which such default occurs exceeds 10% of the aggregate number of Common Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Common Shares are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 8 and Section 9 hereof shall at all times be effective and shall survive such termination. In any such case either the Representatives or the Company shall have the right to postpone the First Closing Date or the Second Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected. As used in this Agreement, the term "Underwriter" shall be deemed to include any person substituted for a defaulting Underwriter under this Section 10. Any action taken under this Section 10 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing Date this Agreement maybe terminated by the Representatives by notice given to the Company if at any time (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the NYSE, or trading in securities generally on either the Nasdaq Stock Market or the NYSE shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal, New York or Delaware authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the judgment of the Representatives is material and adverse and makes it impracticable to market the Common Shares in the manner and on the terms described in the Prospectus or to enforce contracts for the sale of securities; (iv) in the judgment of the Representatives there shall have occurred any Material Adverse Change; or (v) the Company shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Representatives may interfere materially with the conduct of the business and operations of the Company regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company to any Underwriter, except that the Company shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Section 4 and Section 6 hereof, (b) any Underwriter to the Company, or (c) of any party hereto to any other party except that the provisions of Section 8 and Section 9 hereof shall at all times be effective and shall survive such termination. SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Common Shares sold hereunder and any termination of this Agreement. SECTION 13. NOTICES. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Representatives: Smith Barney Inc. NationsBanc Montgomery Securities LLC Furman Selz LLC c/o Smith Barney Inc. 388 Greenwich Street New York, NY 10013 Facsimile: (___) ___-____ Attention: ___________ with copies to: Smith Barney Inc. 388 Greenwich Street New York, NY 10013 Facsimile: (212) 816-7912 Attention: Daniel E. Sell, Esq. If to the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, TN 38119 Facsimile: (___) ___-____ Attention: David C. Sullivan, Chairman and Chief Executive Officer with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, Suite 400 Washington, D.C. 20036 Facsimile: (202) 887-4288 Attention: Bruce S. Mendelsohn, Esq. Any party hereto may change the address for receipt of communications by giving written notice to each other party hereto. SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 10 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9 hereof, and in each case their respective successors and personal representatives, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Common Shares as such from any of the Underwriters merely by reason of such purchase. SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. SECTION 16. GOVERNING LAW PROVISIONS. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE ENTIRELY PERFORMED IN SUCH STATE. (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution provisions of Section 9 hereof, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Section 8 and Section 9 hereof fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any preliminary prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, VACATION PROPERTIES INTERNATIONAL, INC. By:__________________________ Name:________________________ Title:_________________________ The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representatives in New York, New York as of the date first above written. SMITH BARNEY INC. NATIONSBANC MONTGOMERY SECURITIES LLC FURMAN SELZ LLC Acting as Representatives of the several Underwriters named on the attached Schedule A. By SMITH BARNEY INC. By:__________________________ Name:________________________ Title:_________________________ SCHEDULE A NUMBER OF FIRM COMMON SHARES TO BE UNDERWRITER PURCHASED SALOMON SMITH BARNEY INC................................... NATIONSBANC MONTGOMERY SECURITIES LLC...................... FURMAN SELZ LLC ........................................... TOTAL_________________ _________________ EXHIBIT A Opinion of Counsel for the Company (To be delivered pursuant to Section 5(e) of the Underwriting Agreement.) References to the Prospectus in this Exhibit A include any supplements thereto at the Closing Date. (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under the Underwriting Agreement. (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (iv) Each significant subsidiary (as defined in Rule 405 under the Securities Act) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and, to the best knowledge of such counsel, is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (v) All of the issued and outstanding capital stock of each such significant subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or, to the best knowledge of such counsel, any pending or threatened claim. (vi) The authorized, issued and outstanding capital stock of the Company (including the Common Stock) conforms to the descriptions thereof set forth in the Prospectus. All of the outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and, to the best of such counsel's knowledge, have been issued in compliance with the registration and qualification requirements of federal and state securities laws. The form of certificate used to evidence the Common Stock is in due and proper form and complies with all applicable requirements of the charter and by-laws of the Company and the General Corporation Law of the State of Delaware. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted and exercised thereunder, set forth in the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. (vii) No stockholder of the Company or any other person has any preemptive right, right of first refusal or other similar right to subscribe for or purchase securities of the Company arising (i) by operation of the charter or by-laws of the Company or the General Corporation Law of the State of Delaware or (ii) to the best knowledge of such counsel, otherwise. (viii) The Underwriting Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally or by general equitable principles. (ix) The Common Shares to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale pursuant to the Underwriting Agreement and, when issued and delivered by the Company pursuant to the Underwriting Agreement against payment of the consideration set forth therein, will be validly issued, fully paid and nonassessable. (x) Each of the Registration Statement and the Rule 462(b) Registration Statement, if any, has been declared effective by the Commission under the Securities Act. To the best knowledge of such counsel, no stop order suspending the effectiveness of either of the Registration Statement or the Rule 462(b) Registration Statement, if any, has been issued under the Securities Act and no proceedings for such purpose have been instituted or are pending or are contemplated or threatened by the Commission. Any required filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) under the Securities Act has been made in the manner and within the time period required by such Rule 424(b). (xi) The Registration Statement, including any Rule 462(b) Registration Statement, the Prospectus, and each amendment or supplement to the Registration Statement and the Prospectus, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or in exhibits to or excluded from the Registration Statement, as to which no opinion need be rendered) comply as to form in all material respects with the applicable requirements of the Securities Act. (xii) The Common Shares have been approved for listing on the New York Stock Exchange. (xii) The statements (i) in the Prospectus under the captions "Risk Factors--[___]," "Description of Capital Stock," "Management's Discussion and Analysis and Results of Operations--Liquidity," "Business--Litigation," "Business--Intellectual Property," "Certain Relationships and Related Transactions," "Shares Eligible for Future Sale," "Certain United States Income Tax Considerations" and "Underwriting" and (ii) in Item 14 and Item 15 of the Registration Statement, insofar as such statements constitute matters of law, summaries of legal matters, the Company's charter or by-law provisions, documents or legal proceedings, or legal conclusions, has been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. (xiii) To the best knowledge of such counsel, there are no legal or governmental actions, suits or proceedings pending or threatened which are required to be disclosed in the Registration Statement, other than those disclosed therein. (xiv) To the best knowledge of such counsel, there are no Existing Instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto; and the descriptions thereof and references thereto are correct in all material respects. (xv) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority or agency, is required for the Company's execution, delivery and performance of the Underwriting Agreement and consummation of the transactions contemplated thereby and by the Prospectus, except as required under the Securities Act, applicable state securities or blue sky laws and from the NASD. (xvi) The execution and delivery of the Underwriting Agreement by the Company and the performance by the Company of its obligations thereunder (other than performance by the Company of its obligations under the indemnification section of the Underwriting Agreement, as to which no opinion need be rendered) (a) have been duly authorized by all necessary corporate action on the part of the Company; (b) will not result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary; (c) will not constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any material Existing Instrument; and (d) to the best knowledge of such counsel, will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary. (xvii) The Company is not, and after receipt of payment for the Common Shares will not be, an "investment company" within the meaning of Investment Company Act. (xviii) Except for rights disclosed in the Prospectus under the caption "Shares Eligible for Future Sale" which have been duly waived, to the best knowledge of such counsel, there are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by the Underwriting Agreement, except for such rights as have been duly waived. (xix) To the best knowledge of such counsel, neither the Company nor any subsidiary is in violation of its charter or by-laws or any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary or is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any material Existing Instrument, except in each such case for such violations or Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, representatives of the independent public or certified public accountants for the Company and with representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus, and any supplements or amendments thereto, and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus (other than as specified above), and any supplements or amendments thereto, on the basis of the foregoing, nothing has come to their attention which would lead them to believe that either the Registration Statement or any amendments thereto, at the time the Registration Statement or such amendments became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, as of its date or at the First Closing Date or the Second Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or schedules or other financial or statistical data derived therefrom, included in the Registration Statement or the Prospectus or any amendments or supplements thereto). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than [the General Corporation Law of the State of Delaware or the federal law of the United States], to the extent they deem proper and specified in such opinion, upon the opinion (which shall be dated the First Closing Date or the Second Closing Date, as the case may be, shall be satisfactory in form and substance to the Underwriters, shall expressly state that the Underwriters may rely on such opinion as if it were addressed to them and shall be furnished to the Representatives) of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters; provided, however, that such counsel shall further state that they believe that they and the Underwriters are justified in relying upon such opinion of other counsel, and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. EX-2.1 3 EXHIBIT 2.1 EXHIBIT 2.1 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March [___], 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. HOTEL ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) HOTEL CORPORATION OF THE PACIFIC, INC. and the STOCKHOLDER named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving Corporation...............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO..............................................4 1.5 Effect of Merger.....................................................4 2. CONVERSION OF STOCK......................................................5 2.1 Manner of Conversion.................................................5 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER................9 (A) Representations and Warranties of COMPANY and STOCKHOLDER............9 5.1 Due Organization.................................................10 5.2 Authority........................................................11 5.3 Capital Stock of the COMPANY.....................................11 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................12 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................14 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................17 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................18 5.18 Insurance.......................................................19 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................23 5.23 Taxes...........................................................23 5.24 No Violations...................................................25 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Accounts; Powers of Attorney....................................28 5.28 Validity of Obligations.........................................28 5.29 Relations with Governments......................................29 5.30 Disclosure......................................................29 5.31 Prohibited Activities...........................................30 (B) Representations and Warranties of STOCKHOLDER.......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock...............................30 6. REPRESENTATIONS OF VPI AND NEWCO........................................31 6.1 Due Organization....................................................31 6.2 Authorization.......................................................32 6.3 Capital Stock of VPI and NEWCO......................................32 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................33 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................33 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................36 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................38 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................40 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................44 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY..........49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 9.5 No Material Adverse Effect..........................................53 9.6 STOCKHOLDER's Release...............................................53 ii 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 9.18 Termination of Defined Benefit Plans...............................55 9.19 License Grant......................................................55 10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING.....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 10.8 Grant of License to VPI............................................58 11. INDEMNIFICATION........................................................59 11.1 General Indemnification by the STOCKHOLDER.........................59 11.2 Indemnification by VPI.............................................60 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................63 12. TERMINATION OF AGREEMENT...............................................64 12.1 Termination........................................................64 12.2 Liabilities in Event of Termination................................65 13. NONCOMPETITION.........................................................67 13.1 Prohibited Activities..............................................67 13.2 Damages............................................................69 13.3 Reasonable Restraint...............................................69 13.4 Severability; Reformation..........................................70 13.5 Independent Covenant...............................................70 13.6 Materiality........................................................70 13.7 Limitation.........................................................70 13.8 COMPANY Noninterference............................................70 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................70 14.1 STOCKHOLDER........................................................70 14.2 VPI AND NEWCO......................................................71 14.3 Damages............................................................71 14.4 Survival...........................................................72 14.5 Return of Data Submitted...........................................72 15. TRANSFER RESTRICTIONS..................................................72 15.1 Transfer Restrictions..............................................72 15.2 Certain Transfers..................................................73 16. SECURITIES LAW REPRESENTATIONS.........................................73 16.1 Compliance with Law................................................74 16.2 Economic Risk; Sophistication......................................74 17. REGISTRATION RIGHTS....................................................74 17.1 Piggyback Registration Rights......................................74 iii 17.2 Demand Registration Rights.........................................75 17.3 Registration Procedures............................................76 17.4 Underwriting Agreement.............................................77 17.5 Availability of Rule 144...........................................77 17.6 Registration Rights Indemnification................................77 18. GENERAL................................................................82 18.1 Press Releases.....................................................82 18.2 Cooperation........................................................83 18.3 Successors and Assigns; Third Party Beneficiaries..................83 18.4 Entire Agreement...................................................83 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................84 18.7 Expenses...........................................................84 18.8 Notices............................................................85 18.9 Governing Law......................................................86 18.10 Exercise of Rights and Remedies...................................86 18.11 Time..............................................................86 18.12 Reformation and Severability......................................86 18.13 Remedies Cumulative...............................................87 18.14 Captions..........................................................87 18.15 Amendments and Waivers............................................87 18.16 Incorporation by Reference........................................87 18.17 Defined Terms.....................................................87 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDER ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), HCP ACQUISITION CORP., a Delaware corporation ("NEWCO"), HOTEL CORPORATION OF THE PACIFIC, INC., a Hawaii corporation (the "COMPANY"), and Andre S. Tatibouet (the "STOCKHOLDER"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a 1 Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDER and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDER and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDER and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State or the Director of the Department of Commerce and Consumer Affairs, as applicable, of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Articles of Incorporation of the COMPANY then in effect shall be the Articles of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Articles of Incorporation and Bylaws of the Surviving Corporation; and 3 (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Articles of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into 4 the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and 5 outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and/or (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDER pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and the STOCKHOLDER shall not be deprived nor restricted in exercising those rights. At the Effective Time 6 of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDER, who is the holder of certificates representing 75% of the outstanding shares of COMPANY Stock, shall, upon surrender of such certificates and the certificates held by William W. Saunders ("Saunders") representing 25% of the outstanding shares of COMPANY Stock, receive the number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDER shall deliver and shall cause Saunders to deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the holders thereof, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDER's expense, affixed and canceled. The STOCKHOLDER agrees promptly to cure and to cause to be cured any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDER pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. 7 Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDER, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDER, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDER pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Certain indebtedness of affiliates of the STOCKHOLDER to the COMPANY and of the STOCKHOLDER to the COMPANY shall be reduced to unsecured promissory notes bearing interest at a rate of ____% per annum payable to the COMPANY or its order with interest-only payments over a ten-year term. STOCKHOLDER shall be the primary obligor on or shall personally guarantee all such indebtedness. Four million dollars ($4,000,000) in principal under these unsecured notes payable to the COMPANY shall be treated as good assets of the COMPANY for purposes of determination of whether the COMPANY has a positive net worth under clause (i) above and the cash portion of the consideration to be paid to STOCKHOLDER shall not be reduced on account of these receivables payable by the STOCKHOLDER. STOCKHOLDER may, prior to or upon the Closing Date, assume selected liabilities of the COMPANY evidenced by promissory notes or contracts. Any such assumption shall be treated as being in repayment of the indebtedness of the STOCKHOLDER to the COMPANY. STOCKHOLDER shall indemnify the COMPANY with respect to all such liabilities of the COMPANY which may be so assumed by STOCKHOLDER. Notwithstanding anything set forth above, VPI acknowledges (i) that the COMPANY has established a reserve in the amount of $500,000 on its balance sheet relating to contingent liabilities and (ii) that this reserve shall be deemed to have not been established (i.e., shall be ignored and not counted) when conducting the above-referenced balance sheet tests, including positive net working capital, positive net worth and fully funded customer deposits. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, 8 the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDER shall be entitled to receive and which shall be paid to Saunders pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER. Each of the COMPANY and the STOCKHOLDER jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDER agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually 9 incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDER, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDER, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Articles of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or any stockholder of the COMPANY which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 10 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDER and Saunders in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDER and Saunders and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 11 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's audited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance 12 Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and 13 (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the stockholders of the COMPANY. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. Except as set forth on Schedule 5.12, the COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other 14 governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY 15 except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by the stockholders of the COMPANY, relatives of the stockholders of the COMPANY, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the stockholders of the COMPANY and their respective Affiliates, constitute valid and binding agreements 16 of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY or the STOCKHOLDER, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 17 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located (or with the Bureau of Conveyances of the State of Hawaii or the Assistant Registrar of the Land Court of the State of Hawaii, as applicable) which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by the stockholders of the COMPANY or business or personal affiliates of the COMPANY or the stockholders of the COMPANY. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the stockholders 18 of the COMPANY and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY or the STOCKHOLDER, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to) and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no 19 employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the 20 COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor the 21 STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDER further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 22 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet 23 Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor any stockholder of the COMPANY have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth in Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth in Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on 24 behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 25 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; 26 (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, stockholders, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the stockholders of the COMPANY and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the stockholders of the COMPANY or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; 27 (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting 28 the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDER acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDER or any other person 29 affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER The STOCKHOLDER represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. The STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. The STOCKHOLDER and Saunders own beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by the STOCKHOLDER and Saunders, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. The STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. No other stockholder of the COMPANY has any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDER does not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 30 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDER or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 31 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 32 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 33 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 34 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDER pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDER pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 35 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 36 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 37 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDER of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDER set 38 forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDER and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 39 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 40 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or, if not in the normal course of business, involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDER, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDER and the COMPANY shall terminate or cause to be terminated, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any stockholder of the COMPANY not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 43 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDER and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDER contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of the STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or 44 occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours 45 following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDER shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the stockholders of the COMPANY required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDER agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the stockholders of the COMPANY becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDER an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDER an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the stockholders of the COMPANY, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and the STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or Saunders, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the 46 STOCKHOLDER and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY or the STOCKHOLDER become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDER in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDER shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDER of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDER at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 30, 1998, unless the Closing Date shall have occurred on or before April 30, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the 47 COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY The obligations of the STOCKHOLDER and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDER and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDER. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDER. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and/or the number of shares of VPI Stock to be received by the STOCKHOLDER and Saunders is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDER and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDER shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDER (including but not limited to the delivery to VPI of stock certificates representing all of the issued and outstanding Stock of the COMPANY) and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDER shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the COMPANY's Charter Documents and resolutions of the board of directors and the stockholders of the COMPANY approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDER against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDER, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDER, (y) continuing obligations to the STOCKHOLDER relating to his employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the stockholders of the COMPANY not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDER, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. The STOCKHOLDER shall have delivered to VPI a certificate to the effect that he is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. Except as set forth on Schedule 9.15, VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDER shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDER covenants to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDER and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. The STOCKHOLDER shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 9.19 LICENSE GRANT. The COMPANY shall have been granted, for a period of twenty (20) years following the Closing Date, a royalty-free exclusive license (pursuant to the License Agreement attached to Schedule 9.19) to use the name "Aston" in Hawaii in connection with the vacation property management business operated in Hawaii. 10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDER released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that he personally guaranteed and from any and all pledges of assets that he pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDER from the payment of any 55 guaranties on any indebtedness or contractual obligations that the STOCKHOLDER had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDER. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. The STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. 56 (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and the STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDER hereby designates Andre S. Tatibouet to serve as a director of VPI effective as of the Closing Date. Such designated person also shall be a member of the Executive Committee of the Board of Directors effective as of the Closing Date, to serve subject to and in accordance with the Certificate of Incorporation and Bylaws of VPI. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time 57 as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDER for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDER pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 10.8 GRANT OF LICENSE TO VPI. Upon the payment of $400,000 to AST Brands, LLC (which is wholly-owned by the STOCKHOLDER) in cash or shares of VPI Stock (valued at the IPO price per share), or any combination thereof at the election of the STOCKHOLDER, VPI shall have the exclusive right to negotiate, for a period of eighteen (18) months following the Closing, an exclusive license to use the name "Aston" in the mainland United States in connection with the vacation management business. The parties hereto agree that they shall negotiate in good faith and that such exclusive license shall be on commercially reasonable terms. If VPI does not exercise this right by payment of $400,000 in cash and/or stock to AST Brands, LLC at or prior to the Closing, or if VPI makes such payment but VPI and AST Brands, LLC are unable in good faith to enter into a license agreement within such eighteen-month period, AST Brands, LLC shall have the right to license the name "Aston" in connection with the vacation property management business to any third party. 58 Nothing herein shall prohibit AST Brands, LLC from licensing the name "Aston" for use to any third party outside the United States. 11. INDEMNIFICATION The STOCKHOLDER, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER covenants and agrees that he will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDER or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDER or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the stockholders of the COMPANY, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDER, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the stockholders of the COMPANY required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, that in the case of any indemnity arising pursuant to clause (iii) 59 such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDER provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDER at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDER as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDER may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI or NEWCO has claims against the STOCKHOLDER under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified 60 Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such 61 asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 62 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDER until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDER shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDER and Saunders and (ii) the value of the VPI Stock delivered to the STOCKHOLDER (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDER exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDER shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDER may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDER and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), STOCKHOLDER shall not be liable under this Section 11 for an amount which exceeds the amount of 63 proceeds received by the STOCKHOLDER and Saunders in connection with the Merger, provided that the STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by the STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDER pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDER pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; (ii) by the STOCKHOLDER or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; 64 (iii) by the STOCKHOLDER or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDER is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDER pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDER shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 65 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDER shall have received payment in full of the consideration described in Section 3, the STOCKHOLDER shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any condominium property management business in the United States or hotel management business in the State of Hawaii (with respect to condominium property management business in the United States or hotel management business in the State of Hawaii, as applicable, the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that the STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing condominium property management services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on the STOCKHOLDER's own behalf or on behalf of any competitor, with respect to business in the Territory, in the condominium property management or hotel management business, which candidate, to the 66 actual knowledge of the STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of the STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit the STOCKHOLDER from (a) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter, (b) engaging in any business, other than the business of the COMPANY, currently owned by such STOCKHOLDER, including the business of AST International, L.L.C. or Northwest Lodging, Inc., (c) engaging in the hotel management business outside the State of Hawaii or (d) engaging in licensing or franchising activities through AST Brands, LLC or any other business entity, including licensing of the name "Aston Hotels & Resorts," provided that such licensing or franchising activities do not contravene the provisions of Section 10.8 hereof. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, the STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by the STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDER in light of the activities and 67 business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDER that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDER will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that the STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of the STOCKHOLDER's obligations under this Section 13, if any, the STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the STOCKHOLDER against 68 VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of the STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that the STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDER hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that the STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if the STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 13.8 COMPANY NONINTERFERENCE. The parties hereto agree that the Surviving Corporation and the surviving corporations under the Other Agreements that operate in the State of Hawaii shall cooperate with each other and shall not interfere with each other's business relationships. This provision shall be included in the Other Agreements of the Other Founding Companies that operate in the State of Hawaii. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 69 14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he had in the past, currently has, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDER agrees that he shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDER as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDER, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDER shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by the STOCKHOLDER of the provisions of this Section, VPI shall be entitled to an injunction restraining the STOCKHOLDER from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, the STOCKHOLDER shall have none of the above-mentioned restrictions on his ability to disseminate confidential information with respect to the COMPANY. 70 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDER and provide the COMPANY and the STOCKHOLDER with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDER shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDER from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and 71 irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDER or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, the STOCKHOLDER shall not sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDER pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDER pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 72 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDER or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDER shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDER pursuant to Section 3.1 except in accordance with this Section 15.2. If the STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and the STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more of the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by the STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock, and the STOCKHOLDER shall be entitled to pledge his shares of VPI Stock in increments of such amounts as STOCKHOLDER, in his sole discretion, may determine. Any restrictive legend placed upon the certificates of VPI Stock shall indicate this ability to pledge the VPI Stock subject to any other restriction set forth therein. VPI shall cooperate with the STOCKHOLDER and issue or cause to be issued such certificates of shares representing the VPI Stock promptly and in such amounts as requested by the STOCKHOLDER. VPI agrees to acknowledge any pledge of the VPI Stock made by the STOCKHOLDER and comply with the terms of the security agreement or other instrument creating or evidencing such pledge to the extent not inconsistent with this Agreement or law, including without limitation (a) providing the pledgee/secured party with appropriate financial information concerning VPI, (b) notifying the pledgee/secured party of the amount of VPI Stock previously sold or to be sold by the STOCKHOLDER and (c) allowing the pledgee/secured party to rely on VPI for a determination of whether a transfer of such VPI Stock would not violate Rule 144(e)(2) of the 1933 Act in the event VPI authorizes the transfer by the pledgee/secured party of the pledged VPI Stock. VPI agrees to respond promptly to requests by the STOCKHOLDER or any pledgee/secured party to transfer or sell the VPI Stock; provide that VPI receives customary broker's representations and opinion of counsel that such transfer or sales are exempt from registration under the 1933 Act. STOCKHOLDER shall reimburse VPI for reasonable costs incurred by VPI in complying with any obligation relating to a pledgee/secured party arising under this Section 15.2. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDER acknowledges that the shares of VPI Stock to be delivered to the STOCKHOLDER pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by the STOCKHOLDER pursuant to this Agreement is being acquired solely for his own account, 73 for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDER covenants, warrants and represents that none of the shares of VPI Stock issued to the STOCKHOLDER will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDER is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDER has had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Other Founding Companies, and any plans for additional acquisitions and the like. The STOCKHOLDER has asked any and all questions in the nature described in the preceding sentence and all questions have been answered to his satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than 74 (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give the STOCKHOLDER prompt written notice of its intent to do so. Upon the written request of the STOCKHOLDER given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to the STOCKHOLDER pursuant to this Agreement which the STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDER and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDER and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders 75 pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDER pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with 76 registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by the STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to the STOCKHOLDER with respect to the STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDER pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who 77 controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission 78 was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall 79 the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of 80 securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall 81 be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY and the STOCKHOLDER hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDER. 82 18.2 COOPERATION. The COMPANY, the STOCKHOLDER, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDER. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDER, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDER, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 83 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDER shall pay the fees, expenses and disbursements of the STOCKHOLDER, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDER under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDER. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDER for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, the STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. The STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, the STOCKHOLDER acknowledges that he, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall 84 assume all tax risks and liabilities of the STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDER and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDER, addressed to him at his address set forth on Annex IV, with copies to such counsel as is set forth with respect to the STOCKHOLDER on such Annex IV; 85 (c) If to the COMPANY, addressed to it at: Hotel Corporation of the Pacific, Inc. 2155 Kalakaua Avenue Suite 500 Honolulu, Hawaii 96815 Facsimile no.: (808) 931-1444 Attention: Andre S. Tatibouet and marked "Personal and Confidential" with copies to: Cades Schutte Fleming & Wright 1000 Bishop Street Suite 1200 Honolulu, HI 96813 Facsimile no.: (808) 521-9210 Attention: Mark A. Hazlett or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining 86 provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDER (as defined in the introductory paragraph of this Agreement). Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. 87 "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. 88 "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. 89 "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDER" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability 90 company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 91 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. HCP ACQUISITION CORP. By:/s/ Leonard Potter ------------------------------- Leonard Potter Vice President HOTEL CORPORATION OF THE PACIFIC, INC. By:/s/ Andre S. Tatibouet ------------------------------- Name: Andre S. Tatibouet ------------------------------- Title: President ------------------------------ STOCKHOLDER: /s/ Andre S. Tatibouet - ---------------------------------- Andre S. Tatibouet EX-2.2 4 EXHIBIT 2.2 EXHIBIT 2.2 - ---------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. B&B ACQUISITION CORP. and BRINDLEY ACQUISITION CORP. (each a subsidiary of Vacation Properties International, Inc.) B&B ON THE BEACH, INC. BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC. and the STOCKHOLDERS named herein - ---------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporations..............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANIES, VPI and NEWCOS...........................................4 1.5 Effect of Merger.....................................................5 2. CONVERSION OF STOCK......................................................6 2.1 Manner of Conversion.................................................6 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................8 4. CLOSING..................................................................9 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS............10 (A) Representations and Warranties of COMPANIES and STOCKHOLDERS........10 5.1 Due Organization.................................................11 5.2 Authority........................................................11 5.3 Capital Stock of the COMPANIES...................................11 5.4 Transactions in Capital Stock....................................12 5.5 No Bonus Shares..................................................12 5.6 Subsidiaries.....................................................12 5.7 Predecessor Status; etc..........................................13 5.8 Spin-off by the COMPANIES........................................13 5.9 Financial Statements.............................................13 5.10 Liabilities and Obligations.....................................14 5.11 Accounts and Notes Receivable...................................15 5.12 Permits and Intangibles.........................................15 5.13 Environmental Matters...........................................16 5.14 Personal Property...............................................17 5.15 Significant Customers...........................................18 5.16 Material Contracts and Commitments..............................18 5.17 Real Property...................................................18 5.18 Insurance.......................................................20 5.19 Compensation; Employment Agreements; Organized Labor Matters....20 5.20 Employee Plans..................................................21 5.21 Compliance with ERISA...........................................22 5.22 Conformity with Law; Litigation.................................23 5.23 Taxes...........................................................24 5.24 No Violations...................................................26 5.25 Government Contracts............................................27 5.26 Absence of Changes..............................................27 5.27 Deposit Accounts; Powers of Attorney............................29 5.28 Validity of Obligations.........................................29 5.29 Relations with Governments......................................30 5.30 Disclosure......................................................30 5.31 Prohibited Activities...........................................31 (B) Representations and Warranties of STOCKHOLDERS......................31 5.32 Authority; Ownership............................................31 5.33 Preemptive Rights...............................................31 i 5.34 No Intention to Dispose of VPI Stock............................31 6. REPRESENTATIONS OF VPI AND NEWCOS.......................................32 6.1 Due Organization....................................................32 6.2 Authorization.......................................................33 6.3 Capital Stock of VPI and NEWCOS.....................................33 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................34 6.6 Financial Statements................................................34 6.7 Liabilities and Obligations.........................................34 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................35 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................36 6.12 No Side Agreements.................................................36 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................37 6.15 Completion of Due Diligence........................................39 6.16 Disclosure........................................................39 6.17 Tax Treatment......................................................39 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................41 7.3 Prohibited Activities...............................................42 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................44 7.6 Agreements..........................................................44 7.7 Notification of Certain Matters.....................................44 7.8 Amendment of Schedules..............................................45 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................48 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................50 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................51 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 9.5 No Material Adverse Effect..........................................53 9.6 STOCKHOLDERS' Release...............................................53 ii 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 9.18 Termination of Defined Benefit Plans...............................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................58 11.2 Indemnification by VPI.............................................59 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................64 12.1 Termination........................................................64 12.2 Liabilities in Event of Termination................................64 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................67 13.3 Reasonable Restraint...............................................67 13.4 Severability; Reformation..........................................67 13.5 Independent Covenant...............................................68 13.6 Materiality........................................................68 13.7 Limitation.........................................................68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69 14.1 STOCKHOLDERS.......................................................69 14.2 VPI AND NEWCOS.....................................................70 14.3 Damages............................................................71 14.4 Survival...........................................................71 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................71 15.1 Transfer Restrictions..............................................71 15.2 Certain Transfers..................................................72 16. SECURITIES LAW REPRESENTATIONS.........................................72 16.1 Compliance with Law................................................73 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................74 17.1 Piggyback Registration Rights......................................74 17.2 Demand Registration Rights.........................................75 17.3 Registration Procedures............................................76 17.4 Underwriting Agreement.............................................76 iii 17.5 Availability of Rule 144...........................................76 17.6 Registration Rights Indemnification................................77 18. GENERAL................................................................81 18.1 Press Releases.....................................................81 18.2 Cooperation........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries..................82 18.4 Entire Agreement...................................................82 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................83 18.7 Expenses...........................................................83 18.8 Notices............................................................84 18.9 Governing Law......................................................85 18.10 Exercise of Rights and Remedies...................................85 18.11 Time..............................................................85 18.12 Reformation and Severability......................................85 18.13 Remedies Cumulative...............................................86 18.14 Captions..........................................................86 18.15 Amendments and Waivers............................................86 18.16 Incorporation by Reference........................................86 18.17 Defined Terms.....................................................86 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), B&B ACQUISITION CORP., a Delaware corporation, BRINDLEY ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO" and collectively, the "NEWCOS"), B&B ON THE BEACH, INC., a North Carolina corporation, and BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC., a North Carolina corporation (each, a "COMPANY" and collectively, the "COMPANIES"), and DOUGLAS R. BRINDLEY, an individual residing in Corolla, North Carolina, and BETTY SHOTTON BRINDLEY, an individual residing in Duck, North Carolina (the "STOCKHOLDERS"). WHEREAS, each NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, each having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and each NEWCO is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of each NEWCO and each COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that (i) B&B ACQUISITION CORP. merge with and into B&B ON THE BEACH, INC. and (ii) BRINDLEY ACQUISITION CORP. merge with and into BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which each of the COMPANIES is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of Coastal Resorts Realty L.L.C., a Delaware limited 1 liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANIES, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Boards of Directors of the COMPANIES have 2 approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANIES to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGERS 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which each of the COMPANIES is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i) B&B ACQUISITION CORP. shall be merged with and into B&B ON THE BEACH, INC. and (ii) BRINDLEY ACQUISITION CORP. shall be merged with and into BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC., each in accordance with the Articles of Merger, the separate existence of each NEWCO shall cease and each COMPANY shall be the surviving party in the Mergers (each COMPANY is sometimes hereinafter referred to as the "Surviving Corporation" and collectively the COMPANIES are sometimes hereinafter referred to as the "Surviving Corporations"). Each Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATIONS. At the Effective Time of each Merger: (i) the Certificate of Incorporation then in effect of each COMPANY shall be the Certificate of Incorporation of the Surviving Corporation in such Merger until changed as provided by law; (ii) the Bylaws of each NEWCO then in effect shall become the Bylaws of the Surviving Corporation in such Merger; and subsequent to the Effective Time of such Merger, 3 such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger until they shall thereafter be duly amended; (iii) the Board of Directors of each Surviving Corporation shall consist of the persons who are, immediately prior to the Effective Time of the Merger, on the Board of Directors of the COMPANY merging into such Surviving Corporation, provided that the Chief Executive Officer of VPI shall be elected as a director of each Surviving Corporation effective as of the Effective Time of each Merger; the Board of Directors of each Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of each COMPANY immediately prior to the Effective Time of each Merger shall continue as the officers of the Surviving Corporation into which such COMPANY is merged in the same capacity or capacities, and effective upon the Effective Time of each Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of each Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of each Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES, VPI AND NEWCOS. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANIES, VPI and the NEWCOS as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; 4 (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of the Mergers shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which each COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of each COMPANY shall continue unaffected and unimpaired by the Mergers and the corporate franchises, existence and rights of each NEWCO shall be merged with and into the respective COMPANIES, and the COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At the Effective Time of the Mergers, the separate existence of each NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporations shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to be transferred to, and vested in, the respective Surviving Corporations without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the respective Surviving Corporations as they were of each NEWCO and each COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in each respective NEWCO and COMPANY, shall not revert or be in any way impaired by reason of the Mergers. Except as otherwise provided herein, each Surviving Corporation shall thenceforth be responsible and 5 liable for all of the liabilities and obligations of the respective NEWCO and COMPANY and any claim existing, or action or proceeding pending, by or against a NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or COMPANY had not taken place, or the respective Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of a NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall attach to the respective Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporations, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock of each COMPANY issued and outstanding immediately prior to the Effective Time of each respective Merger, by virtue of such Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by each COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and 6 (iii) each share of NEWCO Stock of each NEWCO issued and outstanding immediately prior to the Effective Time of each respective Merger, shall, by virtue of such Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation involved in such Merger which shall constitute all of the issued and outstanding shares of common stock of such Surviving Corporation immediately after the Effective Time of such Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Mergers, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the 7 endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of each COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Notwithstanding the foregoing balance sheet requirements, it is understood that the COMPANY's earnings for the three months ended March 31, 1998 will reflect, with respect to B&B On The Beach, Inc., an amount equal to 25% of the projected earnings for B&B On The Beach, Inc. for the twelve months ended December 31, 1998. The COMPANY's earnings so determined for the three months ended March 31, 1998 will be distributed to the STOCKHOLDERS on the Closing Date and all other revenues including rentals or management fees or commissions (but not any portion thereof previously paid to property owners) related to any periods after March 31, 1998 shall be retained by the COMPANY and acquired by VPI in the transaction contemplated hereunder. The COMPANY's earnings after March 31, 1998 will be retained by the COMPANY. The form of the distribution to the STOCKHOLDERS will be mutually agreed upon by the STOCKHOLDERS and VPI. The parties also will consider entering into a mutual indemnification agreement regarding the tax consequences of such distribution. 8 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Mergers (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Mergers) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Mergers or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and the NEWCOS hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are required by applicable laws of the State in which the COMPANIES are incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANIES directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Mergers shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Mergers referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing 9 Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS. Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANIES and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANIES or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 10 5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and such COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY taken as a whole (as used herein with respect to such COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated and contains a list of all such jurisdictions in which each COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of each COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of each COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of such COMPANY, and of its officers and directors on behalf of such COMPANY. 5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued 11 and outstanding shares of the capital stock of each COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by such COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates any of the COMPANIES to issue any of its capital stock; (ii) neither COMPANY has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of each COMPANY nor the relative ownership of shares among any of their respective stockholders has been altered or changed in contemplation of the Mergers and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of each COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, 12 encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is any COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of each COMPANY, including the names of any entities acquired by each COMPANY (by stock purchase, merger or otherwise) or owned by each COMPANY or from whom the COMPANIES previously acquired material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of any of the COMPANIES since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of each of the COMPANIES: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements, except for the requirement of footnote disclosures). Except as set forth on Schedule 5.9, 13 such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date neither COMPANY has incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANIES, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 14 5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of such COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of each COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of such COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of such COMPANY as now conducted, and such COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by such COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Each of the COMPANIES has 15 conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to each COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each of the COMPANIES has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) each COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by such COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location to which such COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous 16 Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of such COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of such COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by such COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of such COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by each COMPANY in its business is either owned by such COMPANY or leased by such COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the 17 STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of such COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of any COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of any COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by such COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which such COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. Each COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. Each COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by such COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet 18 Date, and all other real property, if any, used by each COMPANY in the conduct of its business. Each COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of each COMPANY with respect to real property owned by such COMPANY. Each COMPANY has also delivered to VPI an accurate list of real property leased by such COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by such COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by the STOCKHOLDERS or business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 19 5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by such COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that such COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by such COMPANY has ever been canceled by the insurer and such COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of such COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or subject to (and none of their respective assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of any COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of each COMPANY's knowledge, threatened labor dispute involving any COMPANY and any group of its 20 employees nor has any COMPANY experienced any labor interruptions over the past three years. Each COMPANY believes its relationship with employees to be good. Each COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of such COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, neither COMPANY sponsors, maintains or contributes to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation 21 arrangement). Neither COMPANY has sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of such COMPANY's employees. All accrued contribution obligations of each COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of such COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of each COMPANY that are currently maintained or contributed to by such COMPANY or cover employees or former employees of such COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No such plan listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each COMPANY has not incurred any liability 22 for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) each COMPANY has not incurred liability under Section 4062 of ERISA; (v) each COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which any COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than a COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes such COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be 23 deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Each COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) Each COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANIES or their respective officers or employees responsible for maintaining the financial records of such COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANIES and their respective employees are not aware of any proposed examinations) or claims against any COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. 24 (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by any COMPANY, any member of an affiliated or consolidated group which includes or included any of the COMPANIES, or with respect to any payment made or deemed made by any COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by any COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements(and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, neither COMPANY has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither COMPANY is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, neither COMPANY has (i) assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which any COMPANY or such person or entity was the surviving corporation or a consolidation) or (ii) indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. 25 (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of each COMPANY for its last three (3) fiscal years or such shorter period of time as such COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) Each COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, each COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither COMPANY is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) Neither COMPANY has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by such COMPANY. 5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter Document. Neither COMPANY or, to the knowledge of either COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of each 26 COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts either COMPANY from freely providing services to any other customer or potential customer of such COMPANY, VPI, the NEWCOS or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither COMPANY is now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of any COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of any COMPANY; (iii) any change in the authorized capital of any COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; 27 (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of any COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by any COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of any COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of any COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to any COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of any COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; 28 (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of any COMPANY's business; (xi) any waiver of any material rights or claims of any COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which any COMPANY is a party; (xiii) any transaction by any COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by any COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which each COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from each COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by each of the COMPANIES and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of each of the COMPANIES and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of each COMPANY, enforceable against such COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting 29 the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of each COMPANY has the legal power, authority and capacity to bind such COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause any COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of each COMPANY for the time periods with respect to which such information was requested. Each COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which any COMPANY is a party, or to which their respective properties are subject, or (ii) any other fact or circumstance regarding any COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to any COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to any COMPANY, the STOCKHOLDERS or any other 30 person affiliated or associated with any COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither COMPANY has, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 31 6. REPRESENTATIONS OF VPI AND NEWCOS VPI and the NEWCOS jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 32 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS executing this Agreement have the authority to enter into and bind VPI and the NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full legal right, power and authority to enter into and perform this Agreement and the Mergers, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date, the authorized capital stock of VPI and the NEWCOS is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of each NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and each NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and the NEWCOS in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or the NEWCOS. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or the NEWCOS to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend 33 or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries except for the NEWCOS and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor any NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or any NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and the NEWCOS have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or 34 instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened, against or affecting VPI or the NEWCOS, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and the NEWCOS have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI Charter Document. None of VPI, the NEWCOS or, to the knowledge of VPI and the NEWCOS, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or any NEWCO is a party, or by which VPI or any NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and the NEWCOS under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and the NEWCOS and the performance of the transactions contemplated herein have been duly and validly 35 authorized by the respective Boards of Directors of VPI and the NEWCOS and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and the NEWCOS have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, the NEWCOS, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and 36 except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES . (a) VPI and the NEWCOS have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or the NEWCOS or their officers or employees responsible for maintaining the financial records of VPI and the NEWCOS subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and the NEWCOS and their employees are not aware of any proposed examinations) or claims against VPI or the NEWCOS (including liens against assets of VPI or the NEWCOS) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or consolidated group which includes or included VPI or the NEWCOS, or with respect to any payment made or deemed made by VPI or the NEWCOS, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or 37 secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or the NEWCOS or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and the NEWCOS for its last three (3) fiscal years or such shorter period of time as VPI or the NEWCOS shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and the NEWCOS have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor the NEWCOS' methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute 38 of limitations has not expired. (i) Neither VPI nor the NEWCOS is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor the NEWCOS has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANIES as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, each COMPANY will afford to the officers and authorized representatives of 39 VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of such COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of such COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. Each COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and the COMPANIES shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of each COMPANY access to all of VPI's and the NEWCOS' sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish each COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and the NEWCOS will cooperate with each COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to each COMPANY, its representatives and advisors on a continuing basis through the Closing Date. Each 40 COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with such COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 41 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, neither COMPANY shall, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; 42 (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of such COMPANY, provided that such COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of such COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANIES, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of any kind with respect to the COMPANIES' capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or 43 (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, any COMPANY or a merger, consolidation or business combination of any COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between such COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between each COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of any COMPANY or any STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or the NEWCOS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not 44 accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by any COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANIES consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI or the NEWCOS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI and a majority of the 45 Founding Companies consent to such amendment or supplement, but the COMPANIES do not give their consent, the COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered 46 under the 1933 Act, any information contained in the prospectus concerning any COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANIES. Insofar as the information contained in the Registration Statement relates solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration Statement each COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANIES and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANIES or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANIES and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANIES, or on behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes 47 hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANIES as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANIES for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANIES or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANIES for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business 48 of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES The obligations STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and the NEWCOS contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and the NEWCOS contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and the NEWCOS on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 49 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Mergers or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANIES as a result of which the management of the COMPANIES deems it inadvisable to proceed with the transactions hereunder. 8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have delivered to the COMPANIES a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or the NEWCOS are authorized to do business, showing that each of VPI and the NEWCOS is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and the NEWCOS, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or the NEWCOS which would constitute a Material Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material loss or damages to any of its properties or assets, 50 whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or the NEWCOS to conduct their respective businesses. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of each NEWCO, certifying the truth and correctness of attached copies of VPI's and the NEWCOS' respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The 51 terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS The obligations of VPI and the NEWCOS with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and the NEWCOS with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO 52 and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of each COMPANY, certifying the truth and correctness of attached copies of each COMPANY's Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving each COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to any COMPANY which would constitute a Material Adverse Effect, and neither COMPANY shall have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of any COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii) obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANIES and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between any of the COMPANIES and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form 53 annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI certificates, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in each COMPANY's state of incorporation and, unless waived by VPI, in each state in which each COMPANY is authorized to do business, showing each COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for each COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of each COMPANY, and certificates of insurance to that effect shall have been delivered to 54 VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT Each of the COMPANIES and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANIES, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had 55 incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANIES as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANIES shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. 56 (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANIES, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Douglas R. Brindley to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at any COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and 57 provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of each COMPANY who were covered by such COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the books and records of such COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) 58 any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) 59 any breach of any agreement on the part of VPI or the NEWCOS under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for the liabilities and obligations of the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, the NEWCOS or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or the NEWCOS or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to 60 defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified 61 Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or the 62 NEWCOS until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 63 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANIES; (ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth 64 therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANIES, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the 65 purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of any COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that such COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. 66 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other 67 covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or any COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANIES, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES', the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by 69 this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANIES, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES` businesses. VPI and the NEWCOS agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANIES, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or any NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANIES to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or the NEWCOS of the provisions of this Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and the NEWCOS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as 70 prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANIES of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY 71 ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by 72 such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANIES, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 73 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the 74 Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the 75 Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 76 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person 77 who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or 78 expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, 79 without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to 80 above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to 81 consummate the transactions contemplated hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANIES and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of each COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable 82 in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the 83 IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or the NEWCOS, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn 84 (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANIES, addressed to it at: B&B On The Beach, Inc. Brindley & Brindley Realty & Development, Inc. 1023 Ocean Trail Corolla, North Carolina 27927 Facsimile no.: (919) 453-2318 Attention: Douglas R. Brindley and Betty Shotton Brindley and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 85 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the respective Mergers. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Mergers and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means any COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean the NEWCOS and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. 86 "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Mergers" shall mean the time as of which the Mergers become effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). 87 "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Mergers" means the mergers of (i) B&B ACQUISITION CORP. with and into B&B ON THE BEACH, INC. and (ii) BRINDLEY ACQUISITION CORP. with and into BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of each respective NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANIES. 88 "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANIES and any affiliated, combined, consolidated, unitary or similar group of which any COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. 89 "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporations" shall mean each of the COMPANIES as the surviving parties in the Mergers. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. 90 "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 91 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. B&B ACQUISITION CORP. BRINDLEY ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President B&B ON THE BEACH, INC. BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC. By:/s/ Douglas R. Brindley ---------------------------------- Name: Douglas R. Brindley --------------------------- Title: President -------------------------- STOCKHOLDERS: /s/ Douglas R. Brindley - ---------------------------------- Douglas R. Brindley /s/ Betty Shotton Brindley - ---------------------------------- Betty Shotton Brindley EX-2.3 5 EXHIBIT 2.3 EXHIBIT 2.3 - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC., COASTAL REALTY ACQUISITION LLC and COASTAL MANAGEMENT ACQUISITION CORP. (each a subsidiary of Vacation Properties International, Inc.), COASTAL RESORTS REALTY L.L.C. COASTAL RESORTS MANAGEMENT, INC. and the STOCKHOLDERS named herein - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Charter Documents and Board of Directors of Surviving Corporations...4 1.4 Certain Information With Respect to the Capital Stock of the COMPANIES, VPI and NEWCOS..........................................5 1.5 Effect of Merger.....................................................6 2. CONVERSION OF STOCK......................................................7 2.1 Manner of Conversion.................................................7 3. DELIVERY OF MERGER CONSIDERATION.........................................9 3.1 Delivery of VPI Stock and Cash.......................................9 3.2 Delivery of COMPANY Stock............................................9 3.3 Balance Sheet Test..................................................10 4. CLOSING.................................................................10 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS............12 (A) Representations and Warranties of COMPANIES and STOCKHOLDERS........12 5.1 Due Organization.................................................12 5.2 Authority........................................................13 5.3 Capital Stock of the COMPANIES...................................13 5.4 Transactions in Capital Stock....................................14 5.5 No Bonus Shares..................................................14 5.6 Subsidiaries.....................................................14 5.7 Predecessor Status; etc..........................................15 5.8 Spin-off by the COMPANIES........................................15 5.9 Financial Statements.............................................15 5.10 Liabilities and Obligations.....................................16 5.11 Accounts and Notes Receivable...................................17 5.12 Permits and Intangibles.........................................18 5.13 Environmental Matters...........................................19 5.14 Personal Property...............................................20 5.15 Significant Customers...........................................21 5.16 Material Contracts and Commitments..............................21 5.17 Real Property...................................................22 5.18 Insurance.......................................................23 5.19 Compensation; Employment Agreements; Organized Labor Matters....23 5.20 Employee Plans..................................................24 5.21 Compliance with ERISA...........................................25 5.22 Conformity with Law; Litigation.................................27 5.23 Taxes...........................................................28 5.24 No Violations...................................................31 5.25 Government Contracts............................................31 5.26 Absence of Changes..............................................31 5.27 Deposit Accounts; Powers of Attorney............................33 5.28 Validity of Obligations.........................................34 5.29 Relations with Governments......................................34 5.30 Disclosure......................................................35 5.31 Prohibited Activities...........................................36 (B) Representations and Warranties of STOCKHOLDERS......................36 5.32 Authority; Ownership............................................36 i 5.33 Preemptive Rights................................................. 5.34 No Intention to Dispose of VPI Stock............................36 6. REPRESENTATIONS OF VPI AND NEWCOS.......................................37 6.1 Due Organization....................................................37 6.2 Authorization.......................................................38 6.3 Capital Stock of VPI and NEWCOS.....................................38 6.4 Transactions in Capital Stock.......................................39 6.5 Subsidiaries........................................................39 6.6 Financial Statements................................................39 6.7 Liabilities and Obligations.........................................40 6.8 Conformity with Law; Litigation.....................................40 6.9 No Violations.......................................................40 6.10 Validity of Obligations............................................41 6.11 VPI Stock..........................................................41 6.12 No Side Agreements.................................................42 6.13 Business; Real Property; Material Agreements.......................42 6.14 Taxes..............................................................42 6.15 Completion of Due Diligence........................................45 6.16 Disclosure........................................................45 6.17 Tax Treatment......................................................45 7. COVENANTS PRIOR TO CLOSING..............................................46 7.1 Access and Cooperation; Due Diligence...............................46 7.2 Conduct of Business Pending Closing.................................47 7.3 Prohibited Activities...............................................48 7.4 No Shop.............................................................50 7.5 Notice to Bargaining Agents.........................................51 7.6 Agreements..........................................................51 7.7 Notification of Certain Matters.....................................51 7.8 Amendment of Schedules..............................................52 7.9 Cooperation in Preparation of Registration Statement................54 7.10 Final Financial Statements.........................................55 7.11 Further Assurances.................................................56 7.12 Authorized Capital.................................................56 7.13 Best Efforts to Consummate Transaction.............................56 7.14 Additional Purchase of VPI Stock...................................56 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......57 8.1 Representations and Warranties......................................57 8.2 Performance of Obligations..........................................57 8.3 No Litigation.......................................................58 8.4 Opinion of Counsel..................................................58 8.5 Registration Statement..............................................58 8.6 Consents and Approvals..............................................58 8.7 Good Standing Certificates..........................................58 8.8 No Material Adverse Change..........................................59 8.9 Closing of IPO......................................................59 8.10 Secretary's Certificate............................................59 8.11 Employment Agreements..............................................59 8.12 Directors and Officers Insurance...................................60 8.13 Stock Options......................................................60 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................60 9.1 Representations and Warranties......................................61 ii 9.2 Performance of Obligations..........................................61 9.3 No Litigation.......................................................61 9.4 Secretary's Certificate.............................................61 9.5 No Material Adverse Effect..........................................62 9.6 STOCKHOLDERS' Release...............................................62 9.7 Termination of Related Party Agreements.............................62 9.8 Opinion of Counsel..................................................62 9.9 Consents and Approvals..............................................62 9.10 Good Standing Certificates.........................................63 9.11 Registration Statement.............................................63 9.12 Employment Agreements..............................................63 9.13 Closing of IPO.....................................................63 9.14 FIRPTA Certificate.................................................63 9.15 Insurance..........................................................63 9.16 Lockup Agreement...................................................64 9.17 Letter of Representation...........................................64 9.18 Termination of Defined Benefit Plans...............................64 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................64 10.1 Release From Guarantees; Repayment of Certain Obligations..........64 10.2 Preservation of Tax and Accounting Treatment.......................65 10.3 Preparation and Filing of Tax Returns..............................65 10.4 Appointment of Directors...........................................67 10.5 Preservation of Employee Benefit Plans.............................67 10.6 Maintenance of Books...............................................67 10.7 Securities Covenants...............................................67 10.8 VPI Noncompetition Covenant........................................68 10.9 VPI Right to Manage................................................68 11. INDEMNIFICATION........................................................70 11.1 General Indemnification by the STOCKHOLDERS........................70 11.2 Indemnification by VPI.............................................71 11.3 Third Person Claims................................................72 11.4 Exclusive Remedy...................................................74 11.5 Limitations on Indemnification.....................................75 12. TERMINATION OF AGREEMENT...............................................76 12.1 Termination........................................................76 12.2 Liabilities in Event of Termination................................77 13. NONCOMPETITION.........................................................78 13.1 Prohibited Activities..............................................78 13.2 Damages............................................................80 13.3 Reasonable Restraint...............................................80 13.4 Severability; Reformation..........................................81 13.5 Independent Covenant...............................................82 13.6 Materiality........................................................82 13.7 Limitation.........................................................82 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................83 14.1 STOCKHOLDERS.......................................................83 14.2 VPI AND NEWCOS.....................................................84 14.3 Damages............................................................85 14.4 Survival...........................................................85 14.5 Return of Data Submitted...........................................85 15. TRANSFER RESTRICTIONS..................................................86 15.1 Transfer Restrictions..............................................86 15.2 Certain Transfers..................................................86 iii 16. SECURITIES LAW REPRESENTATIONS.........................................87 16.1 Compliance with Law................................................87 16.2 Economic Risk; Sophistication......................................88 17. REGISTRATION RIGHTS....................................................88 17.1 Piggyback Registration Rights......................................88 17.2 Demand Registration Rights.........................................89 17.3 Registration Procedures............................................91 17.4 Underwriting Agreement.............................................91 17.5 Availability of Rule 144...........................................91 17.6 Registration Rights Indemnification................................92 18. GENERAL................................................................97 18.1 Press Releases.....................................................97 18.2 Cooperation........................................................98 18.3 Successors and Assigns; Third Party Beneficiaries..................98 18.4 Entire Agreement...................................................98 18.5 Counterparts.......................................................99 18.6 Brokers and Agents.................................................99 18.7 Expenses...........................................................99 18.8 Notices...........................................................100 18.9 Governing Law.....................................................102 18.10 Exercise of Rights and Remedies..................................102 18.11 Time.............................................................102 18.12 Reformation and Severability.....................................102 18.13 Remedies Cumulative..............................................102 18.14 Captions.........................................................102 18.15 Amendments and Waivers...........................................102 18.16 Incorporation by Reference.......................................103 18.17 Defined Terms....................................................103 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), COASTAL REALTY ACQUISITION LLC, a Delaware limited liability company, and COASTAL MANAGEMENT ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO," and collectively, the "NEWCOS"), COASTAL RESORTS REALTY L.L.C., a Delaware limited liability company, COASTAL RESORTS MANAGEMENT, INC., a Delaware corporation (each, a "COMPANY," and collectively, the "COMPANIES"), and Joshua M. Freeman, T. Michael Nally and CMF Coastal Resorts L.L.C., a Delaware limited liability company (the "STOCKHOLDERS"). WHEREAS, each NEWCO is a corporation or a limited liability company duly organized and existing under the laws of the State of Delaware, with Coastal Realty Acquisition, L.L.C., having been formed on March 5, 1998, and Coastal Management Acquisition Corp. having been formed on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and each NEWCO is a wholly-owned subsidiary of VPI; WHEREAS, the Board of Directors of each NEWCO and each COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that (i) COASTAL REALTY ACQUISITION LLC merge with and into COASTAL RESORTS REALTY L.L.C. and (ii) COASTAL MANAGEMENT ACQUISITION CORP. merge with and into COASTAL RESORTS MANAGEMENT, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and 1 Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANIES, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and 2 WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of each COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANIES to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGERS 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGERS. At the Effective Time of the Mergers, (i) COASTAL REALTY ACQUISITION LLC shall be merged with and into COASTAL RESORTS REALTY L.L.C. and (ii) COASTAL MANAGEMENT ACQUISITION CORP. shall be merged with and into COASTAL RESORTS MANAGEMENT, INC., each in accordance with the Articles of Merger, the separate existence of each NEWCO shall cease and each COMPANY shall be the surviving party in the Mergers (each COMPANY is sometimes hereinafter referred to as the "Surviving Corporation" and collectively the COMPANIES are sometimes hereinafter referred to as the "Surviving Corporations"). Each Merger will be effected in a single transaction. 1.3 CHARTER DOCUMENTS AND BOARD OF DIRECTORS OF SURVIVING CORPORATIONS. At the Effective Time of each Merger: (i) the Certificate of Incorporation then in effect of each COMPANY that is a corporation shall be the Certificate of Incorporation of the Surviving Corporation in such Merger until changed as provided by law, and the Limited Liability Company Operating Agreement (as may be amended and restated pursuant hereto) of each COMPANY that is a 3 limited liability company shall be the Limited Liability Company Operating Agreement of the Surviving Corporation in such Merger until changed as provided by law; (ii) the Bylaws then in effect of each NEWCO that is a corporation shall become the Bylaws of the Surviving Corporation in such Merger; and subsequent to the Effective Time of such Merger, such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation that is a corporation shall consist of the persons who are on the Board of Directors, immediately prior to the Effective Time of the Merger, of the COMPANY merging into such Surviving Corporation, provided that the Chief Executive Officer of VPI shall be elected as a director of each Surviving Corporation effective as of the Effective Time of each Merger; the Board of Directors of each Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; the Managing Member of the Surviving Corporation that is a limited liability company shall be as set forth in such Surviving Corporation's amended and restated Limited Liability Company Operating Agreement (unless the context otherwise requires, the term "Board of Directors" when used in this Agreement with respect to Coastal Resorts Realty L.L.C. shall mean such entity's Managing Member); and (iv) the officers of each COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation into which such COMPANY is merged in the same capacity or capacities, and effective upon the Effective Time of each Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of each Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of each Surviving Corporation, each of such officers to serve, subject to the provisions of the 4 Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES, VPI AND NEWCOS. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANIES, VPI and the NEWCOS as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of the Mergers shall be as provided in the applicable provisions of the General Corporation Law and the Limited Liability Company Act of the State of Delaware (the "Delaware GCL"). Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANIES shall continue unaffected and unimpaired by the Mergers and the corporate franchises, existence and rights of each NEWCO shall be merged with and into the respective COMPANIES, and the COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At the Effective Time of the Mergers, the separate existence of each NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporations shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and 5 every other interest of or belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to be transferred to, and vested in, the respective Surviving Corporations without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the respective Surviving Corporations as they were of each NEWCO and each COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the state of incorporation vested in each respective NEWCO and COMPANY, shall not revert or be in any way impaired by reason of the Mergers. Except as otherwise provided herein, each Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of the respective NEWCO and COMPANY and any claim existing, or action or proceeding pending, by or against a NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or COMPANY had not taken place, or the respective Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of a NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall attach to the respective Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporations, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock of each COMPANY issued and outstanding immediately prior to the Effective Time of each respective Merger, by virtue of 6 such Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by each COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefore; and (iii) each share of NEWCO Stock of each NEWCO issued and outstanding immediately prior to the Effective Time of each respective Merger, shall, by virtue of such Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation involved in such Merger, which shall constitute all of the issued and outstanding shares of common stock of such Surviving Corporation immediately after the Effective Time of such Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Mergers, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates (except in the 7 case of uncertificated membership interests) representing shares of COMPANY Stock, shall, upon surrender of such certificates (or, in the case of uncertificated membership interests, the rights representing such interests), receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock of the COMPANY that is a corporation, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. With respect to the COMPANY that is a limited liability company, the STOCKHOLDERS and VPI shall execute and deliver at the Pre-Closing (subject to Section 4) an amended and restated Limited Liability Company Operating Agreement providing for the transfer of all such COMPANY's membership interests. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of each COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a corresponding 8 dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Mergers (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Mergers) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Mergers or the conversion and delivery of the shares and wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and the NEWCOS hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are required by applicable laws of the State in which the COMPANIES are incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANIES directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Mergers shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Mergers referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions 9 described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS. Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANIES and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANIES or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of 10 this Section 5, the term "COMPANY" shall mean and refer to each COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. Each COMPANY is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation, and such COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY taken as a whole (as used herein with respect to such COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated or formed and contains a list of all such jurisdictions in which each COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws or the Certificate of Formation and Operating Agreement, each as amended, of each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of each COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of each COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of such COMPANY, and of its officers and directors on behalf of such COMPANY. 5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital 11 stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of each COMPANY have been duly authorized and validly issued, are (in the case of the COMPANY that is a corporation) fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by such COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates any of the COMPANIES to issue any of its capital stock; (ii) neither COMPANY has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of each COMPANY nor the relative ownership of shares among any of their respective stockholders has been altered or changed in contemplation of the Mergers and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of each COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary 12 and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is any COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of each COMPANY, including the names of any entities acquired by each COMPANY (by stock purchase, merger or otherwise) or owned by each COMPANY or from whom any of the COMPANIES previously acquired material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of any of the COMPANIES since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of each of the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on 13 Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date neither COMPANY has incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANIES, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 14 5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of such COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of each COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of such COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of such COMPANY as now conducted, and such COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by such COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Each of the COMPANIES has 15 conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to each COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each of the COMPANIES has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) each COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by such COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location to which such COMPANY has transported or disposed of Hazardous Wastes and 16 Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of such COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of such COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by such COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by each COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the 17 STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of each COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of any COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of any COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by such COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which such COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. Each COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. Each COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by such COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet 18 Date, and all other real property, if any, used by each COMPANY in the conduct of its business. Each COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of each COMPANY with respect to real property owned by such COMPANY. Each COMPANY has also delivered to VPI an accurate list of real property leased by such COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by such COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 19 5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by such COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that such COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by such COMPANY has ever been canceled by the insurer and such COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of such COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or subject to (and none of their respective assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of any COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of each COMPANY's knowledge, threatened labor dispute involving any COMPANY and any group of its 20 employees nor has any COMPANY experienced any labor interruptions over the past three years. Each COMPANY believes its relationship with employees to be good. Each COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of such COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, neither COMPANY sponsors, maintains or contributes to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation 21 arrangement). Neither COMPANY has sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of such COMPANY's employees. All accrued contribution obligations of each COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of such COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of each COMPANY that are currently maintained or contributed to by such COMPANY or cover employees or former employees of such COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each COMPANY has not incurred any liability 22 for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) each COMPANY has not incurred liability under Section 4062 of ERISA; (v) each COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which any COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than a COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes such COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance 23 shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Each COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) Each COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANIES or their respective officers or employees responsible for maintaining the financial records of such COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANIES and their respective employees are not aware of any proposed examinations) or claims against any COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. 24 (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by any COMPANY, any member of an affiliated or consolidated group which includes or included any of the COMPANIES, or with respect to any payment made or deemed made by any COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by any COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, neither COMPANY has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither COMPANY is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, neither COMPANY has (i) assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which any COMPANY or such person or entity was the surviving corporation or a consolidation) or (ii) indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. 25 (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of each COMPANY for its last three (3) fiscal years or such shorter period of time as such COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) Each COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, each COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither COMPANY is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) Neither COMPANY has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by such COMPANY. 5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter Document. Neither COMPANY or, to the knowledge of either COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of each 26 COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts either COMPANY from freely providing services to any other customer or potential customer of such COMPANY, VPI, the NEWCOS or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither COMPANY is now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of any COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of any COMPANY; (iii) any change in the authorized capital of any COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; 27 (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of any COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by any COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of any COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of any COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to any COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of any COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; 28 (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of any COMPANY's business; (xi) any waiver of any material rights or claims of any COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which any COMPANY is a party; (xiii) any transaction by any COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by any COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which each COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from each COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by each of the COMPANIES and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of each of the COMPANIES and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of each COMPANY, enforceable against such COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting 29 the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of each COMPANY has the legal power, authority and capacity to bind such COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause any COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of each COMPANY for the time periods with respect to which such information was requested. Each COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which any COMPANY is a party, or to which their respective properties are subject, or (ii) any other fact or circumstance regarding any COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to any COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to any COMPANY, the STOCKHOLDERS or any other 30 person affiliated or associated with any COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither COMPANY has, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 31 6. REPRESENTATIONS OF VPI AND NEWCOS VPI and the NEWCOS jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 32 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS executing this Agreement have the authority to enter into and bind VPI and the NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date, the authorized capital stock of VPI and the NEWCOS is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of each NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and each NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and the NEWCOS in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or the NEWCOS. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or the NEWCOS to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend 33 or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries except for the NEWCOS and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor any NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or any NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and the NEWCOS have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or 34 instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened, against or affecting VPI or the NEWCOS, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and the NEWCOS have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI Charter Document. None of VPI, the NEWCOS, or, to the knowledge of VPI and the NEWCOS, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or any NEWCO is a party, or by which VPI or any NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and the NEWCOS under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and the NEWCOS and the performance of the transactions contemplated herein have been duly and validly 35 authorized by the respective Boards of Directors of VPI and the NEWCOS and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and the NEWCOS have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, the NEWCOS, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and 36 except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES (a) VPI and the NEWCOS have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or the NEWCOS or their officers or employees responsible for maintaining the financial records of VPI and the NEWCOS subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and the NEWCOS and their employees are not aware of any proposed examinations) or claims against VPI or the NEWCOS (including liens against assets of VPI or the NEWCOS) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or consolidated group which includes or included VPI or the NEWCOS, or with respect to any payment made or deemed made by VPI or the NEWCOS, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the 37 respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or the NEWCOS or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal years or such shorter period of time as VPI or the NEWCOS shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and the NEWCOS have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor the NEWCOS' methods of accounting have changed in the past five years. No adjustment to taxable income by 38 reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor the NEWCOS is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor the NEWCOS has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANIES as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or the NEWCOS, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 39 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, each COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of such COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of such COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. Each COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and each COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of each COMPANY access to all of VPI's and the NEWCOS' sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish each COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and the NEWCOS will cooperate with each COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this 40 Agreement. VPI will provide complete access to its operations and key officers and employees to each COMPANY, its representatives and advisors on a continuing basis through the Closing Date. Each COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with such COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and 41 (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, neither COMPANY shall, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $25,000; 42 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $25,000 necessary or desirable for the conduct of the businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of such COMPANY, provided that such COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of such COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANIES (except as set forth herein), including, but not limited to, the issuance of any option, warrant, call, conversion 43 right or commitment of any kind with respect to the COMPANIES' capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, any COMPANY or a merger, consolidation or business combination of any COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between such COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between each COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or 44 non-occurrence of which would be likely to cause any representation or warranty of any COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or the NEWCOS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by any COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANIES consent to such amendment or supplement; and 45 provided further, that no amendment or supplement to a schedule prepared by VPI or the NEWCOS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANIES do not give their consent, the COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt by STOCKHOLDERS (including any parties designated herein to receive copies of notices to STOCKHOLDERS) of notice of such amendment or supplement (or sooner 46 if required by the circumstances under which such consent is requested and so requested in the notice). The provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning any COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANIES. Insofar as the information contained in the Registration Statement relates solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration Statement each COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANIES and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve such information. If, prior to the 25th 47 day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANIES or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANIES and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANIES, or on behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANIES as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANIES for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANIES or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANIES for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 48 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 7.14 Additional Purchase of VPI Stock. VPI shall request that the Underwriters make available for purchase by Joshua M. Freeman ("Freeman") up to 5% of the shares of VPI Stock to be issued in the IPO, excluding the shares of VPI Stock to be made available to "friends and family" of VPI and the Founding Companies (which amount available to friends and family is expected to be 5% of the shares of VPI Stock to be issued in the IPO). Freeman acknowledges and agrees that any allocation of shares of VPI Stock for purchase by Freeman shall be subject to the Underwriters' discretion. 49 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES The obligations of STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and the NEWCOS contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and the NEWCOS contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and the NEWCOS on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Mergers or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANIES as a result of which the management of the COMPANIES deems it inadvisable to proceed with the transactions hereunder. 50 8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have delivered to the COMPANIES a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or the NEWCOS are authorized to do business, showing that each of VPI and the NEWCOS is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and the NEWCOS, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or the NEWCOS which would constitute a Material Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or the NEWCOS to conduct their respective businesses. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 51 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of each NEWCO, certifying the truth and correctness of attached copies of VPI's and the NEWCOS' respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 52 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS The obligations of VPI and the NEWCOS with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and the NEWCOS with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANIES contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 53 9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of each COMPANY, certifying the truth and correctness of attached copies of each COMPANY's Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving each COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to any COMPANY which would constitute a Material Adverse Effect, and neither COMPANY shall have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of any COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii) obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANIES and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between any of the COMPANIES and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 54 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI certificates, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in each COMPANY's state of incorporation and, unless waived by VPI, in each state in which each COMPANY is authorized to do business, showing each COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for each COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of each COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so named as an additional insured. 55 9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 9.19 TRANSITION SERVICES AGREEMENT. Carl M. Freeman Associates, Inc. shall have executed and delivered to the COMPANIES the Transition Services Agreement in substantially the form attached hereto as Annex IX. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANIES, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANIES as being conducted at the Pre-Closing Date. 56 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANIES shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANIES, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 57 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Joshua M. Freeman to serve as a director of VPI effective as of the Closing Date. Such designated person also shall be a member of the Executive Committee of the Board of Directors effective as of the Closing Date, to serve subject to and in accordance with the Certificate of Incorporation and Bylaws of VPI. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at any COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; 58 provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of each COMPANY who were covered by such COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the books and records of such COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 10.8 VPI NONCOMPETITION COVENANT. VPI shall not, during the three-year period immediately following the Closing Date, for any reason whatsoever, directly or indirectly, for itself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature, engage, as a shareholder, owner, partner or joint venturer, in any residential or commercial property development or construction business or any golf course development or golf course management business in Bethany Beach, Delaware, or the 25-mile area around Bethany Beach, Delaware. 10.9 VPI RIGHT TO MANAGE. During the three-year period immediately following the Closing Date, the COMPANIES shall have the exclusive listing to market and sell (on substantially the same terms and conditions as set forth in The Cove New Homes Sales and Marketing Agreement, dated as January 1, 1997, by and between Coastal Resorts Realty, L.L.C. and Cove Resort Limited Partnership), and Freeman (or his Affiliates) shall endeavor to cause the COMPANIES to manage individual condominium units or other residential vacation properties, 59 and any related homeowners' association or condominium association, developed by Freeman (or his Affiliates) in Bethany Beach, Delaware, or the 25-mile area around Bethany Beach, Delaware. It is understood and agreed that all such agreements shall contain a provision permitting Freeman (or his Affiliates) to terminate the agreements relating to listing and sale of units or other residential vacation properties agreements upon the occurrence of: (1) breach of such agreement as provided therein; or (2) a Change of Control (as defined below). The provisions of this Section 10.9 shall terminate upon a Change of Control. For purposes of this Section 10.9, a Change of Control shall be deemed to have occurred if any of the following shall have occurred: (i) any person or entity, other than VPI or an employee benefit plan of the COMPANIES or VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the COMPANY or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the COMPANY or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of the IPO, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming 60 "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). 11. INDEMNIFICATION The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless 61 VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 62 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or the NEWCOS under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for the liabilities and obligations of the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, the NEWCOS or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or the NEWCOS or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the 63 "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any 64 such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI 65 Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, the NEWCOS, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or the NEWCOS until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the 66 Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANIES; (ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANIES, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 67 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement (but excluding the transactions contemplated by the Other Agreements) in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales 68 business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANIES, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of any COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of any COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever 69 except to the extent that such COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature (a) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter, (b) operating any and all of its existing business lines and divisions other than those of the COMPANIES or (c) engaging in any of the following activities: (1) mortgage brokerage; (2) title insurance; (3) golf course development and management; (4) property (including hotel) development and development management; (5) construction and construction management; (6) marketing and sales of new homes and resales of existing homes outside Bethany Beach, Delaware, and the 25-mile area surrounding Bethany Beach, Delaware; and (7) rental and management of primary residence apartments. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition 70 to the locations currently established therefor, then the STOCKHOLDERS will be precluded (subject to the last paragraph of Section 13.1) from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that 71 such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or any COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. For purposes of this Section 13 only, "STOCKHOLDERS" shall not include T. Michael Nally. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANIES, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES', the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other 72 advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management or rental industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANIES. 14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANIES, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES' respective businesses. VPI and the NEWCOS agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANIES, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of 73 VPI or any NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANIES to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or the NEWCOS of the provisions of this Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and the NEWCOS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANIES of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 74 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the 75 Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford 76 to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANIES, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be 77 sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. 78 Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 79 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or 80 necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 81 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this 82 Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such 83 indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any 84 Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANIES and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of each COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 85 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees 86 and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. 87 (a) If to VPI, or the NEWCOS, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANIES, addressed as follows: Coastal Resorts Realty L.L.C. Coastal Resorts Management, Inc. c/o Carl M. Freeman Associates, Inc. 11325 Seven Locks Road Potomac, Maryland 20854 Facsimile no.: (301) 983-9289 Attention: Joshua M. Freeman with copies to: Shaw Pittman Potts & Trowbridge 2300 N Street, NW Washington, DC 20037 Facsimile no.: (202) 663-8007 Attention: Stephen B. Huttler or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 88 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the respective Mergers. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Mergers and each future holder of such VPI Stock. 89 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means any COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean the NEWCOS and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. 90 "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Mergers" shall mean the time as of which the Mergers become effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Mergers" means the mergers of (i) COASTAL REALTY ACQUISITION LLC with and into COASTAL RESORTS REALTY L.L.C. and (ii) COASTAL MANAGEMENT ACQUISITION CORP. with and into COASTAL RESORTS MANAGEMENT, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. 91 "NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of each respective NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANIES. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANIES and any affiliated, combined, consolidated, unitary or similar group of which any COMPANY is or was a member. 92 "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporations" shall mean each of the COMPANIES as the surviving parties in the Mergers. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. 93 "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 94 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. COASTAL REALTY ACQUISITION LLC COASTAL MANAGEMENT ACQUISITION CORP. By:/s/ Leonard Potter ------------------------------------------ Leonard Potter Vice President of each of such entities COASTAL RESORTS REALTY L.L.C. COASTAL RESORTS MANAGEMENT, INC. By:/s/ Joshua M. Freeman ------------------------------------------ Joshua M. Freeman President of each of such entities STOCKHOLDERS: /s/ Joshua M. Freeman - --------------------------------------------- Joshua M. Freeman /s/ T. Michael Nally - --------------------------------------------- T. Michael Nally CMF COASTAL RESORTS L.L.C. By:/s/ Joshua M. Freeman ------------------------------------------ Joshua M. Freeman President and Managing Member EX-2.4 6 EXHIBIT 2.4 EXHIBIT 2.4 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC., COLLECTION OF FINE PROPERTIES, INC., TEN MILE HOLDINGS, LTD. and the STOCKHOLDERS named herein - ---------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. PURCHASE AND SALE........................................................2 1.1 General..............................................................2 1.2 Intentionally Deleted................................................2 1.3 Intentionally Deleted................................................2 1.4 Certain Information With Respect to the Capital Stock of the COMPANIES and VPI...................................................3 2. INTENTIONALLY DELETED....................................................3 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE.............................3 3.1 Delivery of VPI Stock and Cash.......................................3 3.2 Delivery of COMPANY Stock............................................3 3.3 Balance Sheet Test...................................................4 4. CLOSING..................................................................4 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.............5 (A) Representations and Warranties of COMPANIES and STOCKHOLDERS.........5 5.1 Due Organization..................................................6 5.2 Authority.........................................................7 5.3 Capital Stock of the COMPANIES....................................7 5.4 Transactions in Capital Stock.....................................7 5.5 No Bonus Shares...................................................8 5.6 Subsidiaries......................................................8 5.7 Predecessor Status; etc...........................................8 5.8 Spin-off by the COMPANIES.........................................8 5.9 Financial Statements..............................................8 5.10 Liabilities and Obligations......................................9 5.11 Accounts and Notes Receivable...................................10 5.12 Permits and Intangibles.........................................11 5.13 Environmental Matters...........................................12 5.14 Personal Property...............................................13 5.15 Significant Customers...........................................14 5.16 Material Contracts and Commitments..............................14 5.17 Real Property...................................................14 5.18 Insurance.......................................................16 5.19 Compensation; Employment Agreements; Organized Labor Matters....16 5.20 Employee Plans..................................................17 5.21 Compliance with ERISA...........................................18 5.22 Conformity with Law; Litigation.................................19 5.23 Taxes...........................................................20 5.24 No Violations...................................................22 5.25 Government Contracts............................................23 5.26 Absence of Changes..............................................23 5.27 Deposit Accounts; Powers of Attorney............................25 5.28 Validity of Obligations.........................................25 5.29 Relations with Governments......................................26 5.30 Disclosure......................................................26 5.31 Prohibited Activities...........................................27 (B) Representations and Warranties of STOCKHOLDERS......................27 5.32 Authority; Ownership............................................27 5.33 Preemptive Rights...............................................27 5.34 No Intention to Dispose of VPI Stock............................27 6. REPRESENTATIONS OF VPI..................................................27 6.1 Due Organization.................................................28 6.2 Authorization....................................................28 6.3 Capital Stock of VPI.............................................29 i 6.4 Transactions in Capital Stock.......................................29 6.5 Subsidiaries........................................................29 6.6 Financial Statements................................................30 6.7 Liabilities and Obligations.........................................30 6.8 Conformity with Law; Litigation.....................................30 6.9 No Violations.......................................................31 6.10 Validity of Obligations............................................31 6.11 VPI Stock..........................................................31 6.12 No Side Agreements.................................................32 6.13 Business; Real Property; Material Agreements.......................32 6.14 Taxes..............................................................32 6.15 Completion of Due Diligence........................................34 6.16 Disclosure........................................................34 6.17 Tax Treatment......................................................35 7. COVENANTS PRIOR TO CLOSING..............................................35 7.1 Access and Cooperation; Due Diligence...............................35 7.2 Conduct of Business Pending Closing.................................36 7.3 Prohibited Activities...............................................37 7.4 No Shop.............................................................39 7.5 Notice to Bargaining Agents.........................................39 7.6 Agreements..........................................................39 7.7 Notification of Certain Matters.....................................39 7.8 Amendment of Schedules..............................................40 7.9 Cooperation in Preparation of Registration Statement................42 7.10 Final Financial Statements.........................................43 7.11 Further Assurances.................................................44 7.12 Authorized Capital.................................................44 7.13 Best Efforts to Consummate Transaction.............................44 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......44 8.1 Representations and Warranties......................................45 8.2 Performance of Obligations..........................................45 8.3 No Litigation.......................................................45 8.4 Opinion of Counsel..................................................45 8.5 Registration Statement..............................................45 8.6 Consents and Approvals..............................................46 8.7 Good Standing Certificates..........................................46 8.8 No Material Adverse Change..........................................46 8.9 Closing of IPO......................................................46 8.10 Secretary's Certificate............................................46 8.11 Employment Agreements..............................................47 8.12 Directors and Officers Insurance...................................47 8.13 Stock Options......................................................47 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI..............................47 9.1 Representations and Warranties......................................47 9.2 Performance of Obligations..........................................48 9.3 No Litigation.......................................................48 9.4 Secretary's Certificate.............................................48 9.5 No Material Adverse Effect..........................................48 9.6 STOCKHOLDERS' Release...............................................49 9.7 Termination of Related Party Agreements.............................49 9.8 Opinion of Counsel..................................................49 9.9 Consents and Approvals..............................................49 9.10 Good Standing Certificates.........................................49 ii 9.11 Registration Statement..............................................50 9.12 Employment Agreements..............................................50 9.13 Closing of IPO.....................................................50 9.14 FIRPTA Certificate.................................................50 9.15 Insurance..........................................................50 9.16 Lockup Agreement...................................................50 9.17 Letter of Representation...........................................50 9.18 Termination of Defined Benefit Plans...............................51 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................51 10.1 Release From Guarantees; Repayment of Certain Obligations..........51 10.2 Preservation of Tax and Accounting Treatment.......................51 10.3 Preparation and Filing of Tax Returns..............................52 10.4 Appointment of Directors...........................................53 10.5 Preservation of Employee Benefit Plans.............................53 10.6 Maintenance of Books...............................................53 10.7 Securities Covenants...............................................53 11. INDEMNIFICATION........................................................54 11.1 General Indemnification by the STOCKHOLDERS........................54 11.2 Indemnification by VPI.............................................55 11.3 Third Person Claims................................................56 11.4 Exclusive Remedy...................................................58 11.5 Limitations on Indemnification.....................................58 12. TERMINATION OF AGREEMENT...............................................59 12.1 Termination........................................................59 12.2 Liabilities in Event of Termination................................60 13. NONCOMPETITION.........................................................61 13.1 Prohibited Activities..............................................61 13.2 Damages............................................................63 13.3 Reasonable Restraint...............................................63 13.4 Severability; Reformation..........................................64 13.5 Independent Covenant...............................................64 13.6 Materiality........................................................64 13.7 Limitation.........................................................64 13.8 Right to Manage Properties.........................................65 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................65 14.1 STOCKHOLDERS.......................................................65 14.2 VPI................................................................66 14.3 Damages............................................................67 14.4 Survival...........................................................67 14.5 Return of Data Submitted...........................................67 15. TRANSFER RESTRICTIONS..................................................68 15.1 Transfer Restrictions..............................................68 15.2 Certain Transfers..................................................68 16. SECURITIES LAW REPRESENTATIONS.........................................69 16.1 Compliance with Law................................................69 16.2 Economic Risk; Sophistication......................................69 17. REGISTRATION RIGHTS....................................................70 17.1 Piggyback Registration Rights......................................70 17.2 Demand Registration Rights.........................................71 17.3 Registration Procedures............................................72 17.4 Underwriting Agreement.............................................73 17.5 Availability of Rule 144...........................................73 17.6 Registration Rights Indemnification................................73 iii 18. GENERAL................................................................78 18.1 Press Releases.....................................................78 18.2 Cooperation........................................................78 18.3 Successors and Assigns; Third Party Beneficiaries..................79 18.4 Entire Agreement...................................................79 18.5 Counterparts.......................................................79 18.6 Brokers and Agents.................................................79 18.7 Expenses...........................................................79 18.8 Notices............................................................80 18.9 Governing Law......................................................81 18.10 Exercise of Rights and Remedies...................................82 18.11 Time..............................................................82 18.12 Reformation and Severability......................................82 18.13 Remedies Cumulative...............................................82 18.14 Captions..........................................................82 18.15 Amendments and Waivers............................................82 18.16 Incorporation by Reference........................................83 18.17 Defined Terms.....................................................83 ANNEX I INTENTIONALLY DELETED ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), COLLECTION OF FINE PROPERTIES, INC., a Colorado corporation, and TEN MILE HOLDINGS, LTD., a Colorado corporation (each, a "COMPANY," and collectively, the "COMPANIES"), and Luis Alonso, Domingo R. Moreira, Domingo A. Moreira Brenda M. Lopez Ibanez and Ana Maria Moreira (the "STOCKHOLDERS"). WHEREAS, the respective Boards of Directors of VPI and the COMPANIES deem it advisable and in the respective best interests of VPI and the COMPANIES and their respective stockholders that the STOCKHOLDERS contribute all of the COMPANY Stock owned by the STOCKHOLDERS to VPI in exchange for VPI Stock and cash pursuant to this Agreement and in accordance with the applicable provisions of the laws of the State of Delaware and the State in which each of the COMPANIES is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE 1 Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANIES, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Boards of Directors of the COMPANIES have approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANIES to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. PURCHASE AND SALE 1.1 GENERAL. Upon the terms and subject to the conditions of this Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver to VPI, and VPI hereby agrees to purchase, all of the outstanding capital stock of the COMPANIES (the "COMPANY Stock"). 1.2 INTENTIONALLY DELETED. 1.3 INTENTIONALLY DELETED. 2 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES AND VPI. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANIES and VPI as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; and (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding. 2. INTENTIONALLY DELETED 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE 3.1 DELIVERY OF VPI STOCK AND CASH. On the Closing Date, the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled; provided, however, that such delivery shall not constitute the actual transfer and delivery of the COMPANY Stock, which shall take place on the Closing Date as provided in Section 4. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the 3 stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i) positive net worth (excluding all assets and liabilities related to customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all assets and liabilities related to customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of each COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the transfer and delivery of the COMPANY Stock as contemplated by Section 1 hereof and (ii) effect the delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not constitute the actual transfer and delivery of the COMPANY Stock and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing, VPI shall redeliver the certificates representing COMPANY Stock to the STOCKHOLDERS. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, 4 N.W., Washington, D.C. 20036. On the Closing Date (x) all transactions contemplated by this Agreement, including the transfer and delivery of COMPANY Stock, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to Section 3 hereof shall occur and (y) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x) and (y) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x) and (y) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS. Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANIES and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof 5 has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANIES or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to each COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and such COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY taken as a whole (as used herein with respect to such COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated and contains a list of all such jurisdictions in which each COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of each COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of each COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of such COMPANY, and of its officers and directors on behalf of such COMPANY. 6 5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority to enter into and perform this Agreement. 5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of each COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by such COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates any of the COMPANIES to issue any of its capital stock; (ii) neither COMPANY has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of each COMPANY nor the relative ownership of shares among any of their respective stockholders has been altered or changed in contemplation of the transactions contemplated hereby and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of each COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 7 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is any COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of each COMPANY, including the names of any entities acquired by each COMPANY (by stock purchase, merger or otherwise) or owned by each COMPANY or from whom any of the COMPANIES previously acquired material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of any of the COMPANIES since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9, except as set forth thereon, are copies of the following financial statements (the "COMPANY Financial Statements") of each of the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); 8 (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date neither COMPANY has incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANIES, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; 9 (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of such COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of each COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of such COMPANY after the Balance Sheet Date. For purposes of determining collectibility of accounts receivable under this Section 5.11, during the one-year period immediately following the Closing Date, (a) the sum of (i) 50% of payments received by the COMPANY from each payor entity on accounts receivable of the COMPANY and (ii) any amount not applied under clause (b) shall be applied to reduce accounts receivable from such payor entity existing as of the Closing Date and (b) an amount equal to the lesser of (i) 50% of such payments or (ii) the unpaid balance generated after the Closing Date shall be applied to reduce the unpaid balance, as of the date the payment is received, of accounts receivable generated from such payor entity after the Closing Date. For example, assuming that the 10 Company X account reflects a balance due to the COMPANY of $1000 as of the Closing Date and on a date two months after the Closing Date, and reflects an additional balance due of $500 during the two-month period immediately following the Closing Date, and further assuming that Company X pays $900 on its accounts receivable to the COMPANY at the end of such two-month period, such $900 payment shall be applied to reduce the Closing Date Company X account balance from $1000 to $550 and to reduce the post-Closing Company X account balance from $500 to $50. If at the time a payment is received by the COMPANY there are no unpaid accounts receivable from the payor entity generated after the Closing Date, the payment shall be applied in its entirety to the unpaid balance of the accounts receivable from the payor entity existing as of the Closing Date. Payments received by the COMPANY after the first anniversary of the Closing Date on accounts receivable of the COMPANY shall first be applied in their entirety (and not on a 50/50 basis) to reduce the unpaid balance of the accounts receivable existing as of the Closing Date until such unpaid balance shall have been paid in full, and thereafter shall be applied to reduce accounts receivable generated after the Closing Date. 5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of such COMPANY as now conducted, and such COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by such COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Each of the COMPANIES has 11 conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to each COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each of the COMPANIES has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) each COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by such COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location to which such COMPANY has transported or disposed of Hazardous Wastes and 12 Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against any of the COMPANIES or VPI for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of such COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of such COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by such COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by each COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the 13 STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of each COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of any COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of any COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by such COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which such COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. Each COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. Each COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by such COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet 14 Date, and all other real property, if any, used by each COMPANY in the conduct of its business. Each COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of each COMPANY with respect to real property owned by such COMPANY. Each COMPANY has also delivered to VPI an accurate list of real property leased by such COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by such COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 15 5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by such COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that such COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by such COMPANY has ever been canceled by the insurer and such COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of such COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or subject to (and none of their respective assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of any COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of each COMPANY's knowledge, threatened labor dispute involving any COMPANY and any group of its 16 employees nor has any COMPANY experienced any labor interruptions over the past three years. Each COMPANY believes its relationship with employees to be good. Each COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of such COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, neither COMPANY sponsors, maintains or contributes to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation 17 arrangement). Neither COMPANY has sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of such COMPANY's employees. All accrued contribution obligations of each COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of such COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of each COMPANY that are currently maintained or contributed to by such COMPANY or cover employees or former employees of such COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each COMPANY has not incurred any liability 18 for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) each COMPANY has not incurred liability under Section 4062 of ERISA; (v) each COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which any COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than a COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes such COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance 19 shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Each COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) Each COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANIES or their respective officers or employees responsible for maintaining the financial records of such COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANIES and their respective employees are not aware of any proposed examinations) or claims against any COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. 20 (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by any COMPANY, any member of an affiliated or consolidated group which includes or included any of the COMPANIES, or with respect to any payment made or deemed made by any COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by any COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any balance sheets and income statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, neither COMPANY has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither COMPANY is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, neither COMPANY has (i) assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which any COMPANY or such person or entity was the surviving corporation or a consolidation) or (ii) indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. 21 (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of each COMPANY for its last three (3) fiscal years or such shorter period of time as such COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) Each COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, each COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither COMPANY is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) Neither COMPANY has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by such COMPANY. 5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter Document. Neither COMPANY or, to the knowledge of either COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of each 22 COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by any COMPANY or VPI of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts either COMPANY from freely providing services to any other customer or potential customer of such COMPANY, VPI or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither COMPANY is now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of any COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of any COMPANY; (iii) any change in the authorized capital of any COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the 23 COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of any COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by any COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of any COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of any COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to any COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of any COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of any COMPANY's business; (xi) any waiver of any material rights or claims of any COMPANY; 24 (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which any COMPANY is a party; (xiii) any transaction by any COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by any COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which each COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from each COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by each of the COMPANIES and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of each of the COMPANIES and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of each COMPANY, enforceable against such COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of each COMPANY has the legal power, authority and capacity to bind such COMPANY to the terms of this Agreement. 25 5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause any COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement (which includes the Schedules and Annexes attached hereto) does not contain any untrue statement of a material fact by either COMPANY or the STOCKHOLDERS and does not omit to state any material fact necessary in order to make the statements made herein (or therein) by either COMPANY or the STOCKHOLDERS, in light of the circumstances under which they are made, not misleading. Each COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which any COMPANY is a party, or to which their respective properties are subject, or (ii) any other fact or circumstance regarding any COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to any COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to any COMPANY, the STOCKHOLDERS or any other person affiliated or associated with any COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 26 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither COMPANY has, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the transactions contemplated hereby to violate the control requirement set forth in Code section 368(c). 6. REPRESENTATIONS OF VPI VPI represents and warrants that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the 27 time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, as amended, of VPI (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The representatives of VPI executing this Agreement have the authority to enter into and bind VPI to the terms of this Agreement and (ii) VPI has the full legal right, 28 power and authority to enter into and perform this Agreement, and all required approvals of the shareholders and board of directors of VPI have been obtained. 6.3 CAPITAL STOCK OF VPI.. Immediately prior to the Closing Date, the authorized capital stock of VPI is as set forth in Section 1.4(ii). All the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, and further, such shares were offered, issued, sold and delivered by VPI in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI to issue any of its authorized but unissued capital stock; and (ii) VPI has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. VPI has no subsidiaries except for the companies to become subsidiaries of VPI pursuant to each of the Other Agreements. Except as set forth in the preceding sentence, VPI does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or 29 business entity nor is VPI directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI has no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, VPI is not in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI, threatened, against or affecting VPI, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and is not in violation of any of the foregoing. 30 6.9 NO VIOLATIONS. VPI is not in violation of any VPI Charter Document. Neither VPI nor, to the knowledge of VPI, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI is a party, or by which VPI, or any of its respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of VPI and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI, enforceable against VPI in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by 31 reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. VPI has not entered and will not enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and neither VPI nor its equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. None of the Other Agreements shall provide for a valuation of any of the Other Founding Companies based on the use of a multiplier greater than ten percent (10%). 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. VPI has not conducted any operations or business since inception other than activities related to the VPI Plan of Organization. VPI does not own and has not at any time owned any real property or any material personal property and is not a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI has timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or its officers or employees responsible for maintaining the financial records of VPI subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and its employees are not aware of any proposed examinations) or claims against VPI 32 (including liens against assets of VPI) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, VPI has not entered into an agreement or waiver and has not been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI, any member of an affiliated or consolidated group which includes or included VPI, or with respect to any payment made or deemed made by VPI, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, VPI has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). VPI is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, VPI (i) has not assumed and is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the 33 basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI for its last three (3) fiscal years or such shorter period of time as VPI shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI has a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, VPI's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) VPI is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI as of the date hereof are disclosed on Schedule 6.14. (k) VPI has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANIES as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by 34 VPI, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, each COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of such COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of such COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. Each COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the STOCKHOLDERS and each COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 35 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of each COMPANY access to all of VPI's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish each COMPANY with such additional financial and operating data and other information as to the business and properties of VPI as each COMPANY may from time to time reasonably request. VPI will cooperate with each COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to each COMPANY, its representatives and advisors on a continuing basis through the Closing Date. Each COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with such COMPANY; 36 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, neither COMPANY shall, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 37 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of such COMPANY, provided that such COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of such COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANIES (except as set forth herein), including, but not limited to, the issuance of any option, warrant, call, conversion 38 right or commitment of any kind with respect to the COMPANIES' capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, any COMPANY or a merger, consolidation or business combination of any COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between such COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between each COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or 39 non-occurrence of which would be likely to cause any representation or warranty of any COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI shall give prompt notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by any COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANIES consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI that constitutes or 40 reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANIES do not give their consent, the COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 41 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning any COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANIES. Insofar as the information contained in the Registration Statement relates solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration Statement each COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANIES and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANIES 42 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANIES and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANIES, or on behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANIES as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated income statements of the COMPANIES for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change (except as described on Schedule 9.5) in the financial condition of the COMPANIES or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such balance sheets and income statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. The balance sheet and income statement of the COMPANY for the fiscal quarter ended March 31, 1998, shall have been prepared on a basis consistent with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, (i) except as noted therein, (ii) except for footnote disclosures normally required by generally accepted accounting principles and (iii) subject to year-end adjustments. Except as noted in such balance sheets and income statements, all of such balance sheets and income statements will present fairly the results of operations of the COMPANIES for the periods indicated thereon and shall 43 be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES The obligations of STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been 44 waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANIES as a result of which the management of the COMPANIES deems it inadvisable to proceed with the transactions hereunder. 8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 45 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI shall have delivered to the COMPANIES a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI is authorized to do business, showing that VPI is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI which would constitute a Material Adverse Effect, and VPI shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI, certifying the truth and correctness of attached copies of VPI's Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI approving VPI's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 46 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI The obligations of VPI with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANIES contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and correct in all 47 material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of each COMPANY, certifying the truth and correctness of attached copies of each COMPANY's Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving each COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. Except as set forth on Schedule 9.5, no event or circumstance shall have occurred with respect to any COMPANY which would constitute a Material Adverse Effect, and neither COMPANY shall have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of any COMPANY to conduct its business. 48 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date, effective as of the Closing Date, releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii) obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANIES and (z) obligations or claims (including statutory and common law claims) arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between any of the COMPANIES and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI certificates, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in each COMPANY's state of incorporation and, unless waived by VPI, in each state in which each COMPANY is authorized to do business, showing each COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for each COMPANY for all periods prior to the Pre-Closing have been filed and paid. 49 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of each COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 50 9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANIES, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANIES as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 51 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANIES shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities, if any (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records), required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANIES, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, 52 each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANIES, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Luis Alonso to serve as a director of VPI effective as of the Closing Date. Such designated person also shall be a member of the Executive Committee of the Board of Directors effective as of the Closing Date, to serve subject to and in accordance with the Certificate of Incorporation and Bylaws of VPI. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at any COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of each COMPANY who were covered by such COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the books and records of such COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing 53 Date. In addition, VPI agrees that it shall remove the restricted stock legend from the VPI Stock received by any STOCKHOLDER pursuant to this Agreement as soon as practicable after receipt from such STOCKHOLDER of a letter requesting removal of the restricted stock legend provided that (i) the STOCKHOLDER has held such stock for a period of at least two years after the Closing Date, (ii) the STOCKHOLDER is not, and has not been for the three months preceding the removal of the legend, a director of VPI, an officer of VPI (other than the President of the COMPANY or its successor), or a beneficial owner of more than one percent of the outstanding shares of VPI and (iii) there have been no amendments to Rule 144(k) that would prohibit VPI from removing such legend. 11. INDEMNIFICATION The STOCKHOLDERS and VPI each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI and each COMPANY at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI and each COMPANY as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration Statement or any 54 prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI or the COMPANIES to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI of its representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's failure to be responsible for the liabilities and obligations of the COMPANIES as provided in Section 1 hereof (except to the extent that VPI has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating 55 to VPI or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party 56 from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 57 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by 58 such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). VPI and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification for a breach, if any, of the representation made in the third sentence of Section 5.11 hereof prior to the date that is eighteen months after the Closing Date. Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the transactions contemplated hereby, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. The provisions of this Section 11 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: 59 (i) by mutual consent of the boards of directors of VPI and the COMPANIES; (ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANIES, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the 60 COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management or rental business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANIES, or any of their subsidiaries, conduct a noncommercial property management or rental business or hotel management business (the "Territory"). (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; 61 (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of any COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management or rental services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management or rental business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of any COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that such COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter; (b) the STOCKHOLDERS who as of the date hereof own and operate certain businesses (other than the businesses of the COMPANIES) engaged in, without limitation, development of condominium and other property, ownership of real property, ownership of hospitality facilities, real estate brokerage, ownership of rental properties and general contractor construction, from continuing to own and operate such businesses; or (c) the STOCKHOLDERS (or their affiliates) who manage 62 properties outside of Summit County, Colorado, owned and controlled by such STOCKHOLDERS (or their affiliates) from continuing to manage such properties. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 63 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or any COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by 64 the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 13.8 RIGHT TO MANAGE PROPERTIES. VPI shall have the first option to manage properties developed by the STOCKHOLDERS (or their affiliates) on commercially reasonable terms which shall be mutually agreed upon between the STOCKHOLDERS and VPI. If the STOCKHOLDERS and VPI are unable to mutually agree on such terms, the STOCKHOLDERS shall have the right to have such newly developed properties managed by an independent property management company. Notwithstanding the foregoing, the STOCKHOLDERS shall cause L&D Development Co. to cause the COMPANIES to be the property manager for the homeowners' association, and, to the extent possible, purchasers of individual units, of the Los Pinos development with no commission payable to the L&D Development Co. therefor. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANIES, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES', the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management or rental industry through no fault of the STOCKHOLDERS, 65 (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANIES. Nothing herein shall restrict the STOCKHOLDERS from using confidential information of the COMPANIES described in this Section 14.1 in the businesses in which they are entitled to engage in competition with the COMPANY pursuant to Sections 13.1(b) and (c). 14.2 VPI . VPI recognizes and acknowledges that it had in the past and currently has access to certain confidential information of the COMPANIES, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES' respective businesses. VPI agrees that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, it will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANIES, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI, (ii) disclosure is required 66 by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANIES to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI of the provisions of this Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining VPI from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANIES of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 67 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the 68 Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford 69 to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANIES, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be 70 sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. 71 Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 72 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or 73 necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 74 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this 75 Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such 76 indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation 77 (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANIES and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS and VPI shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of each COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 78 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANIES and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANIES and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees 79 and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the transactions contemplated hereby, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. 80 (a) If to VPI, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANIES, addressed as follows: Collection of Fine Properties, Inc. 319 North Main Street Breckenridge, Colorado 80424 Facsimile no.: (970) 547-3300 Attention: Mr. Luis Alonso and marked "Personal and Confidential" with copy to: Kelley Drye & Warren LLP 201 South Biscayne Boulevard, Suite 2400 Miami, Florida 33131 Facsimile no.: (305) 372-2490 Attention: Ignacio E. Sanchez or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 81 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the COMPANIES and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the respective transactions contemplated hereby. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the transactions contemplated hereby and each future holder of such VPI Stock. 82 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means any COMPANY, any Subsidiary and any member of a Relevant Group. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 1.1. 83 "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANIES. 84 "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANIES and any affiliated, combined, consolidated, unitary or similar group of which any COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. 85 "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the third recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 86 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. By:/s/ Leonard Potter ------------------------------ Leonard Potter Vice President of each of such entities COLLECTION OF FINE PROPERTIES, INC. By: /s/ Luis Alonso ------------------------------ Name: Luis Alonso ------------------------------- Title: President ------------------------------ TEN MILE HOLDINGS, LTD. By: /s/ Luis Alonso ------------------------------ Name: Luis Alonso ------------------------------- Title: President ------------------------------ STOCKHOLDERS: /s/ Luis Alonso - ---------------------------------- Luis Alonso /s/ Domingo R. Moreira - ---------------------------------- Domingo R. Moreira /s/ Domingo A. Moreira - ---------------------------------- Domingo A. Moreira /s/ Brenda M. Lopez Ibanez - ---------------------------------- Brenda M. Lopez Ibanez /s/ Ana Maria Moreira - ---------------------------------- Ana Maria Moreira EX-2.5 7 EXHIBIT 2.5 EXHIBIT 2.5 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. HOUSTON AND O'LEARY COMPANY and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. PURCHASE AND SALE........................................................2 1.1 General..............................................................2 1.2 Intentionally Deleted................................................2 1.4 Certain Information With Respect to the Capital Stock of the COMPANY and VPI.....................................................3 2. INTENTIONALLY DELETED....................................................3 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE.............................3 3.1 Delivery of VPI Stock and Cash.......................................3 3.2 Delivery of COMPANY Stock............................................3 3.3 Balance Sheet Test...................................................4 4. CLOSING..................................................................4 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............5 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........5 5.1 Due Organization..................................................6 5.2 Authority.........................................................7 5.3 Capital Stock of the COMPANY......................................7 5.4 Transactions in Capital Stock.....................................7 5.5 No Bonus Shares...................................................8 5.6 Subsidiaries......................................................8 5.7 Predecessor Status; etc...........................................8 5.8 Spin-off by the COMPANY...........................................8 5.9 Financial Statements..............................................8 5.10 Liabilities and Obligations......................................9 5.11 Accounts and Notes Receivable...................................10 5.12 Permits and Intangibles.........................................10 5.13 Environmental Matters...........................................11 5.14 Personal Property...............................................12 5.15 Significant Customers...........................................13 5.16 Material Contracts and Commitments..............................13 5.17 Real Property...................................................14 5.18 Insurance.......................................................15 5.19 Compensation; Employment Agreements; Organized Labor Matters....15 5.20 Employee Plans..................................................16 5.21 Compliance with ERISA...........................................17 5.22 Conformity with Law; Litigation.................................19 5.23 Taxes...........................................................19 5.24 No Violations...................................................22 5.25 Government Contracts............................................23 5.26 Absence of Changes..............................................23 5.27 Deposit Accounts; Powers of Attorney............................24 5.28 Validity of Obligations.........................................25 5.29 Relations with Governments......................................25 5.30 Disclosure......................................................25 5.31 Prohibited Activities...........................................26 (B) Representations and Warranties of STOCKHOLDERS......................26 5.32 Authority; Ownership............................................26 5.33 Preemptive Rights...............................................27 5.34 No Intention to Dispose of VPI Stock............................27 6. REPRESENTATIONS OF VPI..................................................28 6.1 Due Organization....................................................28 i 6.2 Authorization.......................................................29 6.3 Capital Stock of VPI................................................29 6.4 Transactions in Capital Stock.......................................29 6.5 Subsidiaries........................................................30 6.6 Financial Statements................................................30 6.7 Liabilities and Obligations.........................................30 6.8 Conformity with Law; Litigation.....................................30 6.9 No Violations.......................................................31 6.10 Validity of Obligations............................................31 6.11 VPI Stock..........................................................32 6.12 No Side Agreements.................................................32 6.13 Business; Real Property; Material Agreements.......................32 6.14 Taxes..............................................................32 6.15 Completion of Due Diligence........................................35 6.16 Disclosure........................................................35 6.17 Tax Treatment......................................................35 7. COVENANTS PRIOR TO CLOSING..............................................35 7.1 Access and Cooperation; Due Diligence...............................35 7.2 Conduct of Business Pending Closing.................................36 7.3 Prohibited Activities...............................................37 7.4 No Shop.............................................................39 7.5 Notice to Bargaining Agents.........................................40 7.6 Agreements..........................................................40 7.7 Notification of Certain Matters.....................................40 7.8 Amendment of Schedules..............................................41 7.9 Cooperation in Preparation of Registration Statement................42 7.10 Final Financial Statements.........................................44 7.11 Further Assurances.................................................44 7.12 Authorized Capital.................................................44 7.13 Best Efforts to Consummate Transaction.............................45 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........45 8.1 Representations and Warranties......................................45 8.2 Performance of Obligations..........................................46 8.3 No Litigation.......................................................46 8.4 Opinion of Counsel..................................................46 8.5 Registration Statement..............................................46 8.6 Consents and Approvals..............................................46 8.7 Good Standing Certificates..........................................46 8.8 No Material Adverse Change..........................................47 8.9 Closing of IPO......................................................47 8.10 Secretary's Certificate............................................47 8.11 Employment Agreements..............................................47 8.12 Directors and Officers Insurance...................................47 8.13 Stock Options......................................................47 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI..............................48 9.1 Representations and Warranties......................................48 9.2 Performance of Obligations..........................................48 9.3 No Litigation.......................................................49 9.4 Secretary's Certificate.............................................49 9.5 No Material Adverse Effect..........................................49 9.6 STOCKHOLDERS' Release...............................................49 9.7 Termination of Related Party Agreements.............................50 9.8 Opinion of Counsel..................................................50 9.9 Consents and Approvals..............................................50 ii 9.10 Good Standing Certificates.........................................50 9.11 Registration Statement.............................................50 9.12 Employment Agreements..............................................50 9.13 Closing of IPO.....................................................50 9.14 FIRPTA Certificate.................................................50 9.15 Insurance..........................................................50 9.16 Lockup Agreement...................................................50 9.17 Letter of Representation...........................................51 9.18 Termination of Defined Benefit Plans...............................51 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................51 10.1 Release From Guarantees; Repayment of Certain Obligations..........51 10.2 Preservation of Tax and Accounting Treatment.......................51 10.3 Preparation and Filing of Tax Returns..............................52 10.4 Appointment of Directors...........................................53 10.5 Preservation of Employee Benefit Plans.............................53 10.6 Maintenance of Books...............................................53 10.7 Securities Covenants...............................................54 11. INDEMNIFICATION........................................................54 11.1 General Indemnification by the STOCKHOLDERS........................54 11.2 Indemnification by VPI.............................................55 11.3 Third Person Claims................................................56 11.4 Exclusive Remedy...................................................58 11.5 Limitations on Indemnification.....................................58 12. TERMINATION OF AGREEMENT...............................................59 12.1 Termination........................................................59 12.2 Liabilities in Event of Termination................................60 13. NONCOMPETITION.........................................................61 13.1 Prohibited Activities..............................................61 13.2 Damages............................................................62 13.3 Reasonable Restraint...............................................63 13.4 Severability; Reformation..........................................63 13.5 Independent Covenant...............................................64 13.6 Materiality........................................................64 13.7 Limitation.........................................................64 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................65 14.1 STOCKHOLDERS.......................................................65 14.2 VPI................................................................66 14.3 Damages............................................................67 14.4 Survival...........................................................67 14.5 Return of Data Submitted...........................................67 15. TRANSFER RESTRICTIONS..................................................67 15.1 Transfer Restrictions..............................................67 15.2 Certain Transfers..................................................68 16. SECURITIES LAW REPRESENTATIONS.........................................68 16.1 Compliance with Law................................................69 16.2 Economic Risk; Sophistication......................................69 17. REGISTRATION RIGHTS....................................................69 17.1 Piggyback Registration Rights......................................70 17.2 Demand Registration Rights.........................................71 17.3 Registration Procedures............................................72 17.4 Underwriting Agreement.............................................72 17.5 Availability of Rule 144...........................................72 17.6 Registration Rights Indemnification................................72 18. GENERAL................................................................77 iii 18.1 Press Releases.....................................................77 18.2 Cooperation........................................................78 18.3 Successors and Assigns; Third Party Beneficiaries..................78 18.4 Entire Agreement...................................................78 18.5 Counterparts.......................................................79 18.6 Brokers and Agents.................................................79 18.7 Expenses...........................................................79 18.8 Notices............................................................80 18.9 Governing Law......................................................81 18.10 Exercise of Rights and Remedies...................................81 18.11 Time..............................................................81 18.12 Reformation and Severability......................................81 18.13 Remedies Cumulative...............................................82 18.14 Captions..........................................................82 18.15 Amendments and Waivers............................................82 18.16 Incorporation by Reference........................................82 18.17 Defined Terms.....................................................82 ANNEX I INTENTIONALLY DELETED ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI FORM OF OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), HOUSTON AND O'LEARY COMPANY, a Colorado corporation (the "COMPANY"), and Heidi O'Leary Houston (the "STOCKHOLDERS"). WHEREAS, the respective Boards of Directors of VPI and the COMPANY deem it advisable and in the respective best interests of VPI and the COMPANY and their respective stockholders that the STOCKHOLDERS contribute all of the COMPANY Stock owned by the STOCKHOLDERS to VPI in exchange for VPI Stock and cash pursuant to this Agreement and in accordance with the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia 1 corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. PURCHASE AND SALE 1.1 GENERAL. Upon the terms and subject to the conditions of this Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver to VPI, and VPI hereby agrees to purchase, all of the outstanding capital stock of the COMPANY (the "COMPANY Stock"). 1.2 INTENTIONALLY DELETED. 1.3 INTENTIONALLY DELETED 2 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY AND VPI . The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY and VPI as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; and (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; 2. INTENTIONALLY DELETED 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE 3.1 DELIVERY OF VPI STOCK AND CASH. On the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled; provided, however, that such delivery shall not constitute the actual transfer and delivery of the COMPANY Stock, which shall take place only on the Closing Date provided in Section 4. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Indebtedness, if any, that was incurred for working capital or in connection with the operating assets of the COMPANY, in each case in amounts that are reasonable and consistent with the past practice of the COMPANY, will be assumed or repaid by VPI without a corresponding reduction to consideration paid hereunder. In addition, so long as the conditions set forth in clauses (i) through (iii) are satisfied as of the Closing Date, the COMPANY shall be permitted to distribute any additional cash or cash equivalents to the STOCKHOLDERS or to pay bonuses to the STOCKHOLDERS or employees of the COMPANY at any time prior to the Closing Date, notwithstanding anything in this Agreement to the contrary. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the transfer and delivery of the COMPANY Stock as contemplated by Section 1 hereof and (ii) effect the delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not constitute the actual transfer and delivery of the shares of COMPANY Stock and certified check(s) or 4 wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event there is no Closing, VPI shall redeliver the certificates for the COMPANY Stock to the STOCKHOLDERS. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) all transactions contemplated by this Agreement, including the transfer and delivery of COMPANY Stock, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to Section 3 hereof shall occur and (y) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x) and (y) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x) and (y) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations 5 and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Articles of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the 6 COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the transactions contemplated hereby 7 and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 8 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9, except as set forth thereon, are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements, except for the requirement of footnote disclosures). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The 9 COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY 10 (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses 11 relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY or VPI for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and 12 (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, 13 strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. 14 The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the 15 Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment 16 agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with 17 their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and 18 (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were 19 true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any balance sheet and income statement delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. 20 (d) Except as set forth in Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth in Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date 21 hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY or VPI of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY or VPI or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 22 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for immaterial 23 cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. 24 Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement (which includes the Schedules and Annexes attached hereto) does not contain any untrue statement of a material fact by the COMPANY or the STOCKHOLDERS and does not omit to state any material fact necessary in order to make the statements made herein (or therein) by the COMPANY or the STOCKHOLDERS, in light of the circumstances under which they are made, not misleading. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the 25 COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 26 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the transactions contemplated hereby to violate the control requirement set forth in Code section 368(c). 27 6. REPRESENTATIONS OF VPI VPI represents and warrants that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, as amended, of VPI (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 28 6.2 AUTHORIZATION. (i) The representatives of VPI executing this Agreement have the authority to enter into and bind VPI to the terms of this Agreement and (ii) VPI has the full legal right, power and authority to enter into and perform this Agreement, and all required approvals of the shareholders and board of directors of VPI have been obtained. 6.3 CAPITAL STOCK OF VPI . Immediately prior to the Closing Date, the authorized capital stock of VPI is as set forth in Section 1.4(ii). All of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V and further, such shares were offered, issued, sold and delivered by VPI in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI to issue any of its authorized but unissued capital stock; and (ii) VPI has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. VPI has no subsidiaries except for companies to become subsidiaries of VPI pursuant to each of the Other Agreements. Except as set forth in the preceding sentence, VPI presently does not own, of record or beneficially, or control, directly or indirectly, any capital stock, 29 securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI has no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, VPI is not in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI, threatened, against or affecting VPI, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI has conducted and is conducting its business in compliance with the requirements, standards, criteria 30 and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and is not in violation of any of the foregoing. 6.9 NO VIOLATIONS. VPI is not in violation of any VPI Charter Document. Neither VPI nor, to the knowledge of VPI, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI is a party, or by which VPI, or any of its respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of VPI and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI, enforceable against VPI in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 31 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. VPI has not entered and will not enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and neither VPI nor its equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. None of the Other Agreements shall provide for a valuation of any of the Other Founding Companies based on the use of a multiplier greater than ten percent (10%). 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. VPI has not conducted any operations or business since inception other than activities related to the VPI Plan of Organization. VPI does not own and has not at any time owned any real property or any material personal property and is not a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI has timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or its officers or employees responsible for maintaining the financial records of VPI subsequent to the filing of such Tax Returns to the contrary of any information 23 contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and its employees are not aware of any proposed examinations) or claims against VPI (including liens against assets of VPI) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, VPI has not entered into an agreement or waiver and has not been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI, any member of an affiliated or consolidated group which includes or included VPI, or with respect to any payment made or deemed made by VPI, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, VPI has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). VPI is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, VPI (i) has not assumed and is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or such person or entity was the surviving corporation or a 33 consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI for its last three (3) fiscal years or such shorter period of time as VPI shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI has a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, VPI's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) VPI is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI as of the date hereof are disclosed on Schedule 6.14. (k) VPI has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 34 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, 35 employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI as the COMPANY may from time to time reasonably request. VPI will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; 36 (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; 37 (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; 38 (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock, except that the STOCKHOLDERS may give shares of COMPANY Stock to their children and may transfer shares of COMPANY Stock to employees of the COMPANY provided the total number of issued and outstanding shares of COMPANY Stock does not increase; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 39 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, 40 would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the 41 provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER 42 represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated income statement of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such balance sheet and income statement shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Such balance sheet and income statement of the COMPANY for the fiscal quarter ended March 43 31, 1998, shall have been prepared on a basis consistent with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, (i) except as noted therein, (ii) except for footnote disclosures normally required by generally accepted accounting principles and (iii) subject to year-end adjustments. Except as noted in such balance sheets and income statements, such balance sheets and income statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 44 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 45 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI is authorized to do business, showing that VPI is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI respectively for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI which would constitute a Material Adverse Effect, and VPI shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 46 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI, certifying the truth and correctness of attached copies of VPI's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI approving VPI's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI The obligations of VPI with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI with respect to actions to be taken on the Closing Date are subject to the 47 satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the 48 consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date effective as of the Closing Date, releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 49 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate 50 family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: 51 (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents 52 relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Heidi O'Leary Houston to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 53 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, VPI agrees that it shall remove the restricted stock legend from the VPI Stock received by any STOCKHOLDER pursuant to this Agreement as soon as practicable after receipt from such STOCKHOLDER of a letter requesting removal of the restricted stock legend provided that (i) the STOCKHOLDER has held such stock for a period of at least two years after the Closing Date, (ii) the STOCKHOLDER is not, and has not been for the three months preceding the removal of the legend, a director of VPI, an officer of VPI (other than the President of the COMPANY or its successor), or a beneficial owner of more than one percent of the outstanding shares of VPI and (iii) there have been no amendments to Rule 144(k) that would prohibit VPI from removing such legend. 11. INDEMNIFICATION The STOCKHOLDERS and VPI each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI and the COMPANY at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI and the COMPANY as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material 54 fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI or the COMPANY to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI of its representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 55 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying 56 Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties 57 hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against VPI exceed $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 58 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the transactions contemplated hereby, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 59 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of 60 its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel 61 management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (b) Heidi O'Leary Houston from engaging in any noncommercial property management, rental or sales business or hotel management business only with respect to her primary personal residence or any real property in which she has a noncontrolling interest such that she is unable to direct management, rental or sales business or hotel management business relating to such real property to the COMPANY or VPI. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that 62 the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting the customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such 63 restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without good cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 64 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the COMPANY and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. Nothing herein shall restrict the STOCKHOLDERS from using confidential information of the COMPANY described in this Section 65 14.1 in the businesses in which they are entitled to engage in competition with the COMPANY pursuant to Section 13.1(b). 14.2 VPI . VPI recognizes and acknowledges that it has in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI agrees that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, it will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential and to the use restrictions contained herein. In the event of a breach or threatened breach by VPI of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 66 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER 67 AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective 68 accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 69 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 70 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 71 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby 72 does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final 73 prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in 74 such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 75 (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. 76 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other 77 media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS and VPI shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, 78 the COMPANY and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property 79 transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the transactions contemplated hereby, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; 80 (c) If to the COMPANY, addressed to it at: Houston and O'Leary Company 620 East Hyman Avenue Aspen, Colorado 81611 Facsimile no: (970) 925-8670 Attention: Heidi O'Leary Houston and marked "Personal and Confidential" with copies to: Krendl Horowitz & Krendl 370 17th Street, Suite 5350 Denver, Colorado 80202 Facsimile no: (303) 629-2406 Attention: Cathy S. Krendl or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining 81 provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the transactions contemplated hereby. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the transactions contemplated hereby and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. 82 "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. 83 "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without good cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. 84 "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. 85 "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the third recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 86 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. By:/s/ Leonard Potter ------------------------------- Leonard Potter Vice President HOUSTON AND O'LEARY COMPANY By:/s/ Heidi O'Leary Houston ------------------------------- Heidi O'Leary Houston President STOCKHOLDER: /s/ Heidi O'Leary Houston - ---------------------------------- Heidi O'Leary Houston EX-2.6 8 EXHIBIT 2.6 EXHIBIT 2.6 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. JUPITER ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC. and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporation............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO..............................................4 1.5 Effect of Merger.....................................................4 2. CONVERSION OF STOCK......................................................6 2.1 Manner of Conversion.................................................6 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock................................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9 5.1 Due Organization.................................................10 5.2 Authority........................................................10 5.3 Capital Stock of the COMPANY.....................................11 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................11 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................14 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................17 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................18 5.18 Insurance.......................................................19 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................22 5.23 Taxes...........................................................23 5.24 No Violations...................................................25 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Deposit Accounts; Powers of Attorney............................28 5.28 Validity of Obligations.........................................28 5.29 Relations with Governments......................................29 5.30 Disclosure......................................................29 5.31 Prohibited Activities...........................................30 (B) Representations and Warranties of STOCKHOLDERS......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock............................30 6. REPRESENTATIONS OF VPI AND NEWCO........................................31 6.1 Due Organization....................................................31 6.2 Authorization.......................................................32 6.3 Capital Stock of VPI and NEWCO......................................32 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................33 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................33 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................36 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................38 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................40 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................43 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 9.5 No Material Adverse Effect..........................................53 9.6 STOCKHOLDERS' Release...............................................53 ii 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 9.18 Termination of Defined Benefit Plans...............................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................58 11.2 Indemnification by VPI.............................................59 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................63 12.1 Termination........................................................63 12.2 Liabilities in Event of Termination................................64 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................66 13.3 Reasonable Restraint...............................................66 13.4 Severability; Reformation..........................................67 13.5 Independent Covenant...............................................67 13.6 Materiality........................................................68 13.7 Limitation.........................................................68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................68 14.1 STOCKHOLDERS.......................................................68 14.2 VPI AND NEWCO......................................................69 14.3 Damages............................................................70 14.4 Survival...........................................................70 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................71 15.1 Transfer Restrictions..............................................71 15.2 Certain Transfers..................................................71 16. SECURITIES LAW REPRESENTATIONS.........................................72 16.1 Compliance with Law................................................72 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................73 17.1 Piggyback Registration Rights......................................73 17.2 Demand Registration Rights.........................................74 17.3 Registration Procedures............................................75 17.4 Underwriting Agreement.............................................76 iii 17.5 Availability of Rule 144...........................................76 17.6 Registration Rights Indemnification................................76 18. GENERAL................................................................81 18.1 Press Releases.....................................................81 18.2 Cooperation........................................................81 18.3 Successors and Assigns; Third Party Beneficiaries..................82 18.4 Entire Agreement...................................................82 18.5 Counterparts.......................................................82 18.6 Brokers and Agents.................................................82 18.7 Expenses...........................................................82 18.8 Notices............................................................83 18.9 Governing Law......................................................84 18.10 Exercise of Rights and Remedies...................................85 18.11 Time..............................................................85 18.12 Reformation and Severability......................................85 18.13 Remedies Cumulative...............................................85 18.14 Captions..........................................................85 18.15 Amendments and Waivers............................................85 18.16 Incorporation by Reference........................................86 18.17 Defined Terms.....................................................86 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPRATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), JUPITER ACQUISITION CORP., a Delaware corporation ("NEWCO"), JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC., a Utah corporation (the "COMPANY"), and Jon R. Brinton (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a 1 Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Certificate of Incorporation of the COMPANY then in effect shall be the Certificate of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or 3 capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance 4 with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 5 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI 6 Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in 7 connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of 8 the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the 9 representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 10 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business 11 entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date. 12 Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements, except for the requirement of footnote disclosures). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and 13 (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other 14 governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY 15 except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the 16 COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 17 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to 18 the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish 19 such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for 20 example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan 21 listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or 22 instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any 23 statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth in Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth in Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. 24 (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the 25 COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the 26 COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; 27 (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 28 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 29 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 30 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent 31 permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned by, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 32 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 33 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 34 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 35 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 36 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 37 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the 38 STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 39 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 40 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non- 43 occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 55 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 56 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 57 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or 58 the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or 59 regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to 60 the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining 61 the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be 62 counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 63 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided,however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of 64 its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business(the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel 65 management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and 66 business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting the customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against 67 VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose 68 such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to 69 authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 70 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires 71 to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: 72 THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares 73 could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other 74 Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are 75 reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final 76 prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter 77 within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such 78 action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, 79 claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay 80 by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and 81 other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, 82 representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be 83 notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: Jupiter Property Management at Park City, Inc. 1700 Park Avenue P.O. Box 680128 Park City, Utah 84068 Facsimile no.: (435) 649-8063 Attention: Jon R. Brinton and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 84 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 85 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. 86 "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. 87 "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. 88 "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. 89 "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 90 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. JUPITER ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC. By:/s/ Jon R. Brinton ---------------------------------- Name: Jon R. Brinton --------------------------- Title: President --------------------------- STOCKHOLDERS: /s/ Jon R. Brinton - ---------------------------------- Jon R. Brinton EX-2.7 9 EXHIBIT 2.7 EXHIBIT 2.7 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. MAUI ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) MAUI CONDOMINIUM & HOME REALTY, INC. and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving Corporation...............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO..............................................4 1.5 Effect of Merger.....................................................4 2. CONVERSION OF STOCK......................................................5 2.1 Manner of Conversion.................................................5 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9 5.1 Due Organization.................................................10 5.2 Authority........................................................10 5.3 Capital Stock of the COMPANY.....................................10 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................11 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................13 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................16 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................17 5.18 Insurance.......................................................18 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................22 5.23 Taxes...........................................................23 5.24 No Violations...................................................25 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Deposit Accounts; Powers of Attorney............................28 5.28 Validity of Obligations.........................................28 5.29 Relations with Governments......................................28 5.30 Disclosure......................................................28 5.31 Prohibited Activities...........................................29 (B) Representations and Warranties of STOCKHOLDERS......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock............................30 6. REPRESENTATIONS OF VPI AND NEWCO........................................31 6.1 Due Organization....................................................31 6.2 Authorization.......................................................32 6.3 Capital Stock of VPI and NEWCO......................................32 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................33 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................33 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................36 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................38 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................40 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................43 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 9.5 No Material Adverse Effect..........................................53 ii 9.6 STOCKHOLDERS' Release...............................................53 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 9.18 Termination of Defined Benefit Plans...............................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................58 11.2 Indemnification by VPI.............................................59 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................63 12.1 Termination........................................................63 12.2 Liabilities in Event of Termination................................64 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................66 13.3 Reasonable Restraint...............................................67 13.4 Severability; Reformation..........................................67 13.5 Independent Covenant...............................................68 13.6 Materiality........................................................68 13.7 Limitation.........................................................68 13.8 COMPANY Noncompetition.............................................68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69 14.1 STOCKHOLDERS.......................................................69 14.2 VPI AND NEWCO......................................................70 14.3 Damages............................................................71 14.4 Survival...........................................................71 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................71 15.1 Transfer Restrictions..............................................71 15.2 Certain Transfers..................................................72 16. SECURITIES LAW REPRESENTATIONS.........................................72 16.1 Compliance with Law................................................73 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................73 17.1 Piggyback Registration Rights......................................74 iii 17.2 Demand Registration Rights.........................................75 17.3 Registration Procedures............................................76 17.4 Underwriting Agreement.............................................76 17.5 Availability of Rule 144...........................................76 17.6 Registration Rights Indemnification................................76 18. GENERAL................................................................81 18.1 Press Releases.....................................................81 18.2 Cooperation........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries..................82 18.4 Entire Agreement...................................................82 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................83 18.7 Expenses...........................................................83 18.8 Notices............................................................84 18.9 Governing Law......................................................85 18.10 Exercise of Rights and Remedies...................................85 18.11 Time..............................................................85 18.12 Reformation and Severability......................................85 18.13 Remedies Cumulative...............................................85 18.14 Captions..........................................................86 18.15 Amendments and Waivers............................................86 18.16 Incorporation by Reference........................................86 18.17 Defined Terms.....................................................86 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), MAUI ACQUISITION CORP., a Delaware corporation ("NEWCO"), MAUI CONDOMINIUM & HOME REALTY, INC., a Hawaii corporation (the "COMPANY"), and Daniel C. Blair and Paul T. Dobson (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, The Maury People, Inc., a 1 Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State or the Director of the Department of Commerce and Consumer Affairs, as applicable, of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Articles of Incorporation of the COMPANY then in effect shall be the Articles of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Articles of Incorporation and Bylaws of the Surviving Corporation; and 3 (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Articles of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the 4 COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and 5 outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective 6 Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding 7 dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be 8 completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of 9 this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Articles of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV 10 and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, 11 free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's unaudited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of 12 Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of 13 the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 14 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, 15 remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a 16 "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: 17 (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located (or with the Bureau of Conveyances of the State of Hawaii or the Assistant Registrar of the Land Court of the State of Hawaii, as applicable) which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received 18 for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. 19 The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 20 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: 21 (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, 22 commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, 23 required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. 24 (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material 25 Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, 26 STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or 27 (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. 30 (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). 29 (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 30 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 31 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 32 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 33 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 34 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 35 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 36 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 37 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the 38 STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 39 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 40 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (ix) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (x) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non- 43 occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 55 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 56 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting 57 conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out 58 of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that 59 VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying 60 Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder 61 shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether 62 the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; 63 (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, 64 however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management or rental business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management or rental business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the 65 COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management or rental services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management or rental business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 66 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 67 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 13.8 COMPANY NONCOMPETITION. The parties hereto agree that the Surviving Corporation and the surviving corporations under the Other Agreements that operate in the State of Hawaii shall cooperate with each other and shall not compete with each other. This provision shall be included in the Other Agreements of the Other Founding Companies that operate in the State of Hawaii. 68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by 69 this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 70 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER 71 AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective 72 accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 73 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 74 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 75 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby 76 does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final 77 prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in 78 such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 79 (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. 80 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other 81 media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the 82 STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property 83 transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; 84 (c) If to the COMPANY, addressed to it at: Maui Condominium & Home Realty, Inc. 2511 South Kihei Road P.O. Box 1840 Kihei, Hawaii 96753 Facsimile no.: (808) 875-1769 Attention: Paul T. Dobson and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 85 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. 86 "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. 87 "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. 88 "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, 89 employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 90 Maui Agreement and Plan of Organization IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. MAUI ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President MAUI CONDOMINIUM & HOME REALTY, INC. By:/s/ Paul T. Dobson ---------------------------------- Name: Paul T. Dobson --------------------------- Title: Vice President/Secretary -------------------------- STOCKHOLDERS: /s/ Daniel C. Blair - ------------------------------------- Daniel C. Blair /s/ Paul T. Dobson - ------------------------------------- Paul T. Dobson EX-2.8 10 EXHIBIT 2.8 EXHIBIT 2.8 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. MAURY ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) THE MAURY PEOPLE, INC. and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporation...............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO..............................................4 1.5 Effect of Merger.....................................................4 2. CONVERSION OF STOCK......................................................5 2.1 Manner of Conversion.................................................5 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9 5.1 Due Organization.................................................10 5.2 Authority........................................................10 5.3 Capital Stock of the COMPANY.....................................10 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................11 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................14 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................17 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................17 5.18 Insurance.......................................................18 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................22 5.23 Taxes...........................................................23 5.24 No Violations...................................................25 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Deposit Accounts; Powers of Attorney............................28 5.28 Validity of Obligations.........................................28 5.29 Relations with Governments......................................29 5.30 Disclosure......................................................29 5.31 Prohibited Activities...........................................30 (B) Representations and Warranties of STOCKHOLDERS......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock............................30 6. REPRESENTATIONS OF VPI AND NEWCO........................................30 6.1 Due Organization....................................................31 6.2 Authorization.......................................................31 6.3 Capital Stock of VPI and NEWCO......................................32 6.4 Transactions in Capital Stock.......................................32 6.5 Subsidiaries........................................................32 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................33 6.8 Conformity with Law; Litigation.....................................33 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................34 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................35 6.14 Taxes..............................................................35 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................38 7. COVENANTS PRIOR TO CLOSING..............................................38 7.1 Access and Cooperation; Due Diligence...............................38 7.2 Conduct of Business Pending Closing.................................39 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................43 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 9.5 No Material Adverse Effect..........................................53 ii 9.6 STOCKHOLDERS' Release...............................................53 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................55 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................59 11.2 Indemnification by VPI.............................................60 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................64 12.1 Termination........................................................64 12.2 Liabilities in Event of Termination................................65 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................67 13.3 Reasonable Restraint...............................................67 13.4 Severability; Reformation..........................................68 13.5 Independent Covenant...............................................68 13.6 Materiality........................................................69 13.7 Limitation.........................................................69 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69 14.1 STOCKHOLDERS.......................................................69 14.2 VPI AND NEWCO......................................................70 14.3 Damages............................................................71 14.4 Survival...........................................................71 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................71 15.1 Transfer Restrictions..............................................71 15.2 Certain Transfers..................................................72 16. SECURITIES LAW REPRESENTATIONS.........................................73 16.1 Compliance with Law................................................73 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................74 17.1 Piggyback Registration Rights......................................74 17.2 Demand Registration Rights.........................................75 17.3 Registration Procedures............................................76 iii 17.4 Underwriting Agreement.............................................76 17.5 Availability of Rule 144...........................................76 17.6 Registration Rights Indemnification................................77 18. GENERAL................................................................81 18.1 Press Releases.....................................................82 18.2 Cooperation........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries..................82 18.4 Entire Agreement...................................................82 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................83 18.7 Expenses...........................................................83 18.8 Notices............................................................84 18.9 Governing Law......................................................85 18.10 Exercise of Rights and Remedies...................................85 18.11 Time..............................................................86 18.12 Reformation and Severability......................................86 18.13 Remedies Cumulative...............................................86 18.14 Captions..........................................................86 18.15 Amendments and Waivers............................................86 18.16 Incorporation by Reference........................................86 18.17 Defined Terms.....................................................87 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), MAURY ACQUISITION CORP., a Delaware corporation ("NEWCO"), THE MAURY PEOPLE, INC., a Massachusetts corporation (the "COMPANY"), and Sharon Benson Doucette (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, 1 Inc., a Hawaii corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the STOCKHOLDERS and the Board of Directors of the COMPANY have approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Certificate of Incorporation of the COMPANY then in effect shall be the Certificate of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or 3 capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified; and (v) the corporate purposes of the Surviving Corporation shall be the purposes set forth in the Articles of Organization of the COMPANY until changed as provided by law. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the 4 COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and 5 outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective 6 Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding 7 dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be 8 completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of 9 this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV 10 and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, 11 free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date and unaudited Statement of Changes in Stockholders' Equity, if any, for the period ended December 31, 1996; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date and unaudited Statement of Cash Flows, if any, for the period ended December 31, 1996. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except 12 as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 13 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is 14 conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which 15 site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 16 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on 17 Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery therof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received 18 for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. 19 The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 20 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. The COMPANY has frozen (or will freeze pursuant to Section 7 hereof), all benefit accrual with respect to any defined benefit employee pension plan listed on Schedule 5.20. The freezing of such benefits will be in accordance with the applicable plans (including all amendments which are adopted to effect the freezing of benefit accrual), and the applicable provisions of ERISA, the Code, the regulations under each of ERISA and the Code, and all other applicable laws. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan 21 listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial 22 noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. 23 (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth in Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth in Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the 24 COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations 25 hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in 26 the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; 27 (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 28 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Founding Company Questionnaire attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 29 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to 30 Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement 31 and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except 32 as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and 33 are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 34 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact 35 or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax 36 sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the 37 Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any 38 documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; 39 (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices; and (ix) freeze all benefit accrual under any defined benefit employee pension benefit plan listed on Schedule 5.20 (and amend any such plan as necessary in order to freeze benefit accrual), and take all steps necessary to begin the plan termination process, including, but not limited to, filing the appropriate forms with the Pension Benefit Guaranty Corporation and the Internal Revenue Service (including, but not limited to, an application to the Internal Revenue Service for a determination upon termination) and procuring from the STOCKHOLDERS a valid waiver of benefits in order to facilitate funding of any such plan for termination purposes 40 and to prevent VPI from assuming any financial liability for funding any such plan. Such steps shall be taken in accordance with the provisions of the plan and the applicable provisions of ERISA and the Code and the regulations under each of ERISA and the Code. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non- 43 occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees or independent contractor service providers on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction 55 contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and 56 information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. Following the Closing Date, VPI shall cause the COMPANY to consummate the termination of any defined benefit employee pension benefit plan which was to be terminated under the provisions of Section 7.2 hereof (including, but not limited to, 57 making any distributions that are required by ERISA, the Code or any other applicable law, and filing any forms required by the Internal Revenue Service or any other applicable governmental agency after such distributions). In addition, the STOCKHOLDERS shall execute any documents required: (i) to effectuate such termination and (ii) to fully fund any such plan to the extent required, following the execution of a waiver of benefits by the STOCKHOLDERS, in order to avoid the existence any liability of VPI, NEWCO and the COMPANY for funding such plan. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 10.8 POST-CLOSING PAYMENTS TO STOCKHOLDERS. VPI shall cause the COMPANY to pay over to the STOCKHOLDERS all brokerage commissions received by the COMPANY on or after the Closing Date pursuant to real estate sales agreements in which the COMPANY serves as a broker that were signed by all parties thereto prior to the Closing Date; provided, however, that a schedule setting forth all such agreements that have been signed prior to the Closing Date (but that have not yet had a closing occur pursuant thereto) shall have been delivered to VPI on or before the Closing Date. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 58 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any 59 indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any 60 party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of- 61 pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall 62 exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the 63 value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or 64 (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, 65 or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, (A) within 100 miles of the locations in which VPI or any of its subsidiaries (except the COMPANY as long as the COMPANY is located on Nantucket Island) conduct a noncommercial property management, rental or sales business or hotel management business or (B) within the geographic boundary of Nantucket Island as long as the COMPANY is located on Nantucket Island (the geographic areas set forth in the foregoing clauses (A) and (B) are collectively referred to herein as the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition 66 candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding anything in this Section 13 to the contrary, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (B) engaging in business as a real estate broker, other than as an employee of the COMPANY while employed by the COMPANY, in any location other than Nantucket Island after any termination of STOCKHOLDER's employment with the COMPANY. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. 67 It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 68 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under 69 color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS 70 with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after 71 the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such 72 STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and 73 proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be 74 sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any 75 of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or 76 successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in 77 reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, 78 if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such 79 indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, 80 access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 81 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and 82 understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the 83 COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter 84 with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: The Maury People, Inc. 35 Main Street Nantucket Island, MA 02554 Facsimile no.: (508) 325-5476 Attention: Sharon Benson Doucette and marked "Personal and Confidential" with copies to: Kenneth M. Goldberg Bernkopf, Goodman & Baseman LLP 125 Summer Street Boston, MA 02110-1621 Facsimile no.: (617) 790-3300 or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any 85 similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 86 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. 87 "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such 88 employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. 89 "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. 90 "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 91 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. MAURY ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President THE MAURY PEOPLE, INC. By:/s/ Sharon Benson Doucette ---------------------------------- Sharon Benson Doucette President and Treasurer STOCKHOLDERS: /s/ Sharon Benson Doucette - ---------------------------------- Sharon Benson Doucette EX-2.9 11 EXHIBIT 2.9 EXHIBIT 2.9 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. PRISCILLA ACQUISITION CORP. REALTY CONSULTANTS ACQUISITION CORP. (each a subsidiary of Vacation Properties International, Inc.) HOWEY ACQUISITION, INC. REALTY CONSULTANTS, INC. and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGERS..............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporations..............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANIES, VPI and NEWCOS...........................................4 1.5 Effect of Merger.....................................................5 2. CONVERSION OF STOCK......................................................6 2.1 Manner of Conversion.................................................6 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.............9 (A) Representations and Warranties of COMPANIES and STOCKHOLDERS.........9 5.1 Due Organization.................................................10 5.2 Authority........................................................11 Capital Stock of the COMPANIES.......................................11 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................12 5.6 Subsidiaries.....................................................12 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANIES........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................14 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................17 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................18 5.18 Insurance.......................................................19 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................23 5.23 Taxes...........................................................23 5.24 No Violations...................................................26 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Deposit Accounts; Powers of Attorney............................28 5.28 Validity of Obligations.........................................29 5.29 Relations with Governments......................................29 5.30 Disclosure......................................................29 5.31 Prohibited Activities...........................................30 (B) Representations and Warranties of STOCKHOLDERS......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock............................31 6. REPRESENTATIONS OF VPI AND NEWCOS.......................................31 6.1 Due Organization....................................................32 6.2 Authorization.......................................................32 6.3 Capital Stock of VPI and NEWCOS.....................................32 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................33 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................34 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................36 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................39 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................40 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................43 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificates............................................53 9.5 No Material Adverse Effect..........................................53 9.6 STOCKHOLDERS' Release...............................................53 ii 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 9.18 Termination of Defined Benefit Plans...............................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................58 11.2 Indemnification by VPI.............................................59 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................64 12.1 Termination........................................................64 12.2 Liabilities in Event of Termination................................64 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................67 13.3 Reasonable Restraint...............................................67 13.4 Severability; Reformation..........................................68 13.5 Independent Covenant...............................................68 13.6 Materiality........................................................68 13.7 Limitation.........................................................68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69 14.1 STOCKHOLDERS.......................................................69 14.2 VPI AND NEWCOS.....................................................70 14.3 Damages............................................................71 14.4 Survival...........................................................71 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................71 15.1 Transfer Restrictions..............................................71 15.2 Certain Transfers..................................................72 16. SECURITIES LAW REPRESENTATIONS.........................................72 16.1 Compliance with Law................................................73 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................74 17.1 Piggyback Registration Rights......................................74 17.2 Demand Registration Rights.........................................75 17.3 Registration Procedures............................................76 17.4 Underwriting Agreement.............................................76 iii 17.5 Availability of Rule 144...........................................76 17.6 Registration Rights Indemnification................................76 18. GENERAL................................................................81 18.1 Press Releases.....................................................81 18.2 Cooperation........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries..................82 18.4 Entire Agreement...................................................82 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................83 18.7 Expenses...........................................................83 18.8 Notices............................................................84 18.9 Governing Law......................................................85 18.10 Exercise of Rights and Remedies...................................85 18.11 Time..............................................................85 18.12 Reformation and Severability......................................85 18.13 Remedies Cumulative...............................................86 18.14 Captions..........................................................86 18.15 Amendments and Waivers............................................86 18.16 Incorporation by Reference........................................86 18.17 Defined Terms.....................................................86 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation, ("VPI"), PRISCILLA ACQUISITION CORP., a Delaware corporation REALTY CONSULTANTS ACQUISITION CORP., a Delaware Corporation (individually, a "NEWCO" and collectively, the "NEWCOS"), REALTY CONSULTANTS, INC., a Florida Corporation, and, HOWEY ACQUISITION, INC., a Florida corporation (each, a "COMPANY" and collectively, the "COMPANIES"), and the stockholders of the COMPANIES set forth on Annex IV hereof (the "STOCKHOLDERS"). WHEREAS, each NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, each having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and each NEWCO is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of each NEWCO and each COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that (i) PRISCILLA ACQUISITION CORP. merge with and into HOWEY ACQUISTION, INC. and (ii) REALTY CONSULTANTS ACQUISITION CORP. merge with and into REALTY CONSULTANTS, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which each of the COMPANIES is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal 1 Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANIES, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Boards of Directors of the COMPANIES have approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANIES to VPI; 2 NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGERS 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which each of the COMPANIES is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i) PRISCILLA ACQUISITION CORP. shall be merged with and into HOWEY ACQUISITION CORP. and (ii) REALTY CONSULTANTS ACQUISITION CORP. shall be merged with and into REALTY CONSULTANTS, INC., each in accordance with the Articles of Merger, the separate existence of each NEWCO shall cease and each COMPANY shall be the surviving party in the Mergers (each COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). Each Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATIONS. At the Effective Time of each Merger: (i) the Certificate of Incorporation then in effect of each COMPANY shall be the Certificate of Incorporation of the Surviving Corporation in such Merger until changed as provided by law; (ii) the Bylaws of each NEWCO then in effect shall become the Bylaws of the Surviving Corporation in such Merger; and subsequent to the Effective Time of such Merger, such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger until they shall thereafter be duly amended; (iii) the Board of Directors of each Surviving Corporation shall consist of the persons who are, immediately prior to the Effective Time of the Merger, on the Board of 3 Directors of the COMPANY merging into such Surviving Corporation, provided that the Chief Executive Officer of VPI shall be elected as a director of each Surviving Corporation effective as of the Effective Time of each Merger; the Board of Directors of each Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of each COMPANY immediately prior to the Effective Time of each Merger shall continue as the officers of the Surviving Corporation into which such COMPANY is merged in the same capacity or capacities, and effective upon the Effective Time of each Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of each Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of each Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES, VPI AND NEWCOS. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANIES, VPI and the NEWCOS as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and 4 (iii) as of the date of this Agreement, the authorized capital stock of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of the Mergers shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State of Florida. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of each COMPANY shall continue unaffected and unimpaired by the Mergers and the corporate franchises, existence and rights of each NEWCO shall be merged with and into the respective COMPANIES, and the COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At the Effective Time of the Mergers, the separate existence of each NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporations shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to be transferred to, and vested in, the respective Surviving Corporations without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the respective Surviving Corporations as they were of each NEWCO and each COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in each respective NEWCO and COMPANY, shall not revert or be in any way impaired by reason of the Mergers. Except as otherwise provided herein, each Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of the respective NEWCO and COMPANY and any claim existing, or action or proceeding pending, by or against a NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or COMPANY had not taken place, or the respective Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens 5 upon the property of a NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall attach to the respective Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporations, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock of each COMPANY issued and outstanding immediately prior to the Effective Time of each respective Merger, by virtue of such Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by each COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock of each NEWCO issued and outstanding immediately prior to the Effective Time of each respective Merger, shall, by virtue of such Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation involved in such 6 Merger which shall constitute all of the issued and outstanding shares of common stock of such Surviving Corporation immediately after the Effective Time of such Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Mergers, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working 7 capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of each COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Mergers (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Mergers) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Mergers or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and the NEWCOS hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are required by the laws of the State of Florida in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANIES directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") 8 at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Mergers shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Mergers referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS. Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANIES and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 9 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANIES or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and such COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY taken as a whole (as used herein with respect to such COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated and contains a list of all such jurisdictions in which each COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of each COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of each COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as 10 set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts after January 1, 1997, of such COMPANY, and of its officers and directors on behalf of such COMPANY, . 5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANIES The authorized capital stock of each COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of each COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by such COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates any of the COMPANIES to issue any of its capital stock; (ii) neither COMPANY has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of each COMPANY nor the relative ownership of shares among any of their respective stockholders has been altered or changed in contemplation of the Mergers and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants 11 or other rights to acquire shares of each COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is any COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of each COMPANY, including the names of any entities acquired by each COMPANY (by stock purchase, merger or otherwise) or owned by each COMPANY or from whom the COMPANIES previously acquired material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of any of the COMPANIES since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of each of the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of 12 Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date neither COMPANY has incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANIES, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and 13 (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of such COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of each COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of such COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of such COMPANY as now conducted, and such COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, 14 trademarks, trade names, patents, patent applications and copyrights owned or held by such COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Each of the COMPANIES has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to each COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each of the COMPANIES has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) each COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list 15 of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by such COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location to which such COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of such COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of such COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by such COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of such COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all 16 personal property used by each COMPANY in its business is either owned by such COMPANY or leased by such COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of such COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of any COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of any COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by such COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which such COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. Each COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 17 5.16 and no notice of default under any such contract or agreement has been received. Each COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by such COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by each COMPANY in the conduct of its business. Each COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of each COMPANY with respect to real property owned by such COMPANY. Each COMPANY has also delivered to VPI an accurate list of real property leased by such COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by such COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by the STOCKHOLDERS or business or personal 18 affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by such COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that such COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by such COMPANY has ever been canceled by the insurer and such COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of such COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. 19 Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or subject to (and none of their respective assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of any COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of each COMPANY's knowledge, threatened labor dispute involving any COMPANY and any group of its employees nor has any COMPANY experienced any labor interruptions over the past three years. Each COMPANY believes its relationship with employees to be good. Each COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of such COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, neither COMPANY sponsors, maintains or contributes to any plan program, fund or 20 arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred compensation arrangement). Neither COMPANY has sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of such COMPANY's employees. All accrued contribution obligations of each COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of such COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of each COMPANY that are currently maintained or contributed to by such COMPANY or cover employees or former employees of such COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not 21 limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No such plan listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) each COMPANY has not incurred liability under Section 4062 of ERISA; (v) each COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which any COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than a COMPANY that is, or at any time was, a member of a 22 "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes such COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Each COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) Each COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANIES or their respective officers or employees responsible for maintaining the financial records of such COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in 23 progress (and the COMPANIES and their respective employees are not aware of any proposed examinations) or claims against any COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by any COMPANY, any member of an affiliated or consolidated group which includes or included any of the COMPANIES, or with respect to any payment made or deemed made by any COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, neither COMPANY has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither COMPANY is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. 24 (e) Except as set forth on Schedule 5.23, neither COMPANY has (i) assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which any COMPANY or such person or entity was the surviving corporation or a consolidation) or (ii) indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of each COMPANY for its last three (3) fiscal years or such shorter period of time as such COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) Each COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, each COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither COMPANY is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) Neither COMPANY has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code agreed to have section 341(f)(2) of the Code apply to any 25 disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by such COMPANY. 5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter Document. Neither COMPANY or, to the knowledge of either COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of each COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts either COMPANY from freely providing services to any other customer or potential customer of such COMPANY, VPI, the NEWCOS or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither COMPANY is now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: 26 (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of any COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of any COMPANY; (iii) any change in the authorized capital of any COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of any COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by any COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of any COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of any COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to any COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation 27 (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of any COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of any COMPANY's business; (xi) any waiver of any material rights or claims of any COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which any COMPANY is a party; (xiii) any transaction by any COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by any COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which each COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from each COMPANY and a description of the terms of such power. 28 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by each of the COMPANIES and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of each of the COMPANIES and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of each COMPANY, enforceable against such COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of each COMPANY has the legal power, authority and capacity to bind such COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause any COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of each COMPANY for the time periods with respect to which such information was requested. Each COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which any COMPANY is a party, or to which their respective properties are subject, or (ii) any other fact or circumstance regarding any COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to any COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. 29 (b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to any COMPANY, the STOCKHOLDERS or any other person affiliated or associated with any COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither COMPANY has, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such 30 STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 6. REPRESENTATIONS OF VPI AND NEWCOS VPI and the NEWCOS jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 31 6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS executing this Agreement have the authority to enter into and bind VPI and the NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full legal right, power and authority to enter into and perform this Agreement and the Mergers, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date, the authorized capital stock of VPI and the NEWCOS is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of each NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and each NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and the NEWCOS in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares 32 was issued in violation of the preemptive rights of any past or present stockholder of VPI or the NEWCOS. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or the NEWCOS to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries except for the NEWCOS and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor any NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or any NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 33 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and the NEWCOS have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened, against or affecting VPI or the NEWCOS, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and the NEWCOS have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or any NEWCO is a party, or by which VPI or any NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and the NEWCOS under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except 34 as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCOS and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and the NEWCOS and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and the NEWCOS have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of 35 VPI, the NEWCOS, , their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and the NEWCOS have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or the NEWCOS or their officers or employees responsible for maintaining the financial records of VPI and the NEWCOS subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and the NEWCOS and their employees are not aware of any proposed examinations) or claims against VPI or the NEWCOS (including liens against assets of VPI or the NEWCOS) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. 36 (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or consolidated group which includes or included VPI or the NEWCOs, or with respect to any payment made or deemed made by VPI or the NEWCOS, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or the NEWCOS or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal years or such shorter period of 37 time as VPI or the NEWCOS shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and the NEWCOS have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor the NEWCOS' methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor the NEWCOS is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor the NEWCOS has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANIES as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 38 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, each COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of such COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of such COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. Each COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and the COMPANIES shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of each COMPANY access to all of VPI's and the NEWCOS' 39 sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish each COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and the NEWCOS will cooperate with each COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to each COMPANY, its representatives and advisors on a continuing basis through the Closing Date. Each COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with such COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental 40 authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, neither COMPANY shall, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of such COMPANY, provided that such COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of such COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANIES, including, but not limited to, the issuance of any option, warrant, call, conversion right or 42 commitment of any kind with respect to the COMPANIES' capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, any COMPANY or a merger, consolidation or business combination of any COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between such COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between each COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or 43 non-occurrence of which would be likely to cause any representation or warranty of any COMPANY or any STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or the NEWCOS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by any COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANIES consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or the NEWCOS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANIES do not give their consent, the COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning any COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANIES. Insofar as the information contained in the Registration Statement relates solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration Statement each COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANIES and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANIES 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANIES and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANIES, or on behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANIES as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANIES for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANIES or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANIES for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES 48 The obligations of STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and the NEWCOS contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and the NEWCOS contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and the NEWCOS on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Mergers or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANIES as a result of which the management of the COMPANIES deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have delivered to the COMPANIES a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or the NEWCOS are authorized to do business, showing that each of VPI and the NEWCOS is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and the NEWCOS, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or the NEWCOS which would constitute a Material Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or the NEWCOS to conduct their respective business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of each NEWCO, certifying the truth and correctness of attached copies of VPI's and the NEWCOS' respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS The obligations of VPI and the NEWCOS with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and the NEWCOS with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of each COMPANY, certifying the truth and correctness of attached copies of each COMPANY's Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving each COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to any COMPANY which would constitute a Material Adverse Effect, and neither COMPANY shall have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of any COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANIES and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between any of the COMPANIES and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI certificates, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in each COMPANY's state of incorporation and, unless waived by VPI, in each state in which each COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for each COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of each COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all personal guarantees, indemnities or liabilities for any indebtedness, and from any and all pledges of assets that they pledged to secure such indebtedness, for the benefit of the COMPANIES, with all such guarantees, indemnifications and liabilities on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such personal guarantees on the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or 55 obligations are related to the business of the COMPANIES as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANIES shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. 56 (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANIES, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Charles O. Howey to serve as a director of VPI effective as of the Closing Date. Such designated person also shall be a member of the Executive Committee of the Board of Directors effective as of the Closing Date, to serve subject to and in accordance with the Certificate of Incorporation and Bylaws of VPI. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at any COMPANY until such 57 time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of each COMPANY who were covered by such COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause such COMPANY (a) to maintain the books and records of each COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) as a result of or arising 58 from (i) any breach of the representations and warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the 59 STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or the NEWCOS under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for the liabilities and obligations of the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, the NEWCOS or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or the NEWCOS or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith 60 and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such 61 defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any 62 such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or the NEWCOS until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS 63 pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANIES; (ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs 64 and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial resort property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANIES, or any of their subsidiaries, conduct a noncommercial resort property management, rental or sales business or hotel management business (the "Territory"); 65 (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of any COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial resort property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial resort property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that such COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. 66 Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a 67 violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or any COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment 68 agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANIES, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES', the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing 69 herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to each COMPANY. 14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANIES, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES' businesses. VPI and the NEWCOS agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANIES, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or any NEWCOS, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANIES to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or the NEWCOS of the provisions of this Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and the NEWCOS from 70 disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANIES of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, 71 EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and 72 therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANIES, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 73 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be 74 registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 75 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby 76 does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final 77 prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in 78 such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 79 (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. 80 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other 81 media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANIES and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and NEWCOS shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of each COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI, acting through their respective 82 officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in 83 connection with the Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. VPI shall bear the expenses of any filing under the Hart-Scott Rodino Anti-Trust Improvements Act of 1976 (the "HSR Act") in connection with the transaction contemplated by this Agreement, provided that no filing under the HSR Act shall be made in connection with the transaction contemplated hereunder unless such filing is determined to be necessary in the opinion of counsel to VPI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or the NEWCOS, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; 84 (c) If to the COMPANIES, addressed to it at: Howey Acquisition, Inc. Realty Consultants, Inc. 22333 Allen Woodhaven, Michigan 48183 Facsimile no.: (313) 676-8308 Attention: Charles O. Howey and marked "Personal and Confidential" with copies to: Raymond & Prokop, P.C. 2000 Town Center Suite 2400 Southfield, MI 48075 Facsimile no.: (248) 357-2720 Attention: R. Peter Prokop or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining 85 provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Mergers. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Mergers and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means any COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean the NEWCOS and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. 86 "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Mergers shall mean the time as of which the Mergers become effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). 87 "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Mergers" means the mergers of (i) PRISCILLA ACQUISITION CORP. with and into HOWEY ACQUISITION, INC. and (ii) REALTY CONSULTANTS ACQUISITION CORP. with and into REALTY CONSULANT, INC., pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" or "NEWCOS"has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of each respective NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANIES. 88 "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANIES and any affiliated, combined, consolidated, unitary or similar group of which any COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. 89 "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporations" shall mean each of the COMPANIES as the surviving parties in the Mergers. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. 90 [THE NEXT PAGE IS THE SIGNATURE PAGE] 91 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. PRISCILLA ACQUISITION CORP. REALTY CONSULTANTS ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President HOWEY ACQUISITION, INC. REALTY CONSULTANTS, INC. By:/s/ Charles O. Howey ---------------------------------- Name: Charles O. Howey --------------------------- Title: President -------------------------- STOCKHOLDERS: /s/ Charles O. Howey - ----------------------------------------------- Charles O. Howey As trustee U/T/A dated March 9, 1979, as amended, of Charles O. Howey, Revocable Trust /s/ Dolores C. Howey - ----------------------------------------------- Dolores C. Howey As trustee U/T/A dated March 9, 1979, as amended, of Dolores C. Howey, Revocable Trust /s/ Paul N. Howey - ----------------------------------------------- Paul N. Howey As co-trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o John K. Howey /s/ John K. Howey - ----------------------------------------------- John K. Howey As co-trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Paul N. Howey As trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Charles O. Howey, Jr. As trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Robert J. Howey As trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Sarah A. Howey As trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Michelle A. Fry As trustee U/T/A dated December 19, 1994, of Charles O. Howey Irrevocable Trust f/b/o Beth A. Dixon /s/ Allen Williams - ----------------------------------------------- Allen Williams /s/ Charles O. Howey - ----------------------------------------------- Charles O. Howey EX-2.10 12 EXHIBIT 2.10 EXHIBIT 2.10 - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. RPM ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) RESORT PROPERTY MANAGEMENT, INC. and the STOCKHOLDERS named herein - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER.................................................................3 1.1 Delivery and Filing of Articles of Merger..............................3 1.2 Effective Time of the Merger...........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporation .............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO ...............................................4 1.5 Effect of Merger.......................................................4 2. CONVERSION OF STOCK........................................................5 2.1 Manner of Conversion...................................................5 3. DELIVERY OF MERGER CONSIDERATION...........................................6 3.1 Delivery of VPI Stock and Cash.........................................7 3.2 Delivery of COMPANY Stock..............................................7 3.3 Balance Sheet Test.....................................................7 4. CLOSING....................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.................9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS.............9 5.1 Due Organization....................................................9 5.2 Authority..........................................................10 5.3 Capital Stock of the COMPANY.......................................10 5.4 Transactions in Capital Stock......................................11 5.5 No Bonus Shares....................................................11 5.6 Subsidiaries.......................................................11 5.7 Predecessor Status; etc............................................12 5.8 Spin-off by the COMPANY............................................12 5.9 Financial Statements...............................................12 5.10 Liabilities and Obligations.......................................13 5.11 Accounts and Notes Receivable.....................................13 5.12 Permits and Intangibles...........................................14 5.13 Environmental Matters.............................................15 5.14 Personal Property.................................................16 5.15 Significant Customers.............................................16 5.16 Material Contracts and Commitments................................17 5.17 Real Property.....................................................17 5.18 Insurance.........................................................18 5.19 Compensation; Employment Agreements; Organized Labor Matters......19 5.20 Employee Plans....................................................20 5.21 Compliance with ERISA.............................................21 5.22 Conformity with Law; Litigation...................................22 5.23 Taxes.............................................................23 5.24 No Violations.....................................................25 5.25 Government Contracts..............................................26 5.26 Absence of Changes................................................26 5.27 Deposit Accounts; Powers of Attorney..............................28 5.28 Validity of Obligations...........................................28 5.29 Relations with Governments........................................28 5.30 Disclosure........................................................28 5.31 Prohibited Activities.............................................29 (B) Representations and Warranties of STOCKHOLDERS........................30 5.32 Authority; Ownership..............................................30 5.33 Preemptive Rights.................................................30 i 5.34 No Intention to Dispose of VPI Stock..............................30 6. REPRESENTATIONS OF VPI AND NEWCO..........................................31 6.1 Due Organization......................................................31 6.2 Authorization.........................................................32 6.3 Capital Stock of VPI and NEWCO........................................32 6.4 Transactions in Capital Stock.........................................33 6.5 Subsidiaries..........................................................33 6.6 Financial Statements..................................................33 6.7 Liabilities and Obligations...........................................33 6.8 Conformity with Law; Litigation.......................................34 6.9 No Violations.........................................................34 6.10 Validity of Obligations..............................................35 6.11 VPI Stock............................................................35 6.12 No Side Agreements...................................................35 6.13 Business; Real Property; Material Agreements.........................36 6.14 Taxes................................................................36 6.15 Completion of Due Diligence..........................................38 6.16 Disclosure..........................................................38 6.17 Tax Treatment........................................................38 7. COVENANTS PRIOR TO CLOSING................................................39 7.1 Access and Cooperation; Due Diligence.................................39 7.2 Conduct of Business Pending Closing...................................40 7.3 Prohibited Activities.................................................41 7.4 No Shop...............................................................43 7.5 Notice to Bargaining Agents...........................................43 7.6 Agreements............................................................43 7.7 Notification of Certain Matters.......................................43 7.8 Amendment of Schedules................................................44 7.9 Cooperation in Preparation of Registration Statement..................46 7.10 Final Financial Statements...........................................47 7.11 Further Assurances...................................................48 7.12 Authorized Capital...................................................48 7.13 Best Efforts to Consummate Transaction...............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY...........49 8.1 Representations and Warranties........................................49 8.2 Performance of Obligations............................................49 8.3 No Litigation.........................................................49 8.4 Opinion of Counsel....................................................50 8.5 Registration Statement................................................50 8.6 Consents and Approvals................................................50 8.7 Good Standing Certificates............................................50 8.8 No Material Adverse Change............................................50 8.9 Closing of IPO........................................................50 8.10 Secretary's Certificate..............................................51 8.11 Employment Agreements................................................51 8.12 Directors and Officers Insurance.....................................51 8.13 Stock Options........................................................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO......................52 9.1 Representations and Warranties........................................52 9.2 Performance of Obligations............................................52 9.3 No Litigation.........................................................52 9.4 Secretary's Certificate...............................................53 9.5 No Material Adverse Effect............................................53 ii 9.6 STOCKHOLDERS' Release.................................................53 9.7 Termination of Related Party Agreements...............................53 9.8 Opinion of Counsel....................................................54 9.9 Consents and Approvals................................................54 9.10 Good Standing Certificates...........................................54 9.11 Registration Statement...............................................54 9.12 Employment Agreements................................................54 9.13 Closing of IPO.......................................................54 9.14 FIRPTA Certificate...................................................54 9.15 Insurance............................................................54 9.16 Lockup Agreement.....................................................55 9.17 Letter of Representation.............................................55 9.18 Termination of Defined Benefit Plans.................................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................55 10.1 Release From Guarantees; Repayment of Certain Obligations............55 10.2 Preservation of Tax and Accounting Treatment.........................56 10.3 Preparation and Filing of Tax Returns................................56 10.4 Appointment of Directors.............................................57 10.5 Preservation of Employee Benefit Plans...............................57 10.6 Maintenance of Books.................................................58 10.7 Securities Covenants.................................................58 11. INDEMNIFICATION..........................................................58 11.1 General Indemnification by the STOCKHOLDERS..........................58 11.2 Indemnification by VPI...............................................59 11.3 Third Person Claims..................................................60 11.4 Exclusive Remedy.....................................................62 11.5 Limitations on Indemnification.......................................62 12. TERMINATION OF AGREEMENT.................................................63 12.1 Termination..........................................................63 12.2 Liabilities in Event of Termination..................................64 13. NONCOMPETITION...........................................................65 13.1 Prohibited Activities................................................65 13.2 Damages..............................................................66 13.3 Reasonable Restraint.................................................67 13.4 Severability; Reformation............................................67 13.5 Independent Covenant.................................................68 13.6 Materiality..........................................................68 13.7 Limitation...........................................................68 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................69 14.1 STOCKHOLDERS.........................................................69 14.2 VPI AND NEWCO........................................................70 14.3 Damages..............................................................70 14.4 Survival.............................................................71 14.5 Return of Data Submitted.............................................71 15. TRANSFER RESTRICTIONS....................................................71 15.1 Transfer Restrictions................................................71 15.2 Certain Transfers....................................................72 16. SECURITIES LAW REPRESENTATIONS...........................................72 16.1 Compliance with Law..................................................73 16.2 Economic Risk; Sophistication........................................73 17. REGISTRATION RIGHTS......................................................73 17.1 Piggyback Registration Rights........................................73 17.2 Demand Registration Rights...........................................74 iii 17.3 Registration Procedures..............................................75 17.4 Underwriting Agreement...............................................76 17.5 Availability of Rule 144.............................................76 17.6 Registration Rights Indemnification..................................76 18. GENERAL..................................................................81 18.1 Press Releases.......................................................81 18.2 Cooperation..........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries....................82 18.4 Entire Agreement.....................................................82 18.5 Counterparts.........................................................82 18.6 Brokers and Agents...................................................83 18.7 Expenses.............................................................83 18.8 Notices..............................................................84 18.9 Governing Law........................................................85 18.10 Exercise of Rights and Remedies.....................................85 18.11 Time................................................................85 18.12 Reformation and Severability........................................85 18.13 Remedies Cumulative.................................................85 18.14 Captions............................................................86 18.15 Amendments and Waivers..............................................86 18.16 Incorporation by Reference..........................................86 18.17 Defined Terms.......................................................86 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), RPM ACQUISITION CORP., a Delaware corporation ("NEWCO"), RESORT PROPERTY MANAGEMENT, INC., a Utah corporation (the "COMPANY"), Daniel L. Meehan, Kimberlie C. Meehan and Nancy Hess (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, 1 Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Certificate of Incorporation of the COMPANY then in effect shall be the Certificate of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or 3 capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance 4 with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: 5 (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 6 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 7 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing 8 Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing 9 and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly 10 issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible 11 into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date and unaudited Statement of Changes in Stockholders' Equity, if any, for the period ended December 31, 1996; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date and unaudited Statement of Cash Flows, if any, for the period ended December 31, 1996. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates 12 indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of 13 the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 14 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, 15 remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a 16 "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: 17 (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is 18 required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial 19 noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA)or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. 20 All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; 21 (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no 22 notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection 23 has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. 24 (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and 25 effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; 26 (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 27 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. 28 (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). 29 (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 30 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 31 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 32 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 33 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 34 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 35 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 36 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for its last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 37 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the 38 STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 39 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 40 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non- 43 occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 52 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 53 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 54 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 55 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 56 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Co mpanies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting 57 conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out 58 of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that 59 VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying 60 Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder 61 shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether 62 the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; 63 (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, 64 however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the 65 COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from (a) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (b) engaging in the hotel management business in any location other than in Park City, Utah, and the 25-mile area around Park City, Utah. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that 66 the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof and through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such 67 restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 68 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 69 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and 70 irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 71 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 72 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses 73 by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or 74 sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the 75 SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any 76 losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect 77 regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in 78 amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than 79 the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which 80 the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 81 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 82 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to 83 Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; 84 (c) If to the COMPANY, addressed to it at: Resort Property Management, Inc. 750 Kearns Boulevard P.O. Box 3808 Park City, Utah 84060 Facsimile no.: (435) 649-6654 Attention: Dan Meehan and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 85 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. 86 "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. 87 "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. 88 "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, 89 employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 90 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. RPM ACQUISITION CORP. By:/s/ Leonard Potter ------------------------------- Leonard Potter Vice President RESORT PROPERTY MANAGEMENT, INC. By:/s/ Daniel L. Meehan ------------------------------- Name: Daniel L. Meehan ------------------------- Title: President ------------------------- STOCKHOLDERS: /s/ Daniel L. Meehan - ---------------------------------- Daniel L. Meehan /s/ Kimberlie C. Meehan - ---------------------------------- Kimberlie C. Meehan /s/ Patti Hess - ---------------------------------- Nancy (a/k/a Patti) Hess EX-2.11 13 EXHIBIT 2.11 EXHIBIT 2.11 - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. TELLURIDE ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) TELLURIDE RESORT ACCOMMODATIONS, INC. and the STOCKHOLDERS named herein - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER...............................................................3 1.1 Delivery and Filing of Articles of Merger............................3 1.2 Effective Time of the Merger.........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporation...............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO..............................................4 1.5 Effect of Merger.....................................................4 2. CONVERSION OF STOCK......................................................5 2.1 Manner of Conversion.................................................6 3. DELIVERY OF MERGER CONSIDERATION.........................................7 3.1 Delivery of VPI Stock and Cash.......................................7 3.2 Delivery of COMPANY Stock............................................7 3.3 Balance Sheet Test...................................................7 4. CLOSING..................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9 5.1 Due Organization.................................................10 5.2 Authority........................................................10 5.3 Capital Stock of the COMPANY.....................................10 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................11 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................14 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................15 5.14 Personal Property...............................................16 5.15 Significant Customers...........................................17 5.16 Material Contracts and Commitments..............................17 5.17 Real Property...................................................18 5.18 Insurance.......................................................19 5.19 Compensation; Employment Agreements; Organized Labor Matters....19 5.20 Employee Plans..................................................20 5.21 Compliance with ERISA...........................................21 5.22 Conformity with Law; Litigation.................................22 5.23 Taxes...........................................................23 5.24 No Violations...................................................25 5.25 Government Contracts............................................26 5.26 Absence of Changes..............................................26 5.27 Deposit Accounts; Powers of Attorney............................28 5.28 Validity of Obligations.........................................28 5.29 Relations with Governments......................................29 5.30 Disclosure......................................................29 5.31 Prohibited Activities...........................................30 (B) Representations and Warranties of STOCKHOLDERS......................30 5.32 Authority; Ownership............................................30 5.33 Preemptive Rights...............................................30 i 5.34 No Intention to Dispose of VPI Stock............................30 6. REPRESENTATIONS OF VPI AND NEWCO........................................31 6.1 Due Organization....................................................31 6.2 Authorization.......................................................32 6.3 Capital Stock of VPI and NEWCO......................................32 6.4 Transactions in Capital Stock.......................................33 6.5 Subsidiaries........................................................33 6.6 Financial Statements................................................33 6.7 Liabilities and Obligations.........................................33 6.8 Conformity with Law; Litigation.....................................34 6.9 No Violations.......................................................34 6.10 Validity of Obligations............................................35 6.11 VPI Stock..........................................................35 6.12 No Side Agreements.................................................35 6.13 Business; Real Property; Material Agreements.......................36 6.14 Taxes..............................................................36 6.15 Completion of Due Diligence........................................38 6.16 Disclosure........................................................38 6.17 Tax Treatment......................................................38 7. COVENANTS PRIOR TO CLOSING..............................................39 7.1 Access and Cooperation; Due Diligence...............................39 7.2 Conduct of Business Pending Closing.................................40 7.3 Prohibited Activities...............................................41 7.4 No Shop.............................................................43 7.5 Notice to Bargaining Agents.........................................43 7.6 Agreements..........................................................43 7.7 Notification of Certain Matters.....................................43 7.8 Amendment of Schedules..............................................44 7.9 Cooperation in Preparation of Registration Statement................46 7.10 Final Financial Statements.........................................47 7.11 Further Assurances.................................................48 7.12 Authorized Capital.................................................48 7.13 Best Efforts to Consummate Transaction.............................48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49 8.1 Representations and Warranties......................................49 8.2 Performance of Obligations..........................................49 8.3 No Litigation.......................................................49 8.4 Opinion of Counsel..................................................50 8.5 Registration Statement..............................................50 8.6 Consents and Approvals..............................................50 8.7 Good Standing Certificates..........................................50 8.8 No Material Adverse Change..........................................50 8.9 Closing of IPO......................................................50 8.10 Secretary's Certificate............................................51 8.11 Employment Agreements..............................................51 8.12 Directors and Officers Insurance...................................51 8.13 Stock Options......................................................51 8.14 Termination of Defined Benefit Plans...............................51 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52 9.1 Representations and Warranties......................................52 9.2 Performance of Obligations..........................................52 9.3 No Litigation.......................................................52 9.4 Secretary's Certificate.............................................53 ii 9.5 No Material Adverse Effect..........................................53 9.6 STOCKHOLDERS' Release...............................................53 9.7 Termination of Related Party Agreements.............................53 9.8 Opinion of Counsel..................................................53 9.9 Consents and Approvals..............................................54 9.10 Good Standing Certificates.........................................54 9.11 Registration Statement.............................................54 9.12 Employment Agreements..............................................54 9.13 Closing of IPO.....................................................54 9.14 FIRPTA Certificate.................................................54 9.15 Insurance..........................................................54 9.16 Lockup Agreement...................................................55 9.17 Letter of Representation...........................................55 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55 10.1 Release From Guarantees; Repayment of Certain Obligations..........55 10.2 Preservation of Tax and Accounting Treatment.......................56 10.3 Preparation and Filing of Tax Returns..............................56 10.4 Appointment of Directors...........................................57 10.5 Preservation of Employee Benefit Plans.............................57 10.6 Maintenance of Books...............................................58 10.7 Securities Covenants...............................................58 11. INDEMNIFICATION........................................................58 11.1 General Indemnification by the STOCKHOLDERS........................58 11.2 Indemnification by VPI.............................................59 11.3 Third Person Claims................................................60 11.4 Exclusive Remedy...................................................62 11.5 Limitations on Indemnification.....................................62 12. TERMINATION OF AGREEMENT...............................................63 12.1 Termination........................................................63 12.2 Liabilities in Event of Termination................................64 13. NONCOMPETITION.........................................................65 13.1 Prohibited Activities..............................................65 13.2 Damages............................................................67 13.3 Reasonable Restraint...............................................67 13.4 Severability; Reformation..........................................68 13.5 Independent Covenant...............................................68 13.6 Materiality........................................................69 13.7 Limitation.........................................................69 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69 14.1 STOCKHOLDERS.......................................................69 14.2 VPI AND NEWCO......................................................70 14.3 Damages............................................................71 14.4 Survival...........................................................71 14.5 Return of Data Submitted...........................................71 15. TRANSFER RESTRICTIONS..................................................72 15.1 Transfer Restrictions..............................................72 15.2 Certain Transfers..................................................72 16. SECURITIES LAW REPRESENTATIONS.........................................73 16.1 Compliance with Law................................................73 16.2 Economic Risk; Sophistication......................................73 17. REGISTRATION RIGHTS....................................................74 17.1 Piggyback Registration Rights......................................74 17.2 Demand Registration Rights.........................................75 iii 17.3 Registration Procedures............................................76 17.4 Underwriting Agreement.............................................77 17.5 Availability of Rule 144...........................................77 17.6 Registration Rights Indemnification................................77 18. GENERAL................................................................82 18.1 Press Releases.....................................................82 18.2 Cooperation........................................................82 18.3 Successors and Assigns; Third Party Beneficiaries..................83 18.4 Entire Agreement...................................................83 18.5 Counterparts.......................................................83 18.6 Brokers and Agents.................................................83 18.7 Expenses...........................................................83 18.8 Notices............................................................84 18.9 Governing Law......................................................86 18.10 Exercise of Rights and Remedies...................................86 18.11 Time..............................................................86 18.12 Reformation and Severability......................................86 18.13 Remedies Cumulative...............................................86 18.14 Captions..........................................................86 18.15 Amendments and Waivers............................................86 18.16 Incorporation by Reference........................................87 18.17 Defined Terms.....................................................87 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI FORM OF OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), TELLURIDE ACQUISITION CORP., a Delaware corporation ("NEWCO"), TELLURIDE RESORT ACCOMMODATIONS, INC., a Colorado corporation (the "COMPANY"), and Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw, Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D. Allred, A.J. Wells, Forrest Faulconer, Thomas McNamara, Donald J. Peterson, Nancy McNamara, Charles E. Cobb, Jr., Sue M. Cobb, Stephen A. Martori, Anthony F. Martori, Arthur John Martori and Alan Mishkin (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a 1 Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; 2 NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Certificate of Incorporation of the COMPANY then in effect shall be the Certificate of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of 2 the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, 4 rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 5 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the 6 STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of 7 nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger 8 referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable 9 limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital 10 stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and 11 outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally 12 accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements, except for the requirement of footnote disclosures). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and 13 (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other 14 governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY 15 except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the 16 COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 17 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to 18 the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish 19 such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section (3)(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for 20 example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan 21 listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 8.14 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or 22 instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any 23 statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. 24 (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the 25 COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the 26 COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; 27 (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 28 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 29 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 30 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent 31 permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 32 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 33 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 34 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 35 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 36 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 37 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the 38 STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 39 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 40 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 41 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 42 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non- 43 occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 44 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 45 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 46 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 47 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 48 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 49 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 50 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 8.14 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with 51 applicable laws and regulations. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a 52 result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form 53 annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. 54 VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 55 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 56 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Park Brady to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting 57 conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out 58 of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that 59 VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying 60 Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder 61 shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether 62 the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; 63 (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, 64 however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management or short-term rental business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management or short-term rental business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the 65 COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management or short-term rental services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management or short-term rental business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. 66 Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (b) any STOCKHOLDER who is also as of the date hereof a shareholder of The Telluride Company, a Colorado corporation (a "Telco STOCKHOLDER"), from engaging in any noncommercial property management or short-term rental business or hotel management business in competition with VPI or any subsidiary thereof in any location other than in Telluride, Colorado, and the 100-mile area around Telluride, Colorado, or (c) Steven A. Schein from engaging in any noncommercial property management or short-term rental business or hotel management business in competition with VPI or any subsidiary thereof in the State of Arizona. For purposes of this Section 13.1, the parties hereto agree that the phrase "short-term" shall mean thirty (30) days with respect to the Telco STOCKHOLDERS and shall mean ninety (90) days with respect to all other STOCKHOLDERS. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition 67 to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in 68 Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. In the event that the criteria set forth on Schedule 13.7 are not met by the COMPANY, the provisions of this Section 13, upon written notice from the STOCKHOLDERS who are also stockholders of The Telluride Company, a Colorado corporation, shall not apply to such STOCKHOLDERS who are also stockholders of The Telluride Company. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties 69 for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) 70 such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 71 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the 72 Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford 73 to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be 74 sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. 75 Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 76 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or 77 necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 78 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this 79 Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such 80 indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any 81 Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 82 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance 83 and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the 84 same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: Telluride Resort Accommodations, Inc. P.O. Box 100 Telluride, Colorado 81435 Facsimile no.: (970) 728-1410 Attention: Park Brady and marked "Personal and Confidential" with copies to: Robert Erie P. O. Box 1247 238 East Colorado Avenue Telluride, Colorado 81435 Facsimilie no.: (970) 728-9439 or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 85 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in 86 accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. 87 "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. 88 "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. 89 "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. 90 "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 91 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. TELLURIDE ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President TELLURIDE RESORT ACCOMMODATIONS, INC. By:/s/ Park Brady ---------------------------------- Name: Park Brady --------------------------- Title: President -------------------------- STOCKHOLDERS: /s/ Steven A. Schein * - ---------------------------------- ---------------------------------- Steven A. Schein Thomas McNamara /s/ Michael E. Gardner * - ---------------------------------- ---------------------------------- Michael E. Gardner Donald J. Peterson /s/ Park Brady * - ---------------------------------- ---------------------------------- Park Brady Nancy McNamara /s/ Daniel Shaw * - ---------------------------------- ---------------------------------- Daniel Shaw Charles E. Cobb, Jr. /s/ Carolyn S. Shaw * - ---------------------------------- ---------------------------------- Carolyn S. Shaw Sue M. Cobb /s/ Virginia C. Gordon * - ---------------------------------- ---------------------------------- Virginia C. Gordon Stephen A. Martori * * - ---------------------------------- ---------------------------------- Joyce Allred Anthony F. Martori * * - ---------------------------------- ---------------------------------- Ronald D. Allred Arthur John Martori * * - ---------------------------------- ---------------------------------- A.J. Wells Alan Mishkin * - ---------------------------------- Forrest Faulconer */s/ A.J. Wells - --------------- A.J. Wells Power of Attorney EX-2.12 14 EXHIBIT 2.12 EXHIBIT 2.12 - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. TRUPP ACQUISITION CORP. and MANAGEMENT ACQUISITION CORP. (each a subsidiary of Vacation Properties International, Inc.) TRUPP-HODNETT ENTERPRISES, INC. THE MANAGEMENT COMPANY and the STOCKHOLDERS named herein - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER.................................................................3 1.1 Delivery and Filing of Articles of Merger..............................3 1.2 Effective Time of the Merger...........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporations..................... ..........................4 1.4 Certain Information With Respect to the Capital Stock of the COMPANIES, VPI and NEWCOS.................... ........................5 1.5 Effect of Mergers......................................................5 2. CONVERSION OF STOCK........................................................6 2.1 Manner of Conversion...................................................7 3. DELIVERY OF MERGER CONSIDERATION...........................................8 3.1 Delivery of VPI Stock and Cash.........................................8 3.2 Delivery of COMPANY Stock..............................................8 3.3 Balance Sheet Test.....................................................8 4. CLOSING....................................................................9 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS..............10 (A) Representations and Warranties of COMPANIES and STOCKHOLDERS..........10 5.1 Due Organization...................................................11 5.2 Authority..........................................................12 5.3 Capital Stock of the COMPANIES.....................................12 5.4 Transactions in Capital Stock......................................13 5.5 No Bonus Shares....................................................13 5.6 Subsidiaries.......................................................13 5.7 Predecessor Status; etc............................................14 5.8 Spin-off by the COMPANIES..........................................14 5.9 Financial Statements...............................................14 5.10 Liabilities and Obligations.......................................15 5.11 Accounts and Notes Receivable.....................................16 5.12 Permits and Intangibles...........................................16 5.13 Environmental Matters.............................................17 5.14 Personal Property.................................................18 5.15 Significant Customers.............................................19 5.16 Material Contracts and Commitments................................20 5.17 Real Property.....................................................20 5.18 Insurance.........................................................21 5.19 Compensation; Employment Agreements; Organized Labor Matters......22 5.20 Employee Plans....................................................23 5.21 Compliance with ERISA.............................................24 5.22 Conformity with Law; Litigation...................................26 5.23 Taxes.............................................................26 5.24 No Violations.....................................................29 5.25 Government Contracts..............................................30 5.26 Absence of Changes................................................30 5.27 Deposit Accounts; Powers of Attorney..............................32 5.28 Validity of Obligations...........................................32 5.29 Relations with Governments........................................33 5.30 Disclosure........................................................33 5.31 Prohibited Activities.............................................34 (B) Representations and Warranties of STOCKHOLDERS........................34 5.32 Authority; Ownership..............................................34 5.33 Preemptive Rights.................................................35 i 5.34 No Intention to Dispose of VPI Stock..............................35 6. REPRESENTATIONS OF VPI AND NEWCOS.........................................35 6.1 Due Organization......................................................36 6.2 Authorization.........................................................36 6.3 Capital Stock of VPI and NEWCOS.......................................36 6.4 Transactions in Capital Stock.........................................36 6.5 Subsidiaries..........................................................37 6.6 Financial Statements..................................................38 6.7 Liabilities and Obligations...........................................38 6.8 Conformity with Law; Litigation.......................................38 6.9 No Violations.........................................................39 6.10 Validity of Obligations..............................................39 6.11 VPI Stock............................................................40 6.12 No Side Agreements...................................................40 6.13 Business; Real Property; Material Agreements.........................40 6.14 Taxes................................................................41 6.15 Completion of Due Diligence..........................................43 6.16 Disclosure..........................................................43 6.17 Tax Treatment........................................................44 7. COVENANTS PRIOR TO CLOSING................................................44 7.1 Access and Cooperation; Due Diligence.................................44 7.2 Conduct of Business Pending Closing...................................45 7.3 Prohibited Activities.................................................46 7.4 No Shop...............................................................48 7.5 Notice to Bargaining Agents...........................................49 7.6 Agreements............................................................49 7.7 Notification of Certain Matters.......................................49 7.8 Amendment of Schedules................................................50 7.9 Cooperation in Preparation of Registration Statement..................52 7.10 Final Financial Statements...........................................53 7.11 Further Assurances...................................................54 7.12 Authorized Capital...................................................54 7.13 Best Efforts to Consummate Transaction...............................54 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.........55 8.1 Representations and Warranties........................................55 8.2 Performance of Obligations............................................55 8.3 No Litigation.........................................................55 8.4 Opinion of Counsel....................................................56 8.5 Registration Statement................................................56 8.6 Consents and Approvals................................................56 8.7 Good Standing Certificates............................................56 8.8 No Material Adverse Change............................................56 8.9 Closing of IPO........................................................57 8.10 Secretary's Certificate..............................................57 8.11 Employment Agreements................................................57 8.12 Directors and Officers Insurance.....................................57 8.13 Stock Options........................................................57 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS.....................58 9.1 Representations and Warranties........................................58 9.2 Performance of Obligations............................................58 9.3 No Litigation.........................................................59 9.4 Secretary's Certificate...............................................59 9.5 No Material Adverse Effect............................................59 ii 9.6 STOCKHOLDERS' Release.................................................59 9.7 Termination of Related Party Agreements...............................60 9.8 Opinion of Counsel....................................................60 9.9 Consents and Approvals................................................60 9.10 Good Standing Certificates...........................................60 9.11 Registration Statement...............................................60 9.12 Employment Agreements................................................61 9.13 Closing of IPO.......................................................61 9.14 FIRPTA Certificate...................................................61 9.15 Insurance............................................................61 9.16 Lockup Agreement.....................................................61 9.17 Letter of Representation.............................................61 9.18 Termination of Defined Benefit Plans.................................62 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................62 10.1 Release From Guarantees; Repayment of Certain Obligations............62 10.2 Preservation of Tax and Accounting Treatment.........................62 10.3 Preparation and Filing of Tax Returns................................63 10.4 Appointment of Directors.............................................64 10.5 Preservation of Employee Benefit Plans...............................64 10.6 Maintenance of Books.................................................65 10.7 Securities Covenants.................................................65 11. INDEMNIFICATION..........................................................65 11.1 General Indemnification by the STOCKHOLDERS..........................65 11.2 Indemnification by VPI...............................................66 11.3 Third Person Claims..................................................67 11.4 Exclusive Remedy.....................................................69 11.5 Limitations on Indemnification.......................................70 12. TERMINATION OF AGREEMENT.................................................71 12.1 Termination..........................................................71 12.2 Liabilities in Event of Termination..................................72 13. NONCOMPETITION...........................................................73 13.1 Prohibited Activities................................................73 13.2 Damages..............................................................75 13.3 Reasonable Restraint.................................................75 13.4 Severability; Reformation............................................76 13.5 Independent Covenant.................................................76 13.6 Materiality..........................................................76 13.7 Limitation...........................................................76 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................77 14.1 STOCKHOLDERS.........................................................77 14.2 VPI AND NEWCOS.......................................................78 14.3 Damages..............................................................79 14.4 Survival.............................................................79 14.5 Return of Data Submitted.............................................80 15. TRANSFER RESTRICTIONS....................................................80 15.1 Transfer Restrictions................................................80 15.2 Certain Transfers....................................................80 16. SECURITIES LAW REPRESENTATIONS...........................................81 16.1 Compliance with Law..................................................81 16.2 Economic Risk; Sophistication........................................82 17. REGISTRATION RIGHTS......................................................82 17.1 Piggyback Registration Rights........................................82 17.2 Demand Registration Rights...........................................84 iii 17.3 Registration Procedures..............................................85 17.4 Underwriting Agreement...............................................85 17.5 Availability of Rule 144.............................................86 17.6 Registration Rights Indemnification..................................86 18. GENERAL..................................................................91 18.1 Press Releases.......................................................91 18.2 Cooperation..........................................................92 18.3 Successors and Assigns; Third Party Beneficiaries....................92 18.4 Entire Agreement.....................................................92 18.5 Counterparts.........................................................93 18.6 Brokers and Agents...................................................93 18.7 Expenses.............................................................93 18.8 Notices..............................................................94 18.9 Governing Law........................................................95 18.10 Exercise of Rights and Remedies.....................................95 18.11 Time................................................................96 18.12 Reformation and Severability........................................96 18.13 Remedies Cumulative.................................................96 18.14 Captions............................................................96 18.15 Amendments and Waivers..............................................96 18.16 Incorporation by Reference..........................................96 18.17 Defined Terms.......................................................97 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), TRUPP ACQUISITION CORP., a Delaware corporation, MANAGEMENT ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO" and collectively, the "NEWCOS"), TRUPP-HODNETT ENTERPRISES, INC., a Georgia corporation, and THE MANAGEMENT COMPANY, a Georgia corporation (each, a "COMPANY" and collectively, the "COMPANIES"), and Hans F. Trupp, Roy K. Hodnett, Pat Hodnett Cooper and Austin Trupp (the "STOCKHOLDERS"). WHEREAS, each NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, each having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and each NEWCO is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of each NEWCO and each COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that (i) TRUPP ACQUISITION CORP. merge with and into TRUPP-HODNETT ENTERPRISES, INC. and (ii) MANAGEMENT ACQUISITION CORP. merge with and into THE MANAGEMENT COMPANY, pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which each of the COMPANIES is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and 1 Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANIES, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will 2 acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Boards of Directors of the COMPANIES have approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANIES to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which each of the COMPANIES is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i) TRUPP ACQUISITION CORP. shall be merged with and into TRUPP-HODNETT ENTERPRISES, INC. and (ii) MANAGEMENT ACQUISITION CORP. shall be merged with and into THE MANAGEMENT COMPANY, each in accordance with the Articles of Merger, the separate existence of each NEWCO shall cease and each COMPANY shall be the surviving party in the Mergers (each COMPANY is sometimes hereinafter referred to as the "Surviving Corporation" and collectively the COMPANIES are sometimes hereinafter referred to as the "Surviving Corporations" ). Each Merger will be effected in a single transaction. 3 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATIONS. At the Effective Time of each Merger: (i) the Certificate of Incorporation then in effect of each COMPANY shall be the Certificate of Incorporation of the Surviving Corporation in such Merger until changed as provided by law; (ii) the Bylaws of each NEWCO then in effect shall become the Bylaws of the Surviving Corporation in such Merger; and subsequent to the Effective Time of such Merger, such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger until they shall thereafter be duly amended; (iii) the Board of Directors of each Surviving Corporation shall consist of the persons who are, immediately prior to the Effective Time of the Merger, on the Board of Directors of the COMPANY merging into such Surviving Corporation, provided that the Chief Executive Officer of VPI shall be elected as a director of each Surviving Corporation effective as of the Effective Time of each Merger; the Board of Directors of each Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of each COMPANY immediately prior to the Effective Time of each Merger shall continue as the officers of the Surviving Corporation into which such COMPANY is merged in the same capacity or capacities, and effective upon the Effective Time of each Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of each Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of each 4 Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES, VPI AND NEWCOS. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANIES, VPI and NEWCOS as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of the Mergers shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which each COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of each COMPANY shall continue unaffected and unimpaired by the Mergers and the corporate franchises, existence and rights of each NEWCO shall be merged with and into the respective COMPANIES, and the COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At the Effective Time of the Mergers, the separate existence of each NEWCO shall 5 cease and, in accordance with the terms of this Agreement, the Surviving Corporations shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to be transferred to, and vested in, the respective Surviving Corporations without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the respective Surviving Corporations as they were of each NEWCO and each COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in each respective NEWCO and COMPANY, shall not revert or be in any way impaired by reason of the Mergers. Except as otherwise provided herein, each Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of the respective NEWCO and COMPANY and any claim existing, or action or proceeding pending, by or against a NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or COMPANY had not taken place, or the respective Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of a NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall attach to the respective Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 6 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of each COMPANY (collectively "COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporations, respectively, shall be as follows: As of the Effective Time of the Merger: (i) all of the shares of COMPANY Stock of each COMPANY issued and outstanding immediately prior to the Effective Time of each respective Merger, by virtue of such Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by each COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock of each NEWCO issued and outstanding immediately prior to the Effective Time of each respective Merger, shall, by virtue of such Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation involved in such Merger which shall constitute all of the issued and outstanding shares of common stock of such Surviving Corporation immediately after the Effective Time of such Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of 7 the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Mergers, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar 8 escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness each COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Mergers (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Mergers) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Mergers or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and the NEWCOS hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are required by applicable laws of the State in which the COMPANIES are incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in 9 this Section and to pay all related costs of the COMPANIES directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Mergers shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Mergers referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS. 10 Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANIES and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANIES or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and such COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of such COMPANY or the STOCKHOLDERS, 11 prospects of such COMPANY taken as a whole (as used herein with respect to such COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated and contains a list of all such jurisdictions in which each COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of each COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of each COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of such COMPANY, and of its officers and directors on behalf of such COMPANY. 5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of each COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by such COMPANY in compliance with all applicable state and federal laws concerning the issuance of 12 securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates any of the COMPANIES to issue any of its capital stock; (ii) neither COMPANY has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of each COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Mergers and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of each COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does 13 not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is any COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of each COMPANY, including the names of any entities acquired by each COMPANY (by stock purchase, merger or otherwise) or owned by each COMPANY or from whom the COMPANIES previously acquired material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of any of the COMPANIES since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") each of the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years in the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of the years in the two-year period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each of the years in the two-year period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial 14 position of such COMPANY as of the dates indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. Each of COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date neither COMPANY has incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANIES, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and 15 (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of such COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of each COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of such COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of such COMPANY as now conducted, and such COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by such 16 COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Each of the COMPANIES has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each of the COMPANIES has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); 17 (ii) each COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by such COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location to which such COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of such COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of such COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by such COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and 18 (z) all leases and agreements in respect of personal property used in the operation of such COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by each COMPANY in its business is either owned by such COMPANY or leased by such COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of such COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of any COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of any COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by such COMPANY. 19 5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which such COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct copies of such agreements to VPI. Each COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. Each COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by such COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by each COMPANY in the conduct of its business. Each COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; 20 (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of each COMPANY with respect to real property owned by such COMPANY. Each COMPANY has also delivered to VPI an accurate list of real property leased by such COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by such COMPANY as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by the STOCKHOLDERS or business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by such COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that such COMPANY is 21 required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by such COMPANY has ever been canceled by the insurer and such COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of such COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or subject to (and none of their respective assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of any COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of each COMPANY's knowledge, threatened labor dispute involving any COMPANY and any group of its employees nor has any COMPANY experienced any labor interruptions over the past three years. Each COMPANY believes its relationship with employees to be good. 22 Each COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of such COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, neither COMPANY sponsors, maintains or contributes to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" 23 (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). Neither COMPANY has sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of such COMPANY's employees. All accrued contribution obligations of each COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of such COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of each COMPANY that are currently maintained or contributed to by such COMPANY or cover employees or former employees of such COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor any COMPANY, 24 nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) each COMPANY has not incurred liability under Section 4062 of ERISA; (v) each COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which any COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or contributed to by any entity other than a COMPANY that is, or at any time was, a member of a 25 "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes such COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over such COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Each COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) Each COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known 26 to the COMPANIES or their respective officers or employees responsible for maintaining the financial records of the such COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANIES and their respective employees are not aware of any proposed examinations) or claims against any COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by any COMPANY, any member of an affiliated or consolidated group which includes or included any of the COMPANIES, or with respect to any payment made or deemed made by any COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by any COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) 27 are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, neither COMPANY has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither COMPANY is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, neither COMPANY has (i) assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which any COMPANY or such person or entity was the surviving corporation or a consolidation) or (ii) indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of each COMPANY for its last three (3) fiscal years or such shorter period of time as such COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) Each COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, each COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a 28 change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither COMPANY is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) Neither COMPANY has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by such COMPANY. 5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter Document. Neither COMPANY or, to the knowledge of either COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of each COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third 29 party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts either COMPANY from freely providing services to any other customer or potential customer of such COMPANY, VPI, the NEWCOS or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither COMPANY is now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of any COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of any COMPANY; (iii) any change in the authorized capital of any COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth 30 in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of any COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by any COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of any COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of any COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to any COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of any COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; 31 (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of any COMPANY's business; (xi) any waiver of any material rights or claims of any COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which any COMPANY is a party; (xiii) any transaction by any COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by any COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from each COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by each of the COMPANIES and the performance of the transactions contemplated herein have been duly 32 and validly authorized by the Board of Directors of each of the COMPANIES and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of each COMPANY, enforceable against such COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of each COMPANY has each legal power, authority and capacity to bind such COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause any COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of each COMPANY for the time periods with respect to which such information was requested. Each COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which any COMPANY is a party, or to which their respective properties are subject, or (ii) any other fact or circumstance regarding any COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to any COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. 33 (b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to any COMPANY, the STOCKHOLDERS or any other person affiliated or associated with any COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither COMPANY has, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 34 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 6. REPRESENTATIONS OF VPI AND NEWCOS VPI and the NEWCOS jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a 35 timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS executing this Agreement have the authority to enter into and bind VPI and the NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full legal right, power and authority to enter into and perform this Agreement and the Mergers, and all required approvals of the shareholders and board of directors of VPI and the NEWCOS, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date, the authorized capital stock of VPI and the NEWCOS is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of each NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, 36 security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and each NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and the NEWCOS in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or the NEWCOS. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or the NEWCOS to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries except for the NEWCOS and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor any NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or any 37 NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and the NEWCOS have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened, against or affecting VPI or the NEWCOS, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or 38 proceeding, whether pending or threatened, has been received. VPI and the NEWCOS have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI Charter Document. None of VPI, the NEWCOS, or, to the knowledge of VPI and the NEWCOS, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or any NEWCO is a party, or by which VPI or any NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and the NEWCOS under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and the NEWCOS and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and the NEWCOS and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding 39 obligation of VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and the NEWCOS have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, the NEWCOS, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO owns or has at any time owned any real property or any 40 material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and the NEWCOS have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or the NEWCOS or their officers or employees responsible for maintaining the financial records of VPI and the NEWCOS subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and the NEWCOS and their employees are not aware of any proposed examinations) or claims against VPI or the NEWCOS (including liens against assets of VPI or the NEWCOS) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or consolidated group which includes or included VPI or the NEWCOS, or with respect to any payment made or deemed made by VPI or the NEWCOS, required to be paid by the date hereof, have been paid. 41 All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or the NEWCOS or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal years or such shorter period of time as VPI or the NEWCOS shall have existed, (ii) any Tax examinations commenced or closed 42 or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and the NEWCOS have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCOS' methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor the NEWCOS is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor the NEWCOS has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANIES as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the 43 statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, each COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of such COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of such COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. Each COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and the COMPANIES shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this 44 Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of each COMPANY access to all of VPI's and the NEWCOS' sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish each COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and the NEWCOS will cooperate with each COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to each COMPANY, its representatives and advisors on a continuing basis through the Closing Date. Each COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; 45 (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with such COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, neither COMPANY shall, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; 46 (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANIES to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; 47 (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of such COMPANY, provided that such COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of such COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANIES, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of any kind with respect to the COMPANIES' capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, 48 (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, any COMPANY or a merger, consolidation or business combination of any COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between such COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between each COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of any COMPANY or any STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely 49 to cause any representation or warranty of VPI or the NEWCOS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by any COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANIES consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI or the NEWCOS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all 50 purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANIES do not give their consent, the COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 51 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning any COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANIES. Insofar as the information contained in the Registration Statement relates solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration Statement each COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANIES and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light 52 of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANIES or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANIES and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANIES, or on behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANIES as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANIES for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANIES or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have 53 been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANIES for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES 54 The obligations of STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and the NEWCOS contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and the NEWCOS contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and the NEWCOS on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Mergers or the IPO and no governmental agency or body shall have taken any other action or made any request of the 55 COMPANIES as a result of which the management of the COMPANIES deems it inadvisable to proceed with the transactions hereunder. 8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have delivered to the COMPANIES a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or the NEWCOS are authorized to do business, showing that each of VPI and the NEWCOS is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and the NEWCOS, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or the NEWCOS which would constitute a Material Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material loss or damages to any of its properties or assets, 56 whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or the NEWCOS to conduct their respective businesses. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and each NEWCO, certifying the truth and correctness of attached copies of VPI's and the NEWCOS' respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all 57 options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS The obligations of VPI and the NEWCOS with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and the NEWCOS with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANIES on or 58 before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of each COMPANY, certifying the truth and correctness of attached copies of each COMPANY's Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving each COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to any COMPANY which would constitute a Material Adverse Effect, and neither COMPANY shall have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of any COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii) obligations of the 59 COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANIES and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between any of the COMPANIES and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI certificates, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in each COMPANY's state of incorporation and, unless waived by VPI, in each state in which each COMPANY is authorized to do business, showing each COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for each COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 60 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of each COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 61 9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANIES, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANIES as being conducted at the Pre-Closing Date. 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or 62 (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANIES shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANIES, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, 63 together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at any COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting conditions for employees of each COMPANY who were covered by such COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 64 10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the books and records of such COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES under this 65 Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the 66 STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or the NEWCOS under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for the liabilities and obligations of the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, the NEWCOS or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or the NEWCOS or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a 67 reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of- 68 pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 69 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, the NEWCOS, the Surviving Corporations and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or the NEWCOS until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such 70 claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANIES; (ii) by the STOCKHOLDERS or the COMPANIES (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the 71 willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and 72 the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANIES, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; 73 (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of any COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that such COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from (a) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (b) owning noncommercial property if such property is managed by the COMPANY. 74 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a 75 violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or any COMPANY pursuant to an employment agreement is terminated without cause (as defined in such 76 employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANIES, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES', the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the 77 STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANIES, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANIES' businesses. VPI and the NEWCOS agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANIES, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or any NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause 78 (ii), VPI and the NEWCOS shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANIES to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or the NEWCOS of the provisions of this Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and the NEWCOS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 79 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANIES of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, 80 transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, 81 pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANIES, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than 82 (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the 83 Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such 84 registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 85 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating 86 or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 87 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be 88 made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. 89 (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately 90 preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other 91 media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANIES and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of each COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This 92 Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the 93 COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or the NEWCOS, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 94 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANIES, addressed to them at: Trupp-Hodnett Enterprises, Inc. 520 Ocean Boulevard St. Simons Island, Georgia 31522 Facsimile no.: (912) 638-2983 Attention: Hans Trupp and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any 95 similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Mergers. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Mergers and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being 96 applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means any COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean the NEWCOS and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. 97 "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Mergers" shall mean the time as of which the Mergers becomes effective, which is contemplated to occur on the Closing Date. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. 98 "Mergers" means the mergers of (i) TRUPP ACQUSITION CORP. with and into TRUPP-HODNETT ENTERPRISES, INC. and (ii) MANAGEMENT ACQUSITION CORP. with and into THE MANAGEMENT COMPANY, pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of each respective NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANIES. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. 99 "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANIES and any affiliated, combined, consolidated, unitary or similar group of which the COMPANIES is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless 100 the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporations" shall mean each of the COMPANIES as the surviving parties in the Mergers. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. 101 [THE NEXT PAGE IS THE SIGNATURE PAGE] 102 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. TRUPP ACQUISITION CORP. MANAGEMENT ACQUISITION CORP. By: -------------------------------- Leonard Potter Vice President TRUPP-HODNETT ENTERPRISES, INC. THE MANAGEMENT COMPANY By:/s/ Hans F. Trupp ---------------------------------- Name: Hans F. Trupp -------------------------- Title: Chairman -------------------------- STOCKHOLDERS: /s/ Hans F. Trupp - ------------------------------------- Hans F. Trupp /s/ Roy K. Hodnett - ------------------------------------- Roy K. Hodnett /s/ Pat Hodnett Cooper - ------------------------------------- Pat Hodnett Cooper /s/ Austin Trupp - ------------------------------------- Austin Trupp EX-2.13 15 EXHIBIT 2.13 EXHIBIT 2.13 - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. WHISTLER CHALETS HOLDING CORP. (a subsidiary of Vacation Properties International, Inc.) WHISTLER CHALETS LIMITED and the STOCKHOLDERS named herein - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- AGREEMENT AND PLAN OF ORGANIZATION............................................1 1. THE PURCHASE AND SALE.....................................................3 1.1 General...............................................................3 1.2 Intentionally Deleted.................................................3 1.3 Intetionally Deleted..................................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO........................................3 2. NEWCO STOCK...............................................................3 2.1 Capitalization of NEWCO...............................................3 2.2 Rights and Obligations of VPI.........................................4 2.3 Voting Rights.........................................................9 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE..............................9 3.1 Delivery of Dividend Access Shares and Cash...........................9 3.2 Delivery of COMPANY Stock.............................................9 3.3 Balance Sheet Test...................................................10 4. CLOSING..................................................................10 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............11 (A) Representations and Warranties of COMPANY and STOCKHOLDERS...........11 5.1 Due Organization..................................................12 5.2 Authority.........................................................13 5.3 Capital Stock of the COMPANY......................................13 5.4 Transactions in Capital Stock.....................................13 5.5 No Bonus Shares...................................................14 5.6 Subsidiaries......................................................14 5.7 Predecessor Status; etc...........................................14 5.8 Spin-off by the COMPANY...........................................14 5.9 Financial Statements..............................................14 5.10 Liabilities and Obligations......................................15 5.11 Accounts and Notes Receivable....................................16 5.12 Permits and Intangibles..........................................16 5.13 Environmental Matters............................................17 5.14 Personal Property................................................18 5.15 Significant Customers............................................19 5.16 Material Contracts and Commitments...............................19 5.17 Real Property....................................................20 5.18 Insurance........................................................21 5.19 Compensation; Employment Agreements; Organized Labor Matters.....21 5.20 Employee Plans...................................................23 5.21 Compliance with Laws Governing Pension and Other Benefit Plans...25 5.22 Conformity with Law; Litigation..................................28 5.23 Taxes............................................................28 5.24 No Violations....................................................30 5.25 Government Contracts.............................................31 5.26 Absence of Changes...............................................31 5.27 Deposit Accounts; Powers of Attorney.............................33 5.28 Validity of Obligations..........................................33 5.29 Relations with Governments.......................................34 5.30 Disclosure.......................................................34 5.31 Prohibited Activities............................................35 (B) Representations and Warranties of STOCKHOLDERS.......................35 5.32 Authority; Ownership.............................................35 i 5.33 Preemptive Rights...................................................35 5.34 Resident Status ....................................................35 6. REPRESENTATIONS OF VPI AND NEWCO..........................................36 6.1 Due Organization.....................................................36 6.2 Authorization........................................................37 6.3 Capital Stock of VPI and NEWCO.......................................37 6.4 Transactions in Capital Stock........................................37 6.5 Subsidiaries.........................................................38 6.6 Financial Statements.................................................38 6.7 Liabilities and Obligations..........................................38 6.8 Conformity with Law; Litigation......................................38 6.9 No Violations........................................................39 6.10 Validity of Obligations.............................................39 6.11 Restricted Common Stock.............................................40 6.12 No Side Agreements..................................................40 6.13 Business; Real Property; Material Agreements........................40 6.14 Taxes...............................................................41 6.15 Completion of Due Diligence.........................................43 6.16 Disclosure.........................................................43 7. COVENANTS PRIOR TO CLOSING...............................................43 7.1 Access and Cooperation; Due Diligence................................43 7.2 Conduct of Business Pending Closing..................................44 7.3 Prohibited Activities................................................45 7.4 No Shop..............................................................47 7.5 Notice to Bargaining Agents..........................................48 7.6 Agreements...........................................................48 7.7 Notification of Certain Matters......................................48 7.8 Amendment of Schedules...............................................49 7.9 Cooperation in Preparation of Registration Statement.................50 7.10 Final Financial Statements..........................................51 7.11 Further Assurances..................................................52 7.12 Authorized Capital..................................................52 7.13 Best Efforts to Consummate Transaction..............................52 7.14 Section 85 Elections................................................53 7.15 British Columbia Securities Consents................................53 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY..........53 8.1 Representations and Warranties.......................................53 8.2 Performance of Obligations...........................................54 8.3 No Litigation........................................................54 8.4 Opinion of Counsel...................................................54 8.5 Registration Statement...............................................54 8.6 Consents and Approvals...............................................54 8.7 Good Standing Certificates...........................................55 8.8 No Material Adverse Change...........................................55 8.9 Closing of IPO.......................................................55 8.10 Secretary's Certificate.............................................55 8.11 Employment Agreements...............................................55 8.12 Directors and Officers Insurance....................................56 8.13 Stock Options.......................................................56 8.14 Support Agreement and Trust Agreement...............................56 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO.....................56 9.1 Representations and Warranties.......................................56 9.2 Performance of Obligations...........................................57 9.3 No Litigation........................................................57 9.4 Secretary's Certificate..............................................57 9.5 No Material Adverse Effect...........................................57 ii 9.6 STOCKHOLDERS' Release................................................58 9.7 Termination of Related Party Agreements..............................58 9.8 Opinion of Counsel...................................................58 9.9 Consents and Approvals...............................................58 9.10 Good Standing Certificates..........................................58 9.11 Registration Statement..............................................59 9.12 Employment Agreements...............................................59 9.13 Closing of IPO......................................................59 9.14 FIRPTA Certificate..................................................59 9.15 Insurance...........................................................59 9.16 Lockup Agreement....................................................59 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING.....................60 10.1 Release From Guarantees; Repayment of Certain Obligations...........60 10.2 Intentionally Deleted...............................................60 10.3 Preparation and Filing of Tax Returns...............................60 10.4 Appointment of Directors............................................61 10.5 Preservation of Employee Benefit Plans..............................61 10.6 Maintenance of Books................................................62 10.7 Liquidation.........................................................62 11. INDEMNIFICATION.........................................................62 11.1 General Indemnification by the STOCKHOLDERS.........................62 11.2 Indemnification by VPI..............................................63 11.3 Third Person Claims.................................................64 11.4 Exclusive Remedy....................................................66 11.5 Limitations on Indemnification......................................66 12. TERMINATION OF AGREEMENT................................................67 12.1 Termination.........................................................67 12.2 Liabilities in Event of Termination.................................68 13. NONCOMPETITION..........................................................69 13.1 Prohibited Activities...............................................69 13.2 Damages.............................................................70 13.3 Reasonable Restraint................................................71 13.4 Severability; Reformation...........................................71 13.5 Independent Covenant................................................72 13.6 Materiality.........................................................72 13.7 Limitation..........................................................72 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................73 14.1 STOCKHOLDERS........................................................73 14.2 VPI AND NEWCO.......................................................74 14.3 Damages.............................................................74 14.4 Survival............................................................75 14.5 Return of Data Submitted............................................75 15. TRANSFER RESTRICTIONS...................................................75 15.1 Transfer Restrictions...............................................75 15.2 Certain Transfers...................................................76 16. SECURITIES LAW REPRESENTATIONS..........................................76 16.1 Compliance with Law.................................................77 16.2 Economic Risk; Sophistication.......................................78 17. REGISTRATION RIGHTS.....................................................78 17.1 Piggyback Registration Rights.......................................78 17.2 Demand Registration Rights..........................................79 17.3 Registration Procedures.............................................80 17.4 Underwriting Agreement..............................................81 iii 17.5 Availability of Rule 144............................................81 17.6 Registration Rights Indemnification.................................81 18. GENERAL.................................................................86 18.1 Press Releases......................................................86 18.2 Cooperation.........................................................87 18.3 Successors and Assigns; Third Party Beneficiaries...................87 18.4 Entire Agreement....................................................87 18.5 Counterparts........................................................88 18.6 Brokers and Agents..................................................88 18.7 Expenses............................................................88 18.8 Notices.............................................................89 18.9 Governing Law.......................................................90 18.10 Exercise of Rights and Remedies....................................90 18.11 Time...............................................................90 18.12 Reformation and Severability.......................................90 18.13 Remedies Cumulative................................................90 18.14 Captions...........................................................91 18.15 Amendments and Waivers.............................................91 18.16 Incorporation by Reference.........................................91 18.17 Defined Terms......................................................91 ANNEX I EXHIBIT A - DIVIDEND ACCESS SHARE PROVISIONS ANNEX I EXHIBIT B - SUPPORT AGREEMENT ANNEX I EXHIBIT C - EXCHANGE AND VOTING TRUST AGREEMENT ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI FORM OF OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), WHISTLER HOLDING CORP., a Canadian corporation ("NEWCO"), WHISTLER CHALETS LIMITED, a British Columbia corporation (the "COMPANY"), and J. Patrick McCurdy (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of Canada, having been incorporated on March [____], 1998, for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that the STOCKHOLDERS sell all of the COMPANY Stock owned by the STOCKHOLDERS to NEWCO in exchange for cash and Dividend Access Shares of NEWCO pursuant to this Agreement and the applicable provisions of the laws of the jurisdictions in which NEWCO and the COMPANY are incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property 1 Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, and Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE PURCHASE AND SALE 1.1 GENERAL. Upon the terms and subject to the conditions of this Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver to NEWCO, and NEWCO hereby agrees to purchase, all of the outstanding capital stock of the COMPANY (the "COMPANY Stock"). 1.2 INTENTIONALLY DELETED. 1.3 INTENTIONALLY DELETED. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of an unlimited number shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 2. NEWCO STOCK Prior to the Pre-Closing Date, the Articles of Incorporation of NEWCO, shall be amended to provide for authorized capital consisting of (i) a class of an unlimited number of voting common shares (all of the issued and outstanding shares of which shall be held by VPI) and (ii) a class of non-voting capital shares ("Dividend Access Shares") having the rights, privileges, restrictions and conditions set forth on Exhibit A of Annex I hereto (the "Dividend Access Share Provisions"). Each share of the Dividend Access Shares shall (x) entitle the holder thereof (the "Holder") to dividend rights equal, after conversion into Canadian dollars 3 based on the Canadian/U.S. exchange rate in effect on the record date thereof, to the per share dividend rights of VPI Stock; (y) subject to the "Liquidation Call Right" (as defined in Section 2.2(i) hereof), entitle the Holder, on a liquidation of NEWCO, to receive in exchange for each Dividend Access Share one (1) share of VPI Stock as provided in Section 2.1(i)(a) for a period ending on the twentieth (20th) anniversary of the Closing Date; (z) subject to the "Retraction Call Right" (as defined in Section 6.1(c) of the Dividend Access Share Provisions), entitle the Holder, at his election from time to time for a period ending on the twentieth (20th) anniversary of the Closing Date, upon thirty (30) days' written notice given by such Holder to NEWCO, to require NEWCO to redeem any or all Dividend Access Shares and to exchange therefor, on a share for share basis, shares of VPI Stock (the "Right of Retraction"). 2.2 RIGHTS AND OBLIGATIONS OF VPI. (i) VPI LIQUIDATION CALL RIGHT. (a) Subject to Section 10.7, VPI shall have the overriding right (the "Liquidation Call Right"), in the event of and notwithstanding the proposed liquidation, dissolution or winding up of NEWCO pursuant to Article 5 of the Dividend Access Share Provisions, to purchase all but not less than all of the Dividend Access Shares held by each such Holder on payment by VPI to each such Holder of an amount per Dividend Access Share as set forth in section 5.1 of the Dividend Access Share Provisions (the "Liquidation Call Purchase Price"); provided, however, that if the record date for any such declared and unpaid dividends occurs on or after the Liquidation Date, the 4 Liquidation Call Purchase Price shall not include such additional amount equivalent to such dividends. In the event of the exercise of the Liquidation Call Right by VPI, each Holder shall be obligated to sell all of the Dividend Access Shares held by such Holder to VPI on the Liquidation Date on payment by VPI to the Holder of the Liquidation Call Purchase Price for each such Dividend Access Share. (b) To exercise the Liquidation Call Right, VPI must notify NEWCO and the Holders of VPI's intention to exercise such right at least sixty (60) days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding up of NEWCO, or at least five (5) Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding up of NEWCO. NEWCO will notify the Holders as to whether or not VPI has exercised the Liquidation Call Right as soon as practicable after the end of the period during which the Liquidation Call Right may be exercised by VPI. If VPI exercises the Liquidation Call Right, on the Liquidation Date VPI will purchase and the Holders will sell all of the Dividend Access Shares then outstanding for a price per Dividend Access Share equal to the Liquidation Call Purchase Price. (c) For purposes of completing the purchase of the Dividend Access Shares pursuant to the Liquidation Call Right, VPI shall deposit with NEWCO or an authorized agent or shall hold on behalf of NEWCO, on or before the Liquidation Date, certificates representing the aggregate number of shares of VPI Stock deliverable by VPI in payment of the total Liquidation Call Purchase Price and a cheque or cheques in the amount of the remaining portion, if any, of the total Liquidation Call Purchase Price. Provided that the total Liquidation Call Purchase Price has been so deposited with NEWCO or an authorized agent or held on behalf of NEWCO, on and after the Liquidation Date the rights of each Holder of Dividend Access Shares will be limited to receiving such Holder's proportionate part of the total Liquidation Call Purchase Price payable by VPI upon presentation and surrender by the Holder of certificates representing the Dividend Access Shares held by such Holder and the Holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the Holder of the VPI Stock delivered to such Holder. Upon surrender to NEWCO or an authorized agent of a certificate or certificates representing Dividend Access Shares, 5 together with such other documents and instruments as may be required to effect a transfer of Dividend Access Shares under the Canada Business Corporation Act ("CBCA") and the by-laws of NEWCO and such additional documents and instruments as NEWCO or an authorized agent may reasonably require, the Holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and VPI or NEWCO on behalf of VPI or an authorized agent of VPI shall deliver to such Holder, certificates representing the VPI Stock to which the Holder is entitled and a cheque or cheques of VPI payable at par and in Canadian dollars at any branch of the bankers of VPI or NEWCO in Canada in payment of the remaining portion, if any, of the total Liquidation Call Purchase Price. If VPI does not exercise the Liquidation Call Right in the manner described above, on the Liquidation Date the Holders of the Dividend Access Shares will be entitled to receive in exchange therefor the liquidation price otherwise payable by NEWCO in connection with the liquidation, dissolution or winding up of NEWCO pursuant to Article 5 of the Dividend Access Share Provisions. (ii) VPI REDEMPTION CALL RIGHT. (a) Subject to the "Automatic Redemption Date" (as defined in Section 1.1 of the Dividend Access Share Provisions), VPI shall have the overriding right (the "Redemption Call Right"), notwithstanding the proposed redemption of Dividend Access Shares by NEWCO pursuant to Article 7 of the Dividend Access Share Provisions, to purchase from all but not less than all of the Holders of Dividend Access Shares to be redeemed on the "Redemption Date" (as defined in Section 7.2 of the Dividend Access Share Provisions) all but not less than all of the Dividend Access Shares held by each such Holder that are otherwise to be redeemed on payment by VPI to each such Holder of an amount per such Dividend Access Share equal to (x) the Current Market Price of one (1) share of VPI Stock on the last Business Day prior to the Redemption Date which shall be satisfied in full by causing to be delivered to such Holder one (1) share of VPI Stock, plus (y) an additional amount equivalent to the full amount of all dividends declared and unpaid on such Dividend Access Share and all dividends declared on Restricted Common Stock that have not been declared on such Dividend Access Share in accordance with Section 7.1 of the Dividend Access Share Provisions 6 (collectively, the "Redemption Call Purchase Price"); provided, however, that if the record date for any such declared and unpaid dividends occurs on or after the Redemption Date, the Redemption Call Purchase Price shall not include such additional amount equivalent to such dividends. In the event of the exercise of the Redemption Call Right by VPI, each Holder shall be obligated to sell all the Dividend Access Shares held by such Holder and otherwise to be redeemed to VPI on the Redemption Date on payment by VPI to the Holder of the Redemption Call Purchase Price for each such Dividend Access Share. (b) To exercise the Redemption Call Right, VPI must notify NEWCO and the Holders or an authorized agent of VPI's intention to exercise such right at least one hundred twenty-five (125) days before the Automatic Redemption Date (as defined in Section 1.1 of the Dividend Access Share Provisions), in the case of the "Automatic Redemption" (as defined in Section 7.1 of the Dividend Access Share Provisions), or at least thirty-five (35) days before a "Section 12(g) Redemption Date" (as defined in Section 7.2 of the Dividend Access Share Provisions) in the case of a "Section 12(g) Redemption" (as defined in Section 7.1 of the Dividend Access Share Provisions). NEWCO or an authorized agent will notify the Holders of Dividend Access Shares as to whether or not VPI has exercised the Redemption Call Right as soon as practicable after the end of the period during which the same may be exercised by VPI. If VPI exercises the Redemption Call Right, on the Redemption Date VPI will purchase and the Holders will sell all of the Dividend Access Shares to be redeemed for a price per Dividend Access Share equal to the Redemption Call Purchase Price. (c) For purposes of completing the purchase of Dividend Access Shares pursuant to the Redemption Call Right, VPI shall deposit with NEWCO or an authorized agent of NEWCO or will hold on behalf of NEWCO, on or before the Redemption Date, certificates representing the aggregate number of shares of VPI Stock deliverable by VPI in payment of the total Redemption Call Purchase Price and a cheque or cheques in the amount of the remaining portion, if any, of the total Redemption Call Purchase Price. Provided that the total Redemption Call Purchase Price has been so deposited with NEWCO or an authorized agent or held on behalf of NEWCO, on and after 7 the Redemption Date the rights of each Holder of Dividend Access Shares so purchased will be limited to receiving such Holder's proportionate part of the total Redemption Call Purchase Price payable by VPI upon presentation and surrender by the Holder of certificates representing the Dividend Access Shares or held by such Holder and the Holder shall on and after the Redemption Date be considered and deemed for all purposes to be the Holder of the VPI Stock delivered to such Holder. Upon surrender to NEWCO of a certificate or certificates representing Dividend Access Shares, together with such other documents and instruments as may be required to effect a transfer of Dividend Access Shares under the CBCA and the by-laws of NEWCO and such additional documents and instruments as NEWCO may reasonably require, the Holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and VPI or NEWCO on behalf of VPI or an authorized agent of VPI shall deliver to such Holder, certificates representing the VPI Stock to which the Holder is entitled and a cheque or cheques of VPI payable at par and in Canadian dollars at any branch of the bankers of VPI or NEWCO in Canada in payment of the remaining portion, if any, of the total Redemption Call Purchase Price. If VPI does not exercise the Redemption Call Right in the manner described above, on the Redemption Date the Holders of the Dividend Access Shares will be entitled to receive in exchange therefor the redemption price otherwise payable by NEWCO in connection with the redemption of Dividend Access Shares pursuant to Article 7 of the Dividend Access Share Provisions. (iii) WITHHOLDING RIGHTS. VPI and NEWCO shall be entitled to deduct and withhold from the consideration otherwise payable to any Holder of Dividend Access Shares, including any dividend payments in respect of the Dividend Access Shares, such amount as VPI or NEWCO is required or permitted to deduct and withhold with respect to such payment under the Code, the Income Tax Act (Canada) or any provision of state, provincial, local or foreign tax law. VPI and NEWCO shall not initially withhold any United States Tax on dividends paid on the Dividend Access Shares. However, if any United States taxing authority determines that VPI or NEWCO is liable for United States withholding Tax on dividends paid to the Holders on the Dividend Access Shares, NEWCO shall be 8 entitled to reduce the amount of any future dividends to be paid to the Holders by such withholding obligation. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Holder of Dividend Access Shares in respect of which such deduction and withholding was made; provided, however, that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Holder exceeds the cash portion of the consideration otherwise payable to the Holders, VPI upon at least ten (10) days' prior written notice to such Holder, is hereby authorized to sell or otherwise dispose of at fair market value such portion of such non-cash consideration otherwise payable to the Holder as is necessary to provide sufficient funds to VPI in order to enable it to comply with such deduction or withholding requirement and VPI shall give an accounting to the Holder with respect thereof and any balance of such proceeds of sale. 2.3 VOTING RIGHTS. Prior to the Closing Date, VPI shall provide voting rights to the Holders, whereby each Holder will be entitled to the same rights and privileges regarding the voting of his Dividend Access Shares as if each Holder held the equivalent number of shares of VPI Stock. 3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE 3.1 DELIVERY OF DIVIDEND ACCESS SHARES AND CASH. On the Closing Date, the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of Dividend Access Shares and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified cheque or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to NEWCO at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary 9 transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Notwithstanding anything set forth above, VPI acknowledges (i) that the COMPANY has established a reserve in the amount of $385,000 on its balance sheet relating to contingent liabilities and (ii) that this reserve shall be deemed to have not been established (i.e., shall be ignored and not counted) when conducting the above-referenced balance sheet tests, including positive net working capital, positive net worth and fully funded customer deposits. 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the transfer and delivery of the COMPANY Stock as contemplated by Section 1 hereof and (ii) effect the delivery of the consideration referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the transfer and delivery of the shares and check(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place in escrow on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, 10 Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date such escrow shall automatically be terminated and (x) all transactions contemplated by this Agreement, including the transfer and delivery of shares, the delivery of a check or checks in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to Section 3 hereof shall occur and (y) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x) and (y) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x) and (y) occur shall be referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Upon a termination of this Agreement pursuant hereto after the Pre-Closing Date but prior to the Closing Date, all documents delivered into escrow on the Pre-Closing Date shall be redelivered to the respective parties from whom such documents originated. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 11 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Memorandum of Association and Articles of Association, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as 12 set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable provincial and Canadian federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the transactions contemplated hereby and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights 13 to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's unaudited Comparative Balance Sheet, 14 if any, as of December 31, 1997, 1996 and 1995, Comparative Statements of Changes in Cash Position and Retained Earnings, if any, and spreadsheets showing revenues and expenses for the four quarters for each of the years in the three-year period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date"). Also attached as Schedule 5.9 are copies of the unaudited Balance Sheets as of April 30, 1997, 1996 and 1995 and Statements of Earnings, Changes in Cash Position and Retained Earnings for each of the three fiscal years in the three-year period ended April 30, 1997 (the "Fiscal Financial Statements"). Except as set forth on Schedule 5.9, such Fiscal Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Comparative Balance Sheets as of December 31, 1997, 1996 and 1995 and such Balance Sheets as of April 30, 1997, 1996 and 1995 present fairly the financial position of the COMPANY as of the dates indicated thereon, and such Comparative Statements of Changes in Cash Position and Retained Earnings, spreadsheets and Statements of Earnings present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: 15 (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the 16 COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by the COMPANY (including interests in software or other technology systems, programs and intellectual property) (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Except as set forth on Schedule 5.12, the COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, provincial, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including 17 petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are 18 currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct 19 copies (or, in the case of oral agreements, summaries of the material terms) of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY 20 as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the 21 compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, no officer, director, key employee, or other employee is on short-term disability leave, long-term disability leave, maternity/parental leave or other extended absence or receiving workers' compensation. All current assessments under the Workers' Compensation Act (British Columbia) and similar laws in other provinces in relation to the COMPANY have been paid or accrued and the COMPANY has not been subject to any special or penalty assessment under such legislation which has not been paid. Except for those written employment contracts with salaried employees or consulting arrangements with former employees identified and fully described in Schedule 5.19, there are no written contracts of employment or of a consulting nature entered into with any employees or any oral contracts of employment or of a consulting nature which are not terminable on the giving of reasonable notice in accordance with applicable laws or which contain any additional obligations as a result of the acquisition of COMPANY Stock by the VPI or otherwise. Schedule 5.19 sets forth a complete list of all collective bargaining agreements, either directly or by operation of law, with any trade union or association which may qualify as a trade union. To the knowledge of the COMPANY (i) there are no outstanding labor tribunal proceedings of any kind, including any proceedings which could result in certification of a trade union as bargaining agent for any employees or dependent contractors of the COMPANY, and there have not been any such proceedings within the last three years, and (ii) there are no threatened or apparent union organizing activities involving employees or dependent contractors of the COMPANY, not already covered by the collective bargaining agreements. The COMPANY is not in default under any collective bargaining agreements. There is no strike or lock out occurring or threatened affecting the COMPANY. The COMPANY does not have any serious grievances or pending arbitration cases or other labor problems that might materially or adversely affect its value or lead to an interruption of its operations at any location. 22 The COMPANY has been and is being operated in full compliance with all laws relating to employees, including employment standards, human rights, occupational health and safety, pay equity and employment equity. There have been no complaints under such laws against the COMPANY. Except as set forth on Schedule 5.19, there are no complaints nor, to the knowledge of the COMPANY, are there any threatened complaints, against the COMPANY, before any employment standards branch or tribunal or human rights commission or tribunal. To the knowledge of the COMPANY, nothing has occurred which might lead to a complaint against the COMPANY under any human rights legislation, employment standards legislation, health and safety legislation, workers' compensation legislation, or pay equity legislation. There are no outstanding decisions or settlements or pending settlements under employment standards, human rights legislation, health and safety legislation, workers' compensation legislation, pay equity legislation or labor relations legislation which place any obligation upon the COMPANY to do or refrain from doing any act or which place a financial obligation on the COMPANY. There have been no accidents in the last three years of which the COMPANY has received notice or is otherwise aware which could lead to health and safety claims or charges against the COMPANY. The COMPANY (i) is in compliance with all applicable Canadian federal, provincial and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours; (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all plans, arrangements, agreements, programs, policies or practices, whether oral or written, formal or informal, funded or unfunded, to or by which the COMPANY is a party or 23 bound or under which the COMPANY has any liability or contingent liability relating to (a) retirement savings or pensions or compensation, including, without limitation, any defined benefit pension plan, defined contribution pension plan, group registered retirement savings plan or supplemental pension or retirement income plan or (b) any bonus, profit sharing, deferred compensation, incentive compensation, stock compensation, stock purchase, hospitalization, health, drug, dental, legal, disability, insurance (including without limitation unemployment insurance), vacation pay, severance pay or other benefit plan, arrangement or practice with respect to any of its employees or former employees, individuals working on contract with it or other individuals providing services to it of a kind normally provided by employees; and all statutory plans with which the COMPANY is required to comply (collectively, "Pension/Benefit Plans"). Current and complete copies of all written Pension/Benefit Plans or, where oral, written summaries of the material terms thereof, have been made available to VPI and NEWCO together with current and complete copies of all documents relating to the Pension/Benefit Plans, including, without limitation, as applicable, (i) all documents establishing, creating or amending any Pension/Benefit Plan; (ii) all trust agreements, funding agreements, insurance contracts and investment management agreements; (iii) all financial statements and accounting statements and reports, investment reports and actuarial reports for each of the last seven years; (iv) all reports, returns, filings and material correspondence with any Governmental Authority in the last seven years; (v) all booklets, summaries, descriptions or manuals prepared for or circulated to, and written communications of a general nature to employees concerning any Pension/Benefit Plan; (vi) all professional opinions (whether or not internally prepared) with respect to each Pension/Benefit Plan; and (vii) all material internal memoranda concerning each Pension/Benefit Plan prepared within the last seven years. Except as set out and described in Schedule 5.20, there are no employment policies or plans, including policies or plans regarding incentive compensation, stock options, severance pay or other terms or conditions of employment or terms or conditions upon which employees or any individual employee may be terminated, which are binding upon the COMPANY. 24 All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH LAWS GOVERNING PENSION AND OTHER BENEFIT PLANS. Each Pension/Benefit Plan is, and has been, established, registered, qualified, administered and invested, in compliance with the terms thereof, all applicable laws, all collective bargaining agreements of the COMPANY, any other agreement (past or present) relating to the benefits provided under one or more of the Pension/Benefit Plans and all understandings, written or oral, between the COMPANY and the employees and former employees. The COMPANY and STOCKHOLDERS further represent that: (i) no fact or circumstance exists which would adversely affect the tax-exempt status of any Pension/Benefit Plan; (ii) neither the COMPANY nor its agents has received, in the last seven years, any notice from any Person questioning or challenging such compliance (other than in respect of any claim related solely to that Person), and the COMPANY has no knowledge of any such notice from any Person questioning or challenging such compliance beyond the last seven years; (iii) all obligations under the Pension/Benefit Plans (whether pursuant to the terms thereof or applicable law) have been satisfied, and there are no outstanding defaults or violations thereunder by any of the COMPANY or its agents nor does the COMPANY have any knowledge of any default or violation by any other party to any Pension/Benefit Plan; (iv) there have been no amendments, modifications or restatements of any Pension/Benefit Plan made, or any improvements in benefits promised, under the Pension/Benefit Plans except as expressly provided therein or as provided to VPI; (v) all contributions or premiums required to be paid to or in respect of each Pension/Benefit Plan have been paid in a timely fashion in accordance with the terms thereof 25 and all applicable laws, and no taxes, penalties or fees are owing or exigible under or in respect of any Pension/Benefit Plan; (vi) there is no investigation, examination, proceeding, action, suit or claim (other than routine claims for benefits) pending or threatened involving any Pension/Benefit Plan or its assets, and no facts exist which presently or after notice or lapse of time or both could reasonably be expected to give rise to any such investigation, examination, proceeding, action, suit or claim (other than routine claims for benefits); (vii) no event has occurred respecting any Pension/Benefit Plan which would entitle any Person (without the consent of the COMPANY) to wind-up or terminate any Pension/Benefit Plan, in whole or in part, or which could reasonably be expected to materially or adversely affect the tax status thereof (viii) there are no going concern unfunded actuarial liabilities, past service unfunded liabilities or solvency deficiencies respecting any of the Pension/Benefit Plans; (ix) no material changes have occurred in respect of any Pension/Benefit Plan since the date of the most recent financial, accounting or actuarial report, as applicable, issued in connection with any Pension/Benefit Plan, which could reasonably be expected to materially or adversely affect the relevant report (including, without limitation, rendering it misleading in any material respect); (x) neither the COMPANY nor any previous employer of members or former members of any Pension/Benefit Plan has received, or applied for, any payment of surplus or other funds out of any Pension/Benefit Plan; (xi) neither the COMPANY nor any previous employer of members or former members of any Pension/Benefit Plan has taken any contribution holidays under or drawn any surplus or other funds from any Pension/Benefit Plan; 26 (xii) there have been no withdrawals or transfers of assets from any Pension/Benefit Plan other than as contemplated and permitted by the provisions of such Pension/Benefit Plan and applicable laws; (xiii) all employee data necessary to administer each Pension/Benefit Plan is in the possession of the COMPANY, and is complete, correct and in a form which is sufficient for the proper administration of the Pension/Benefit Plans, and none of the Pension/Benefit Plans, other than any group registered retirement savings plan, provides benefits to retired employees or to the beneficiaries or dependents of retired employees; (xiv) none of the Pension/Benefit Plans requires or permits a retroactive increase in premiums or payments, and the level of insurance reserves, if any, under any insured Pension/Benefit Plan is reasonable and sufficient to provide for all incurred but unreported claims; (xv) neither the COMPANY nor its agents are in breach of any contractual or fiduciary obligation with respect to the administration of the Pension/Benefit Plans or the trusts or other funding media relating thereto; (xvi) none of the Pension/Benefit Plans are multiemployer pension plans as defined under applicable laws; (xvii) there exists no liability in connection with any former Pension/Benefit Plan that has terminated and all procedures for termination of each such former Pension/Benefit Plan has been properly followed in accordance with the terms of such former Pension/Benefit Plan and applicable laws; (xviii) there are no merger or asset transfer applications pending with any governmental authority with respect to any Pension/Benefit Plan; and (xix) neither the execution of this Agreement nor any agreement referred to or contemplated herein, nor the consummation of any of the transactions contemplated herein will result in any payment (including, without limitation, severance, unemployment compensation, 27 golden parachute or otherwise) becoming due under any Pension/Benefit Plan, increase any benefits otherwise payable under any Pension/Benefit Plan or result in the acceleration of the time of payment or vesting of any such benefits. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, provincial and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, provincial, local, foreign and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of 28 any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, provincial, local, foreign and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, provincial, local, foreign or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. 29 (e) Except as set forth on Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, provincial, foreign and local income tax returns and franchise tax returns, if any, of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) [INTENTIONALLY DELETED] (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) [INTENTIONALLY DELETED] 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under 30 any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; 31 (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of 32 the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the 33 COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur 34 at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 RESIDENT STATUS . None of the STOCKHOLDERS are non-residents within the meaning of the Income Tax Act (Canada). 35 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. NEWCO is a corporation duly organized, validly existing and in good standing under the laws of Canada. VPI and NEWCO each are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 36 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the transactions contemplated hereby, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state, Canadian provincial and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make 37 any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, provincial, Canadian, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set 38 forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state, foreign and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been 39 duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS upon exchange of Dividend Access Shares pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects, except with respect to voting rights, to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and 40 except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental 41 agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by 42 reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will 43 reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): 44 (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; 45 (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; 46 (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 47 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 48 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and 49 VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the 50 STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the 51 COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 52 7.14 SECTION 85 ELECTIONS. Each of the STOCKHOLDERS and NEWCO hereby agrees to jointly elect in the prescribed form and within the prescribed time elections under subsection 85(l) of the Income Tax Act (Canada) at the respective amounts selected by each STOCKHOLDER to be the proceeds of disposition and the cost of the COMPANY Stock sold hereunder. 7.15 BRITISH COLUMBIA SECURITIES CONSENTS. VPI and NEWCO shall use their commercially reasonable best efforts to obtain all necessary rulings, orders or consents of the British Columbia Securities Commission (the "Securities Consents") to permit the consummation of the transactions contemplated herein, including without limitation, the acquisition and disposition of the Dividend Access Shares and the rights of exchange contained therein, the acquisition of the VPI Stock, and the disposition of the VPI Stock in circumstances substantially the same as all other stockholders of the Other Founding Companies, all in compliance with applicable United States and Canadian securities laws. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing 53 Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter from counsel for VPI, dated the Pre-Closing Date, in the form annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 54 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state or province in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 55 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 8.14 SUPPORT AGREEMENT AND TRUST AGREEMENT. The Support Agreement attached as Exhibit B of Annex I hereto and the Trust Agreement attached as Exhibit C of Annex I hereto shall have been executed and delivered by VPI, NEWCO and, where applicable, the trustee under the Trust Agreement . 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all 56 material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 57 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's province of incorporation and, unless waived by VPI, in each province in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all province franchise (if any) and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 58 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 INTENTIONALLY DELETED. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 59 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 10.2 INTENTIONALLY DELETED. 10.3 PREPARATION AND FILING OF TAX RETURNS (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or 60 properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Patrick McCurdy to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting 61 conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 LIQUIDATION. Each of VPI and NEWCO covenant and agree that it will not liquidate NEWCO, or terminate the Support Agreement or the Exchange Trust Agreement, until the earlier of (i) the tenth anniversary of the Closing Date and (ii) the point in time at which no Dividend Access Shares are outstanding. 11. INDEMNIFICATION The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO or the COMPANY as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and 62 provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO or the COMPANY to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of 63 such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the 64 same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees 65 in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 66 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the transactions contemplated hereby, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; 67 (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of Restricted Common Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable out of pocket fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, 68 however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable out of pocket fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement (but excluding the transactions contemplated by the Other Agreements) in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any residential property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of Whistler, British Columbia, and the other locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a residential property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; 69 (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing residential property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the residential property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (B) engaging in business as a real estate broker, other than as an employee of the COMPANY while employed by the COMPANY, in any location other than Nantucket Island after any termination of STOCKHOLDER'S employment with the COMPANY. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that 70 the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such 71 restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 72 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or NEWCO and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the residential property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 73 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and 74 irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 2. The certificates evidencing the Restricted Common Stock delivered to the STOCKHOLDERS pursuant to Section 2 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 75 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 2 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act and without compliance with the Securities Act (British Columbia). The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling 76 or otherwise disposing of it in connection with a distribution. The STOCKHOLDERS acknowledge that VPI and NEWCO are not now, and may never become, reporting issuers in the Province of British Columbia, and as a result, the Dividend Access Shares and the VPI Stock will be issued either pursuant to a statutory exemption, or an order of the British Columbia Securities Commission granting an exemption, from the prospectus and registration requirements contained in the Securities Act and thereafter may be subject to indefinite resale restrictions and may not be resold except pursuant to an exemption from the prospectus and registration requirements of the Securities Act (British Columbia) or an order of the British Columbia Securities Commission, if any. In the event that the Closing occurs without the requisite order of the British Columbia Securities Commission granting VPI or NEWCO the right to issue the VPI Stock to the STOCKHOLDERS without the requirement to file a prospectus under the Securities Act (British Columbia), the STOCKHOLDERS covenant and agree (I) not to exercise any of the rights attached to the Dividend Access Shares to obtain VPI Stock unless the issue and delivery of the VPI Stock can be effected pursuant to an exemption from the prospectus and registration requirements of the Securities Act (British Columbia) and (ii) not to sell or otherwise dispose of any of the Dividend Access Shares unless the transferee has provided a similar acknowledgment and covenant to VPI and NEWCO. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state and provincial securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: 77 THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock into which the Dividend Access Shares are exchangeable issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares 78 included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the Holders of a majority of the shares of VPI Stock into which the Dividend Access Shares are exchangeable pursuant to this Agreement and the VPI Stock issued pursuant to the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock into which the Dividend Access Shares are exchangeable pursuant to this Agreement and the VPI Stock issued 79 pursuant to the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock or VPI Stock into which the Dividend Access Shares are exchangeable shall be initiated under this Section 17.2 until 90 days after the effective date of such registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and the VPI Stock into which the Dividend Access Shares are exchangeable and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 80 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock and the VPI Stock into which the Dividend Access Shares are exchangeable which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock and the VPI Stock into which the Dividend Access Shares are exchangeable covered by such registration statement under applicable state securities laws as the Holders shall reasonably request for the distribution for the VPI Stock and the VPI Stock into which the Dividend Access Shares are exchangeable; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating Holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock into which the Dividend Access Shares are exchangeable at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such VPI Stock. 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock into which the Dividend Access Shares are exchangeable pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each 81 other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of 82 Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or 83 controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each 84 seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately 85 preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning 86 VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 87 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and NEWCO and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to US$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the transactions contemplated hereby, other than 88 Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; 89 (c) If to the COMPANY, addressed to it at: Whistler Chalets Limited 4368 Main Street Suite 216 Whistler, British Columbia Canada V0N 1B4 Facsimile no.: (604) 938-6622 Attention: Patrick McCurdy and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 90 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the Dividend Access Shares issued or to be issued to the STOCKHOLDERS upon consummation of the transactions contemplated hereby. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving Dividend Access Shares in connection with the transactions contemplated hereby and each future holder of such Dividend Access Shares. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under 91 common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Balance Sheet Date" has the meaning set forth in Section 5.9. "CBCA" has the meaning set forth in Section 2.2. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 1.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. 92 "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pension/Benefit Plans" has the meaning set forth in Section 5.20. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. 93 "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value US$0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. 94 "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value US$.01 per share, of VPI. "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 95 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. WHISTLER CHALETS HOLDING CORP. By:/s/ Leonard Potter -------------------------------- Leonard Potter Vice President WHISTLER CHALETS LIMITED By:/s/ J. Patrick McCurdy -------------------------------- J. Patrick McCurdy President STOCKHOLDERS: /s/ J. Patrick McCurdy - ----------------------------------- J. Patrick McCurdy EX-2.14 16 EXHIBIT 2.14 EXHIBIT 2.14 - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of March 11, 1998 by and among VACATION PROPERTIES INTERNATIONAL, INC. FRS ACQUISITION CORP. (a subsidiary of Vacation Properties International, Inc.) FIRST RESORT SOFTWARE, INC. and the STOCKHOLDERS named herein - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- AGREEMENT AND PLAN OF ORGANIZATION.............................................1 1. THE MERGER................................................................3 1.1 Delivery and Filing of Articles of Merger.............................3 1.2 Effective Time of the Merger..........................................3 1.3 Certificate of Incorporation, Bylaws and Board of Directors of Surviving Corporation.............................................3 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, VPI and NEWCO................................................4 1.5 Effect of Merger......................................................4 2. CONVERSION OF STOCK.......................................................5 2.1 Manner of Conversion..................................................5 3. DELIVERY OF MERGER CONSIDERATION..........................................6 3.1 Delivery of VPI Stock and Cash........................................7 3.2 Delivery of COMPANY Stock.............................................7 3.3 Balance Sheet Test....................................................7 4. CLOSING...................................................................8 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS................9 (A) Representations and Warranties of COMPANY and STOCKHOLDERS............9 5.1 Due Organization.................................................10 5.2 Authority........................................................10 5.3 Capital Stock of the COMPANY.....................................10 5.4 Transactions in Capital Stock....................................11 5.5 No Bonus Shares..................................................11 5.6 Subsidiaries.....................................................11 5.7 Predecessor Status; etc..........................................12 5.8 Spin-off by the COMPANY..........................................12 5.9 Financial Statements.............................................12 5.10 Liabilities and Obligations.....................................13 5.11 Accounts and Notes Receivable...................................13 5.12 Permits and Intangibles.........................................14 5.13 Environmental Matters...........................................16 5.14 Personal Property...............................................17 5.15 Significant Customers...........................................18 5.16 Material Contracts and Commitments..............................18 5.17 Real Property...................................................19 5.18 Insurance.......................................................20 5.19 Compensation; Employment Agreements; Organized Labor Matters........................................................20 5.20 Employee Plans..................................................21 5.21 Compliance with ERISA...........................................22 5.22 Conformity with Law; Litigation.................................24 5.23 Taxes...........................................................24 5.24 No Violations...................................................27 5.25 Government Contracts............................................27 5.26 Absence of Changes..............................................27 5.27 Deposit Accounts; Powers of Attorney............................29 5.28 Validity of Obligations.........................................29 5.29 Relations with Governments......................................30 5.30 Disclosure......................................................30 5.31 Prohibited Activities...........................................31 (B) Representations and Warranties of STOCKHOLDERS.......................31 5.32 Authority; Ownership............................................31 5.33 Preemptive Rights...............................................31 i 5.34 No Intention to Dispose of VPI Stock............................31 6. REPRESENTATIONS OF VPI AND NEWCO.........................................32 6.1 Due Organization.................................................32 6.2 Authorization....................................................33 6.3 Capital Stock of VPI and NEWCO...................................33 6.4 Transactions in Capital Stock....................................34 6.5 Subsidiaries.....................................................34 6.6 Financial Statements.............................................34 6.7 Liabilities and Obligations......................................34 6.8 Conformity with Law; Litigation..................................35 6.9 No Violations....................................................35 6.10 Validity of Obligations.........................................36 6.11 VPI Stock.......................................................36 6.12 No Side Agreements..............................................36 6.13 Business; Real Property; Material Agreements....................37 6.14 Taxes...........................................................37 6.15 Completion of Due Diligence.....................................39 6.16 Disclosure.....................................................39 6.17 Tax Treatment...................................................39 7. COVENANTS PRIOR TO CLOSING...............................................40 7.1 Access and Cooperation; Due Diligence............................40 7.2 Conduct of Business Pending Closing..............................41 7.3 Prohibited Activities............................................42 7.4 No Shop..........................................................44 7.5 Notice to Bargaining Agents......................................44 7.6 Agreements.......................................................44 7.7 Notification of Certain Matters..................................44 7.8 Amendment of Schedules...........................................45 7.9 Cooperation in Preparation of Registration Statement.............47 7.10 Final Financial Statements......................................48 7.11 Further Assurances..............................................49 7.12 Authorized Capital..............................................49 7.13 Best Efforts to Consummate Transaction..........................49 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY..........50 8.1 Representations and Warranties...................................50 8.2 Performance of Obligations.......................................50 8.3 No Litigation....................................................50 8.4 Opinion of Counsel...............................................51 8.5 Registration Statement...........................................51 8.6 Consents and Approvals...........................................51 8.7 Good Standing Certificates.......................................51 8.8 No Material Adverse Change.......................................51 8.9 Closing of IPO...................................................51 8.10 Secretary's Certificate.........................................52 8.11 Employment Agreements...........................................52 8.12 Directors and Officers Insurance................................52 8.13 Stock Options...................................................52 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO.....................53 9.1 Representations and Warranties...................................53 9.2 Performance of Obligations.......................................53 9.3 No Litigation....................................................53 9.4 Secretary's Certificate..........................................54 9.5 No Material Adverse Effect.......................................54 ii 9.6 STOCKHOLDERS' Release............................................54 9.7 Termination of Related Party Agreements..........................54 9.8 Opinion of Counsel...............................................54 9.9 Consents and Approvals...........................................55 9.10 Good Standing Certificates......................................55 9.11 Registration Statement..........................................55 9.12 Employment Agreements...........................................55 9.13 Closing of IPO..................................................55 9.14 FIRPTA Certificate..............................................55 9.15 Insurance.......................................................55 9.16 Lockup Agreement................................................56 9.17 Letter of Representation........................................56 9.18 Termination of Defined Benefit Plans............................56 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................56 10.1 Release From Guarantees; Repayment of Certain Obligations.......56 10.2 Preservation of Tax and Accounting Treatment....................57 10.3 Preparation and Filing of Tax Returns...........................57 10.4 Appointment of Directors........................................58 10.5 Preservation of Employee Benefit Plans..........................58 10.6 Maintenance of Books............................................59 10.7 Securities Covenants............................................59 10.8 License of Source Code..........................................59 11. INDEMNIFICATION..........................................................61 11.1 General Indemnification by the STOCKHOLDERS.....................61 11.2 Indemnification by VPI..........................................62 11.3 Third Person Claims.............................................62 11.4 Exclusive Remedy................................................64 11.5 Limitations on Indemnification..................................64 12. TERMINATION OF AGREEMENT.................................................66 12.1 Termination.....................................................66 12.2 Liabilities in Event of Termination.............................67 13. NONCOMPETITION...........................................................67 13.1 Prohibited Activities...........................................67 13.2 Damages.........................................................69 13.3 Reasonable Restraint............................................69 13.4 Severability; Reformation.......................................70 13.5 Independent Covenant............................................70 13.6 Materiality.....................................................70 13.7 Limitation......................................................71 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................71 14.1 STOCKHOLDERS....................................................71 14.2 VPI AND NEWCO...................................................72 14.3 Damages.........................................................73 14.4 Survival........................................................73 14.5 Return of Data Submitted........................................73 15. TRANSFER RESTRICTIONS....................................................73 15.1 Transfer Restrictions...........................................73 15.2 Certain Transfers...............................................74 16. SECURITIES LAW REPRESENTATIONS...........................................75 16.1 Compliance with Law.............................................75 16.2 Economic Risk; Sophistication...................................75 17. REGISTRATION RIGHTS......................................................76 17.1 Piggyback Registration Rights...................................76 iii 17.2 Demand Registration Rights......................................77 17.3 Registration Procedures.........................................78 17.4 Underwriting Agreement..........................................78 17.5 Availability of Rule 144........................................78 17.6 Registration Rights Indemnification.............................79 18. GENERAL..................................................................83 18.1 Press Releases..................................................83 18.2 Cooperation.....................................................84 18.3 Successors and Assigns; Third Party Beneficiaries...............84 18.4 Entire Agreement................................................84 18.5 Counterparts....................................................85 18.6 Brokers and Agents..............................................85 18.7 Expenses........................................................85 18.8 Notices.........................................................86 18.9 Governing Law...................................................87 18.10 Exercise of Rights and Remedies................................87 18.11 Time...........................................................87 18.12 Reformation and Severability...................................87 18.13 Remedies Cumulative............................................88 18.14 Captions.......................................................88 18.15 Amendments and Waivers.........................................88 18.16 Incorporation by Reference.....................................88 18.17 Defined Terms..................................................88 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT iv AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of March [____], 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation ("VPI"), FRS ACQUISITION CORP., a Delaware corporation ("NEWCO"), FIRST RESORT SOFTWARE, INC., a Colorado corporation (the "COMPANY"), and Thomas A. Leddy, Evan H. Gull and Daniel Patrick Curry (the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on March 4, 1998, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of VPI; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as the "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that NEWCO merge with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and the State in which the COMPANY is incorporated; WHEREAS, VPI is entering into other separate agreements substantially similar to this Agreement (the "Other Agreements"), each of which is entitled "Agreement and Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado corporation, Jupiter Property Management at Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation, The Maury 1 People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort Property Management, Inc., a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management Company, a Georgia corporation, and Whistler Chalets Limited, a British Columbia corporation, and their respective stockholders in order to acquire additional businesses (the COMPANY, together with each of the entities with which VPI has entered into the Other Agreements, are collectively referred to herein as the "Founding Companies"); WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock constitute the "VPI Plan of Organization;" WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI that are parties to the Other Agreements intend to consummate the VPI Plan of Organization as an integrated plan pursuant to which the STOCKHOLDERS and the stockholders of the Other Founding Companies shall transfer the capital stock of the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the stock of VPI as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code; and WHEREAS, in consideration of the agreements of the Other Founding Companies pursuant to the Other Agreements, the Board of Directors of the COMPANY has approved this Agreement as part of the VPI Plan of Organization in order to transfer the capital stock of the COMPANY to VPI; NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 2 1. THE MERGER 1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State in which the COMPANY is incorporated and will deliver stamped receipt copies of each such filing to VPI on or before the Closing Date. 1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger, NEWCO shall be merged with and into the COMPANY in accordance with the Articles of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be the surviving party in the Merger (the COMPANY is sometimes hereinafter referred to as the "Surviving Corporation"). The Merger will be effected in a single transaction. 1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger: (i) the Certificate of Incorporation of the COMPANY then in effect shall be the Certificate of Incorporation of the Surviving Corporation until changed as provided by law; (ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the Surviving Corporation; and subsequent to the Effective Time of the Merger, such Bylaws shall be the Bylaws of the Surviving Corporation until they shall thereafter be duly amended; (iii) the Board of Directors of the Surviving Corporation shall consist of the persons who are on the Board of Directors of the COMPANY immediately prior to the Effective Time of the Merger, provided that the Chief Executive Officer of VPI shall be elected as a director of the Surviving Corporation effective as of the Effective Time of the Merger; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the state in which the Surviving Corporation is located and of the Certificate of Incorporation and Bylaws of the Surviving Corporation; and (iv) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or 3 capacities, and effective upon the Effective Time of the Merger the person designated by VPI to be appointed as such officer shall be appointed as a vice president of the Surviving Corporation and the person designated by VPI to be appointed as such officer shall be appointed as an Assistant Secretary of the Surviving Corporation, each of such officers to serve, subject to the provisions of the Certificate of Incorporation and Bylaws of the Surviving Corporation, until his or her successor is duly elected and qualified. 1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY, VPI AND NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, VPI and NEWCO as of the date of this Agreement are as follows: (i) as of the date of this Agreement, the authorized and outstanding capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (ii) immediately prior to the Closing Date, the authorized capital stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the number of issued and outstanding shares will be as set forth in the Registration Statement, and 10,000,000 shares of preferred stock, $.01 par value, of which no shares will be issued and outstanding; and (iii) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares are issued and outstanding. 1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of the Merger shall be as provided in the applicable provisions of the General Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of the State in which the COMPANY is incorporated. Except as herein specifically set forth, the identity, existence, purposes, powers, objects, franchises, privileges, rights and immunities of the COMPANY shall continue unaffected and unimpaired by the Merger and the corporate franchises, existence and rights of NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested therewith. At the Effective Time of the Merger, the separate existence of NEWCO shall cease and, in accordance 4 with the terms of this Agreement, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, of a public, as well as of a private, nature, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all Taxes, including those due and owing and those accrued, and all other choses in action, and all and every other interest of or belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed; and all property, rights and privileges, powers and franchises and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of NEWCO and the COMPANY; and the title to any real estate, or interest therein, whether by deed or otherwise, under the laws of the states of incorporation vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by reason of the Merger. Except as otherwise provided herein, the Surviving Corporation shall thenceforth be responsible and liable for all of the liabilities and obligations of NEWCO and the COMPANY and any claim existing, or action or proceeding pending, by or against NEWCO or the COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in their place. Neither the rights of creditors nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the Surviving Corporation, and may be enforced against such Surviving Corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by such Surviving Corporation. 2. CONVERSION OF STOCK 2.1 MANNER OF CONVERSION. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: 5 (i) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent (l) the right to receive the number of fully paid and nonassessable shares of VPI Stock set forth on Annex III hereto with respect to such holder and (2) the right to receive the amount of cash, subject to adjustment pursuant to Section 3.3 hereof, set forth on Annex III hereto with respect to such holder; (ii) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of VPI Stock or other consideration shall be delivered or paid in exchange therefor; and (iii) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger, shall, by virtue of the Merger and without any action on the part of VPI, automatically be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all of the other shares of outstanding VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI or as otherwise provided by the Delaware GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At the Effective Time of the Merger, VPI shall have no class of capital stock (including preferred stock) issued and outstanding other than the VPI Stock. 3. DELIVERY OF MERGER CONSIDERATION 6 3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, shall, upon surrender of such certificates, receive the respective number of shares of VPI Stock and the amount of cash (subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to be payable by certified check or wire transfer. 3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. 3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i) positive net worth (excluding all customer deposits and similar escrow-type accounts); (ii) positive net working capital (defined as current assets minus current liabilities, excluding all customer deposits and similar escrow-type accounts); and (iii) all customer deposit accounts and other similar escrow-type accounts fully funded in cash or cash equivalents. To the extent that any condition set forth in clauses (i) through (iii) is not met, the cash portion of the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount required to cure any such failure. Indebtedness of the COMPANY in excess of the amount set forth on Annex III that was incurred in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the cash portion of the consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment shall be made to effect the intent of this Section 3.3. Notwithstanding anything set forth above, VPI acknowledges (i) that the COMPANY has established a reserve in the amount of $125,000 on its balance sheet relating to contingent liabilites and (ii) that this reserve shall be deemed to have not been established (i.e., shall be ignored and not counted) when conducting the above-referenced balance sheet tests, including positive net working capital, positive net worth and fully funded customer deposits. 7 4. CLOSING At or prior to the Pricing, the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 3 hereof; provided, however, that such actions shall not include the actual completion of the Merger or the conversion and delivery of the shares and certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of which actions shall only be taken upon the Closing Date as herein provided. In the event that there is no Closing Date and this Agreement terminates, VPI and NEWCO hereby covenant and agree to do all things required by Delaware law and all things which counsel for the COMPANY advise VPI and/or NEWCO are required by applicable laws of the State in which the COMPANY is incorporated in order to rescind the effects, if any, of the filing of the Articles of Merger as described in this Section and to pay all related costs of the COMPANY directly associated with such rescission. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of Merger shall have been filed with the appropriate state authorities so that they shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall become effective and the Merger shall thereby be effected, (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, the delivery of a certified check or checks or wire transfer(s) in an amount equal to the cash portion of the consideration which the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in Section 3 hereof shall occur and (z) the closing with respect to the IPO shall be completed. The taking of the actions described in the preceding clauses (x), (y) and (z) shall constitute the closing of the transactions hereunder (the "Closing"), and the date on which the actions described in the preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing 8 Date." Except as provided in Sections 8 and 9 hereof with respect to actions to be taken on the Closing Date, during the period from the Pre-Closing Date to the Closing Date this Agreement may only be terminated by a party if the underwriting agreement in respect of the IPO is terminated pursuant to the terms of such agreement. This Agreement shall in any event terminate if the Closing Date has not occurred within 15 business days of the Pre-Closing Date. Time is of the essence. 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS. Each of the COMPANY and the STOCKHOLDERS jointly and severally represents and warrants that all of the following representations and warranties in this Section 5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of the COMPANY and the STOCKHOLDERS agrees that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 5.23 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 5.23 and (ii) solely for purposes of determining whether a claim for indemnification under Section 11.1(iii) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or any other federal or state securities laws as a result of a breach of a representation or warranty by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if any. 9 5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and the COMPANY is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified would not have a material adverse effect on the business, operations, affairs, properties, assets, condition (financial or otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is incorporated and contains a list of all such jurisdictions in which the COMPANY is authorized or qualified to do business. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore made available to VPI, are correct and complete in all material respects. There are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all of such minutes are correct and complete in all material respects. Except as set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten business days prior to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and directors on behalf of the COMPANY. 5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to enter into and perform this Agreement and the Merger. 5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. All of the issued 10 and outstanding shares of the capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and further, such shares were offered, issued, sold and delivered by the COMPANY in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares were issued in violation of the preemptive rights of any past or present stockholder of the COMPANY. 5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates the COMPANY to issue any of its capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iii) neither the voting stock structure of the COMPANY nor the relative ownership of shares among any of its respective stockholders has been altered or changed in contemplation of the Merger and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list of all outstanding options, warrants or other rights to acquire shares of the COMPANY's stock and the material terms of such outstanding options, warrants or other rights. 5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses. 5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of the COMPANY's subsidiaries, whether a corporation, limited liability company or other business entity (each, a "Subsidiary"), and sets forth the number and class of the authorized capital stock of each Subsidiary and the number of shares or interests of each Subsidiary which are issued and outstanding, all of which shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not presently 11 own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all names of all predecessor companies of the COMPANY, including the names of any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or owned by the COMPANY or from whom the COMPANY previously acquired material assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of another corporation or a part of an acquisition which was later rescinded. 5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has not been any sale, spin-off or split-up of material assets of the COMPANY since January 1, 1995. 5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the following financial statements (the "COMPANY Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited Statement of Operations, if any, for the period ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet Date") and unaudited Statement of Operations, if any, for the period ended December 31, 1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash Flows, if any, for the period ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements, except for the requirement of footnote disclosures). Except as set forth on Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the financial position of such COMPANY as of the dates 12 indicated thereon, and such Statements of Operations, Statements of Changes in Stockholders' Equity and Statements of Cash Flows present fairly the results of operations for the periods indicated thereon. 5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date of (i) all liabilities of the COMPANY which are not reflected in the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements, together with true, correct and complete copies of such documents. Except as set forth on Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any material liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case of those contingent liabilities related to pending or, to the knowledge of the COMPANY, threatened litigation, or other liabilities which are not fixed or are being contested, the following information: (i) a summary description of the liability together with the following: (a) copies of all relevant documentation relating thereto; (b) amounts claimed and any other action or relief sought; and (c) name of claimant and all other parties to the claim, suit or proceeding; (ii) the name of each court or agency before which such claim, suit or proceeding is pending; (iii) the date such claim, suit or proceeding was instituted; and (iv) a good faith and reasonable estimate of the maximum amount, if any, which is likely to become payable with respect to each such liability. If no estimate is provided, the estimate shall for purposes of this Agreement be deemed to be zero. 5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and notes receivable of the COMPANY, as of 13 the Balance Sheet Date, including any such amounts which are not reflected in the balance sheet as of the Balance Sheet Date, and including receivables from and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the accounts, notes and other receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible in the amounts shown, net of reserves reflected in the balance sheet as of the Balance Sheet Date with respect to accounts receivable as of the Balance Sheet Date, and net of reserves reflected in the books and records of the COMPANY (consistent with the methods used for the balance sheet) with respect to accounts receivable of the COMPANY after the Balance Sheet Date. 5.12 PERMITS AND INTANGIBLES. (a) The COMPANY holds all licenses, franchises, permits and other governmental authorizations that are necessary for the operation of the business of the COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list and summary description (which is set forth on Schedule 5.12) of all such licenses, franchises, permits and other governmental authorizations, including permits, titles, licenses, franchises and certificates held by the COMPANY (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 5.13). The licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any 14 of the foregoing, except for inadvertent, immaterial noncompliance with such requirements, standards, criteria and conditions (provided that any such noncompliance shall be deemed a breach of this Section 5.12 for purposes of Section 11 hereof). Except as specifically provided on Schedule 5.12, the transactions contemplated by this Agreement will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any such licenses, franchises, permits or government authorizations. (b) Except as provided on Schedule 5.12, the COMPANY is the exclusive owner of all right, title and interest in and to all Intellectual Property rights that are in any material respect used or proposed to be used in the business of the COMPANY as now conducted, or is licensed to use such Intellectual Property, and has delivered to VPI an accurate list and summary description of all such Intellectual Property owned or licensed by the COMPANY (which is set forth on Schedule 5.12). (c) Schedule 5.12 sets forth as of the date hereof all Intellectual Property owned by the COMPANY. All issued patents, registered trademarks, trade names, service marks and copyright registrations listed in Schedule 5.12 are valid, enforceable and subsisting. To the knowledge of the COMPANY, as of the date hereof, there has not been and there is not any material unauthorized use, infringement or misappropriation of any of the Intellectual Property owned by the COMPANY by any third party, employee or former employee of the COMPANY. The COMPANY has the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Intellectual Property owned by the COMPANY. (d) Schedule 5.12 sets forth as of the date hereof a list of all licenses and other agreements with third parties under which the COMPANY has been granted rights to the use, reproduction, distribution, manufacture, and sale or licensing of items embodying the Intellectual Property rights of such third parties. (e) Schedule 5.12 sets forth as of the date hereof a list of all licenses and agreements under which the COMPANY has granted rights under Intellectual Property to third parties. All 15 such rights granted have been and are nonexclusive. (f) As of the date hereof, no claims with respect to the Intellectual Property rights owned or licensed by the COMPANY have been asserted against the COMPANY or, to the knowledge of the COMPANY are threatened by any Person against the COMPANY, nor does the COMPANY know of any valid grounds for any bona fide claims against the use by the COMPANY of any Intellectual Property owned or licensed by the COMPANY. (g) No Intellectual Property owned or licensed by the COMPANY is subject to any court order restricting in any manner the use or licensing thereof by the COMPANY. The COMPANY has not entered into any agreement granting any third party the right to bring infringement actions with respect to, or otherwise to enforce rights with respect to, any Intellectual Property rights owned by the COMPANY. (h) Each of the computer programs and databases and their associated system and user documentation (collectively, the "Software Products") owned by the COMPANY, licensed to any third party and set forth on Schedule 5.12 hereto conforms in all material respects to the functional and operational specifications set forth in the respective user manuals and other documentation for such Software Products. The COMPANY owns and has possession of all such technical documentation (including the source code, system documentation, statements of principles of operation and schematics) for each of the Software Products as may be necessary and sufficient for the continued effective use, further development and maintenance of the same. 5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the COMPANY has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to any of them or any of their respective properties, assets, operations and businesses relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances including 16 petroleum and petroleum products (as such terms are defined in any applicable Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and other approvals necessary to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of which permits and approvals is set forth on Schedule 5.13, and has reported to the appropriate authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of or otherwise handled; (iii) there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in or on any property owned or operated by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances or arranged for the transportation of Hazardous Wastes and Hazardous Substances, which site is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. 5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.14) of (x) all personal property included in "depreciable plant, property and equipment" on the balance sheet of the COMPANY as of the Balance Sheet Date or that will be included on any balance sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other personal property (except cash and cash equivalents) owned by the COMPANY with a value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property used in the operation of the COMPANY's business as now conducted, including, true, complete and correct copies of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are 17 currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in good working order and condition, ordinary wear and tear excepted and (iii) all leases and agreements included on Schedule 5.14 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.15) of (i) all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.15, means a customer (or person or entity) representing 5% or more of the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of the COMPANY's significant customers (or persons or entities that are sources of a significant number of customers) have canceled or substantially reduced or, to the knowledge of the COMPANY, are currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. 5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule 5.16 all material contracts, commitments and similar agreements to which the COMPANY currently is a party or by which it or any of its properties are bound (including, but not limited to, contracts with significant customers, joint venture or partnership agreements, contracts with any labor organizations, strategic alliances and options to purchase land), other than contracts, commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a) in existence as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in each case has delivered true, complete and correct 18 copies of such agreements to VPI. The COMPANY has complied with all material commitments and obligations pertaining to it, and is not in default under any contracts or agreements listed on Schedule 5.16 and no notice of default under any such contract or agreement has been received. The COMPANY has also indicated on Schedule 5.16 a summary description of all pending plans or projects involving the opening of new operations, expansion of existing operations, and the acquisition of any personal property, business or assets requiring, in any event, the payment of more than $25,000 by the COMPANY. 5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired or leased since the Balance Sheet Date, and all other real property, if any, used by the COMPANY in the conduct of its business. The COMPANY has good and insurable title to the real property owned by it, including those reflected on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance or charge, except for: (i) liens reflected on Schedules 5.10 or 5.17 as securing specified liabilities (with respect to which no default exists); (ii) liens for current Taxes not yet payable and assessments not in default; (iii) easements for utilities serving the property only; and (iv) easements, covenants and restrictions and other exceptions to title shown of record in the office of the County Clerks in which the properties, assets and leasehold estates are located which do not adversely affect the current use of the property. Schedule 5.17 contains, without limitation, true, complete and correct copies of all title reports and title insurance policies currently in possession of the COMPANY with respect to real property owned by the COMPANY. The COMPANY has also delivered to VPI an accurate list of real property leased by the COMPANY as lessee (which list is set forth on Schedule 5.17), together with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY 19 as lessee (which copies are attached to Schedule 5.17), and an indication as to which such properties, if any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in full force and effect and, assuming due execution and delivery thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and their respective affiliates, constitute valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their successors) thereto in accordance with their respective terms. 5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii) an accurate list of all insurance loss runs and workers compensation claims received for the past three (3) policy years and (iii) true, complete and correct copies of all insurance policies currently in effect. Such insurance policies evidence all of the insurance that the COMPANY is required to carry pursuant to all of its contracts and other agreements and pursuant to all applicable laws. All of such insurance policies are currently in full force and effect and shall remain in full force and effect through the Closing Date. No insurance carried by the COMPANY has ever been canceled by the insurer and the COMPANY has never been unable to obtain insurance coverage for its assets and operations. 5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The COMPANY has delivered to VPI an accurate list (which is set forth on Schedule 5.19) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus and other compensation, respectively) of each of such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to VPI true, complete and correct copies of any employment agreements for persons listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance Sheet Date, there have been no increases in the 20 compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or subject to (and none of its assets or properties is bound by or subject to) any arrangement with any labor union, (ii) no employees of the COMPANY are represented by any labor union or covered by any collective bargaining agreement, (iii) to the best of the COMPANY's knowledge, no campaign to establish such representation is in progress and (iv) there is no pending or, to the best of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any group of its employees nor has the COMPANY experienced any labor interruptions over the past three years. The COMPANY believes its relationship with employees to be good. The COMPANY (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic or foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for inadvertent, immaterial noncompliance with such laws, rules, and regulations (provided that any such noncompliance shall be deemed a breach of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other employment-related benefits; and (iv) has provided employees with the benefits to which they are entitled pursuant to the terms of all COMPANY benefit plans. 5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule (Schedule 5.20) showing all employee benefit plans currently sponsored or maintained or contributed to by, or which cover the current or former employees or directors of the COMPANY, all employment agreements and other agreements or arrangements containing "golden parachute" or other similar provisions, and all deferred compensation agreements, together with true, complete and correct copies of such plans, agreements and any trusts related thereto, and classifications of employees covered 21 thereby as of the Balance Sheet Date. Except for the employee benefit plans, if any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan program, fund or arrangement that constitutes an "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to or accrue or pay any benefits under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has not sponsored, maintained or contributed to any employee pension benefit plan other than the plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions or employment of any of the COMPANY's employees. All accrued contribution obligations of the COMPANY with respect to any plan listed on Schedule 5.20 have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. 5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and trusts of the COMPANY that are currently maintained or contributed to by the COMPANY or cover employees or former employees of the COMPANY listed on Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have been so qualified and have been determined by the Internal Revenue Service to be so qualified, and copies of such determination letters are included as part of Schedule 5.21 hereof. All employee benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all reports and other documents required to be filed with any governmental 22 agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns) have been timely filed or distributed, and copies thereof for the three most recent plan years are included as part of Schedule 5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability for excise tax or penalty due to the Internal Revenue Service nor any liability to the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further represent that: (i) there have been no terminations, partial terminations or discontinuance of contributions to any such Qualified Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service; (ii) no such plan listed on Schedule 5.20 subject to the provisions of Title IV of ERISA has been terminated except in accordance with applicable laws and regulations or as may be required pursuant to Section 9.18 hereof; (iii) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA) with respect to any such plan listed on Schedule 5.20; (iv) the COMPANY has not incurred liability under Section 4062 of ERISA; (v) the COMPANY is not now, and cannot as a result of its past activities become, liable to the Pensions Benefit Guaranty Corporation or to any multi-employer pension benefit plan under the provisions of Title IV of ERISA; and (vi) no circumstances exist pursuant to which the COMPANY has or could have any direct or indirect liability whatsoever (including, but not limited to, any liability to the Internal Revenue Service for any excise tax or penalty, or being subject to any Statutory Lien to secure payment of any liability) with respect to any plan now or heretofore maintained or 23 contributed to by any entity other than the COMPANY that is, or at any time was, a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY. 5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance with any such law, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or, to the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the COMPANY and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. The COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, orders, approvals, variances, rules and regulations, and is not in violation of any of the foregoing. 5.23 TAXES. (a) The COMPANY has timely filed all requisite federal, state, local and other Tax returns, reports, declarations or Tax return filing extension requests ("Tax Returns") for all fiscal periods ended on or before the Balance Sheet Date. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to the COMPANY or its officers or employees responsible for maintaining the financial records of the COMPANY subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 5.23, there are no examinations in progress (and the 24 COMPANY and its employees are not aware of any proposed examinations) or claims against the COMPANY (including liens against the COMPANY's assets) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the Balance Sheet Date and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated group which includes or included the COMPANY, or with respect to any payment made or deemed made by the COMPANY, required to be paid by the date hereof, have been paid. All amounts required to be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by the COMPANY for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof). (c) The amounts, if any, shown as accruals for Taxes on the COMPANY Financial Statements (and, if applicable, any Financial Statements delivered pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 5.23, the COMPANY has not been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). The COMPANY is not a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 5.23, the COMPANY (i) has not assumed or is not liable for any Taxes of any other person or entity, including any predecessor corporation or 25 partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which the COMPANY or such person or entity was the surviving corporation or a consolidation) and (ii) has not indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of COMPANY for its last three (3) fiscal years or such shorter period of time as the COMPANY shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 5.23. (g) The COMPANY has a taxable year ended on the date set forth as such on Schedule 5.23. (h) Except as disclosed on Schedule 5.23, the COMPANY's methods of accounting have not changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) The COMPANY is not an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule 5.23. After the date hereof, no statutory or regulatory election with respect to Taxes will be made without the written consent of VPI. (k) The COMPANY has not filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code and has not agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by the COMPANY. 26 5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other party thereto, is in default under any lease, instrument, agreement, license or permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a party or by which its properties are bound (the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the Material Documents or the Charter Documents. Except as set forth on Schedule 5.24, none of the Material Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect, and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. Except as set forth on Schedule 5.24, none of the Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any other party to such Material Document, and none of the Material Documents prohibits or restricts the COMPANY from freely providing services to any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding Company. 5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the COMPANY is not now a party to any governmental contract subject to price redetermination or renegotiation. 5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth on Schedule 5.26, there has not been: (i) any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), income or business of the COMPANY; (ii) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of the COMPANY; 27 (iii) any change in the authorized capital of the COMPANY or its outstanding securities or any change in its ownership interests or any grant of any options, warrants, calls, conversion rights or commitments; (iv) any declaration or payment of any dividend or distribution in respect of the capital stock (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3) or any direct or indirect redemption, purchase or other acquisition of any of the capital stock of the COMPANY; (v) any increase in the compensation, bonus, sales commissions or fee arrangement payable or to become payable by the COMPANY to any of its officers, directors, STOCKHOLDERS, employees, consultants or agents, except for ordinary and customary bonuses and salary increases for employees in accordance with past practice; (vi) any work interruptions, labor grievances or claims filed, or any event or condition of any character, materially adversely affecting the business of the COMPANY; (vii) any sale or transfer, or any agreement to sell or transfer, any material assets, property or rights of the COMPANY to any person (other than VPI), including, without limitation, the STOCKHOLDERS and their respective affiliates; (viii) any cancellation of, or agreement to cancel, any indebtedness or other obligation owing to the COMPANY, including without limitation any indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof, except for inadvertent, immaterial cancellations of or agreements to cancel any such indebtedness or obligation (provided that any such cancellation or agreement to cancel shall be deemed a breach of this Section 5.26 for purposes of Section 11 hereof); (ix) any plan, agreement or arrangement granting (other than to VPI) any preferential rights to purchase or acquire any interest in any of the assets, property or rights of 28 the COMPANY or requiring consent of any party to the transfer and assignment of any such assets, property or rights; (x) any purchase or acquisition of, or agreement, plan or arrangement to purchase or acquire, any property, rights or assets outside of the ordinary course of the COMPANY's business; (xi) any waiver of any material rights or claims of the COMPANY; (xii) any material breach, amendment or termination of any contract, agreement, license, permit or other right to which the COMPANY is a party; (xiii) any transaction by the COMPANY outside the ordinary course of its business; (xiv) any cancellation or termination of a material contract with a customer or client prior to the scheduled termination date; or (xv) any other distribution of property or assets by the COMPANY. 5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as of the date of the Agreement of: (i) the name of each financial institution in which the COMPANY has accounts or safe deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the type of account and account number; and (iv) the name of each person authorized to draw thereon or have access thereto. Schedule 5.27 also sets forth a complete list of the names of each person, corporation, firm or other entity holding a general or special power of attorney from the COMPANY and a description of the terms of such power. 5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by the COMPANY and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of the COMPANY and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of the 29 COMPANY, enforceable against the COMPANY in accordance with its terms except as may be limited by (i) bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally or (ii) the discretionary power of a court exercising equity jurisdiction. The individual signing this Agreement on behalf of the COMPANY has the legal power, authority and capacity to bind the COMPANY to the terms of this Agreement. 5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office in violation of applicable law nor has it otherwise taken any action which would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. 5.30 DISCLOSURE. (a) This Agreement, including the schedules hereto, together with the completed Directors and Officers Questionnaires and Registration Statement Questionnaires attached hereto as Schedule 5.30 and all other documents and information made available to VPI and its representatives in writing pursuant hereto or thereto, present fairly the business and operations of the COMPANY for the time periods with respect to which such information was requested. The COMPANY's rights under the documents delivered pursuant to this Agreement would not be materially adversely affected by, and no statement made in this Agreement would be rendered untrue in any material respect by, (i) any other document to which the COMPANY is a party, or to which its properties are subject, or (ii) any other fact or circumstance regarding the COMPANY (which fact or circumstance was, or should reasonably, after due inquiry, have been known to the COMPANY) that is not disclosed pursuant to this Agreement or to such delivered documents. (b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm commitment, binding agreement, or promise or other assurance of any kind, whether express or implied, oral or written, that a Registration Statement will become effective or that the IPO pursuant thereto will occur at a particular price or within a particular range of prices or occur 30 at all; and (ii) that neither VPI or any of its officers, directors, agents or representatives nor any Underwriter shall have any liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with the COMPANY for any failure of the Registration Statement to become effective, the IPO to occur at a particular price or within a particular range of prices or to occur at all. 5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3 (Prohibited Activities). (B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on the Closing Date, and that the representations and warranties set forth in Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the Closing Date, which shall be the Expiration Date for purposes of those Sections. 5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens, encumbrances and claims of every kind. 5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives, any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock that such STOCKHOLDER has or may have had on the date hereof other than rights of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI. 5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any present plan, intention, commitment, binding agreement, or arrangement to dispose of any shares of VPI Stock received as described in Section 3.1 in a manner that would cause the Merger to violate the control requirement set forth in Code section 368(c). 31 6. REPRESENTATIONS OF VPI AND NEWCO VPI and NEWCO jointly and severally represent and warrant that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that (i) the warranties and representations set forth in Section 6.14 hereof shall survive until such time as the limitations period has run for all Tax periods ended on or prior to the Closing Date, which shall be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and representations set forth in Section 6.17 hereof shall survive until April 15, 2002, or until such later date as the limitations period on the assessment of additional tax relating to the taxable year in which the transactions contemplated herein occur may be extended from time to time, so long as VPI has been notified of such extension and has consented to such extension (which consent shall not be unreasonably withheld) and (iii) solely for purposes of determining whether a claim for indemnification under Section 11.2(iv) hereof has been made on a timely basis, and solely to the extent that in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any other federal or state securities laws, the representations and warranties set forth herein shall survive until the expiration of any applicable limitations period, which shall be deemed to be the Expiration Date for such purposes. 6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their respective businesses in the places and in the manner as now conducted except where the failure to be so authorized or qualified would not have a Material Adverse Effect. True, complete and correct copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The VPI 32 Charter Documents provide for indemnification of officers and directors to the full extent permitted by the General Corporation Law of Delaware. 6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO executing this Agreement have the authority to enter into and bind VPI and NEWCO to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right, power and authority to enter into and perform this Agreement and the Merger, and all required approvals of the shareholders and board of directors of VPI and NEWCO, respectively, have been obtained. 6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date, the authorized capital stock of VPI and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the capital stock of NEWCO are owned by VPI and all of the issued and outstanding shares of the capital stock of VPI are owned by the persons set forth on Annex V hereof, and further are owned, in each case, free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Upon consummation of the IPO, the number of outstanding shares of VPI will be as set forth in the Registration Statement. All of the issued and outstanding shares of the capital stock of VPI and NEWCO have been duly authorized and validly issued, are fully paid and nonassessable, are owned of record and beneficially by VPI and the persons set forth on Annex V, respectively, and further, such shares were offered, issued, sold and delivered by VPI and NEWCO in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such shares was issued in violation of the preemptive rights of any past or present stockholder of VPI or NEWCO. 33 6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion right or commitment of any kind exists which obligates VPI or NEWCO to issue any of their respective authorized but unissued capital stock; and (ii) neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof. Schedule 6.4 also includes complete and accurate copies of all stock option or stock purchase plans, including a list, accurate as of the date hereof, of all outstanding options, warrants or other rights to acquire shares of the stock of VPI. 6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except for NEWCO and each of the companies identified as "NEWCO" in each of the Other Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity nor is VPI or NEWCO, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the following financial statements (the "VPI Financial Statements") of VPI, which reflect the results of its operations from inception: VPI's audited Balance Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained Earnings for the period from inception through December 31, 1997. Such VPI Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted thereon or on Schedule 6.6). Except as set forth on Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the financial position of VPI as of such date, and such Statements of Income, Cash Flows and Retained Earnings present fairly the results of operations for the period indicated. 6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI and NEWCO have no material liabilities, contingent or otherwise, except as set forth in or contemplated by this 34 Agreement and the Other Agreements and except for fees and expenses incurred in connection with the transactions contemplated hereby and thereby. 6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or of any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them; and except to the extent set forth on Schedule 6.8, there are no material claims, actions, suits or proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over either of them and no notice of any claim, action, suit or proceeding, whether pending or threatened, has been received. VPI and NEWCO have conducted and are conducting their respective businesses in compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations and are not in violation of any of the foregoing. 6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other party thereto, is in default under any lease, instrument, agreement, license or permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of their respective properties, are bound (collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under, any of the terms or provisions of the VPI Documents or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or the consent or approval of, any governmental agency or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated 35 hereby will not give rise to any right to termination, cancellation or acceleration or loss of any right or benefit. 6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement by VPI and NEWCO and the performance of the transactions contemplated herein have been duly and validly authorized by the respective Boards of Directors of VPI and NEWCO and this Agreement has been duly and validly authorized by all necessary corporate action and is a legal, valid and binding obligation of VPI and NEWCO, enforceable against each of VPI and NEWCO in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and the individuals signing this Agreement on behalf of VPI and NEWCO have the legal power, authority and capacity to bind such parties. 6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid and legally issued shares of VPI, fully paid and nonassessable, and with the exception of restrictions upon resale set forth in Sections 15 and 16 hereof, will be identical in all material and substantive respects to the VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be issued pursuant to the Other Agreements by reason of the provisions of the Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933 Act, except as provided in Section 17 hereof. 6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter into any agreement with any of the Founding Companies or any of the stockholders of the Founding Companies or VPI other than the Other Agreements and the agreements specifically contemplated by each of the Other Agreements, including the employment agreements referred to therein, and none of VPI, NEWCO, their equity owners or affiliates have received any cash compensation or payments in connection with this transaction except for reimbursement of out-of-pocket expenses which are necessary or appropriate to this transaction. 36 6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO has conducted any operations or business since inception other than activities related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at any time owned any real property or any material personal property or is a party to any other agreement, except as listed on Schedule 6.13 and except that VPI is a party to the Other Agreements and the agreements contemplated thereby and to such agreements as will be filed as Exhibits to the Registration Statement. 6.14 TAXES. (a) VPI and NEWCO have timely filed all requisite federal, state, local and other Tax Returns for all fiscal periods ended on or before the date hereof. All such Tax Returns have set forth all material items required to be set forth therein and were prepared in compliance with applicable laws and were true, correct and complete in all material respects. No material fact or information has become known to VPI or NEWCO or their officers or employees responsible for maintaining the financial records of VPI and NEWCO subsequent to the filing of such Tax Returns to the contrary of any information contained therein. Except as set forth on Schedule 6.14, there are no examinations in progress (and VPI and NEWCO and their employees are not aware of any proposed examinations) or claims against VPI or NEWCO (including liens against assets of VPI or NEWCO) for federal, state, local and other Taxes (including penalties and interest) for any period or periods prior to and including the date hereof and no notice of any claim for Taxes, whether pending or threatened, has been received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has entered into an agreement or waiver or have been requested to enter into an agreement or waiver extending any statute of limitations regarding Taxes. (b) All Taxes, including interest and penalties (whether or not shown on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or consolidated group which includes or included VPI or NEWCO, or with respect to any payment made or deemed made by VPI or NEWCO, required to be paid by the date hereof, have been paid. All amounts required to 37 be deposited, withheld or collected under applicable federal, state, local or other Tax laws and regulations by VPI and NEWCO for Taxes have been so deposited, withheld or collected, and such deposit, withholding or collection has either been paid to the respective governmental agencies or set aside and secured in accounts for such purpose or secured and reserved against and entered on the financial statements. (c) The amounts, if any, shown as accruals for Taxes on the VPI Financial Statements are sufficient for the payment of all Taxes of the kinds indicated (including penalties and interest) for all fiscal periods ended on or before that date. (d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has been included in or joined in the filing of any consolidated or combined Tax Return (other than as a common parent). Neither VPI nor NEWCO is a party to or bound by or obligated under any Tax sharing, Tax benefit or similar agreement with any person or entity. (e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i) has assumed or is liable for any Taxes of any other person or entity, including any predecessor corporation or partnership, as a result of any purchase of assets or other business acquisition transaction (other than a merger in which VPI or NEWCO or such person or entity was the surviving corporation or a consolidation) and (ii) has indemnified any other person or entity or otherwise agreed to pay on behalf of any other person or entity any Taxes arising from or which may be asserted on the basis of any Tax treatment adopted with respect to all or any aspect of such business acquisition transaction. (f) Copies of (i) the federal, state and local income tax returns and franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax examinations commenced or closed or outstanding during their three (3) most recent fiscal years, and (iii) currently outstanding extensions of statutory limitations, are attached hereto as Schedule 6.14. 38 (g) VPI and NEWCO have a taxable year ended on the date set forth as such on Schedule 6.14. (h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's methods of accounting have changed in the past five years. No adjustment to taxable income by reason of a change of accounting method is required in respect of any period for which the statute of limitations has not expired. (i) Neither VPI nor NEWCO is an investment company as defined in Section 351(e)(1) of the Code. (j) All statutory or regulatory material elections with respect to Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule 6.14. (k) Neither VPI nor NEWCO has filed a consent with the Internal Revenue Service pursuant to section 341(f) of the Code or has agreed to have section 341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO. 6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due diligence of the COMPANY as of the date hereof, except for any additional investigation that may be needed as a result of a notice pursuant to Section 7.7 or an amendment pursuant to Section 7.8. 6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes attached hereto) and the Registration Statement do not contain any untrue statement of a material fact by VPI or NEWCO, and do not omit to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they are made, not misleading. 6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, provided that the representations of the 39 STOCKHOLDERS set forth in the letter of representations (referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true and correct in all material respects. 7. COVENANTS PRIOR TO CLOSING 7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of VPI and the Other Founding Companies (including the Underwriters and their counsel) access to all of the COMPANY's sites, properties, books and records and will furnish VPI with such additional financial and operating data and other information as to the business and properties of the COMPANY as VPI or the Other Founding Companies may from time to time reasonably request. The COMPANY will reasonably cooperate with VPI and the Other Founding Companies and their respective representatives, including VPI's auditors and counsel, in the preparation of any documents or other material (including the Registration Statement) which may be required in connection with any documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted with respect to the Other Founding Companies as confidential in accordance with the provisions of Section 14 hereof. In addition, VPI will cause each of the Other Founding Companies to enter into a provision similar to this Section 7.1 requiring each such Other Founding Company, its stockholders, directors, officers, representatives, employees and agents to keep confidential any information regarding the COMPANY obtained by such Other Founding Company. 40 (b) Between the date of this Agreement and the Closing Date, VPI will afford to the officers and authorized representatives of the COMPANY access to all of VPI's and NEWCO's sites, properties, books and records and all due diligence, agreements, documents and information of or concerning the Founding Companies and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of VPI and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with any documents or materials required by this Agreement. VPI will provide complete access to its operations and key officers and employees to the COMPANY, its representatives and advisors on a continuing basis through the Closing Date. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule 7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall not be unreasonably withheld): (i) carry on its business in substantially the same manner as it has heretofore and not introduce any new method of management, operation or accounting; (ii) maintain its properties and facilities, including those held under leases, in at least as good working order and condition as at present, ordinary wear and tear excepted; (iii) perform in all material respects its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties, equipment or rights; (iv) keep in full force and effect present insurance policies or other comparable insurance coverage; (v) maintain and preserve its business organization intact, and use its best efforts to retain its present employees and relationships and present agreements with suppliers, customers and others having business relations with the COMPANY; 41 (vi) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities, except for inadvertent, immaterial noncompliance with any such permit, law, rule, regulation or order (provided that any such noncompliance shall be deemed a breach of this Section 7.2 for purposes of Section 11 hereof); (vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, other than in the ordinary course of business; and (viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for regularly scheduled raises to non-officers consistent with past practices. 7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the date hereof and the Closing Date, the COMPANY shall not, without the prior written consent of VPI or unless requested by VPI: (i) make any change in its Charter Documents; (ii) issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.4; (iii) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding (except for dividends or distributions of cash that do not cause the COMPANY to fail to meet the financial requirements, as of the Closing Date, set forth in the first sentence of Section 3.3), or purchase, redeem or otherwise acquire or retire for value any shares of its stock; (iv) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditures, except if it is in the normal course of business (consistent with past practice) or involves an amount not in excess of $10,000; 42 (v) create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any assets or properties whether now owned or hereafter acquired, except: (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or payable or being contested in good faith and by appropriate proceedings (and for which contested Taxes adequate reserves have been established and are being maintained) or (B) materialmen's, mechanics', workers', repairmen's, employees' or other like liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17 hereto; (vi) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the normal course of business; (vii) negotiate for the acquisition of any business or the start-up of any new business; (viii) merge or consolidate or agree to merge or consolidate with or into any other corporation; (ix) waive any material rights or claims of the COMPANY, provided that the COMPANY may negotiate and adjust bills in the course of good faith disputes with customers in a manner consistent with past practice, provided, further, that such adjustments shall not be deemed to be included on Schedule 5.11 unless specifically listed thereon; (x) commit a material breach or amend or terminate any material agreement, permit, license or other right of the COMPANY; (xi) enter into any other transaction outside the ordinary course of its business or prohibited hereunder; (xii) effect any change in the capital structure of the COMPANY, including, but not limited to, the issuance of any option, warrant, call, conversion right or commitment of 43 any kind with respect to the COMPANY's capital stock or the purchase or other reacquisition of any outstanding shares for treasury stock; or (xiii) make expenditures outside the normal course of business. 7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly: (i) solicit or initiate the submission of proposals or offers from any person or entity for, (ii) participate in any discussions pertaining to, or (iii) furnish any information to any person or entity other than VPI or its authorized agents relating to any acquisition or purchase of all or a material amount of the assets of, or any equity interest in, the COMPANY or a merger, consolidation or business combination of the COMPANY. 7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY shall satisfy any requirement for notice of the transactions contemplated by this Agreement under applicable collective bargaining agreements, and shall provide VPI on Schedule 7.5 with proof that any required notice has been sent. 7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or prior to the Closing Date, (i) any stockholders agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except such existing agreements as are set forth on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and copies thereof are attached hereto. 7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall give prompt notice to VPI of (i) the occurrence or non- 44 occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is not accompanied by a proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Pre-Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising which, if existing at the date of this Agreement, would have been required to be set forth or described in the Schedules, provided, however, that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing Date, unless such Schedule is to be amended to reflect an event occurring other than in the ordinary course of business. Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule prepared by the COMPANY that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless VPI and a majority of the Founding Companies other than the COMPANY consent to such amendment or supplement; and 45 provided further, that no amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless a majority of the Founding Companies consent to such amendment or supplement. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be deemed to be the schedules as amended or supplemented pursuant to this Section 7.8. In the event that one of the Other Founding Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one of the Other Agreements, and such amendment or supplement constitutes or reflects an event or occurrence that would have a Material Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice promptly after it has knowledge thereof. If VPI and a majority of the Founding Companies consent to such amendment or supplement, but the COMPANY does not give its consent, the COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of the Other Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a majority of the Founding Companies do not consent to such amendment or supplement, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.8. No amendment of or supplement to a Schedule shall be made later than 24 hours prior to the anticipated effectiveness of the Registration Statement. For purposes of this Section 7.8, consent to an amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the Other Agreements shall have been deemed given by VPI or any Founding Company if no response is received within 24 hours following receipt of notice of such amendment or supplement (or sooner if required by the circumstances under which such consent is requested and so requested in the notice). The 46 provisions of this Section 7.8 shall be contained in the Other Agreements executed in connection with the VPI Plan of Organization. 7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS required for inclusion in, and will cooperate with VPI and the Underwriters in the preparation of, the Registration Statement and the prospectus included therein (including audited and unaudited financial statements, prepared in accordance with generally accepted accounting principles, in form suitable for inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to advise VPI if, at any time during the period in which a prospectus relating to the offering is required to be delivered under the 1933 Act, any information contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDERS an opportunity and a reasonable amount of time to review and comment on a substantially final draft of the Registration Statement prior to filing, and with respect to all amendments thereto, VPI will give the COMPANY and STOCKHOLDERS an opportunity to review and comment on those portions of such amendments that relate to the COMPANY. Insofar as the information contained in the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as of the effective date of the Registration Statement the COMPANY represents and warrants as to such information with respect to itself, and each STOCKHOLDER represents and warrants, as to such information with respect to the COMPANY and himself or herself, that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and that the STOCKHOLDERS and the COMPANY have had the opportunity to review and approve such information. If, prior to the 25th day after the date of the final prospectus of VPI utilized in connection with the IPO, the COMPANY 47 or the STOCKHOLDERS become aware of any fact or circumstance which would change (or, if after the Closing Date, would have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any document delivered pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI. However, subject to the provisions of Section 7.8, such notification shall not relieve either the COMPANY or the STOCKHOLDERS of their respective obligations under this Agreement, and, subject to the provisions of Section 7.8, at the sole option of VPI, the truth and accuracy of any and all warranties and representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on the Closing Date, contained in this Agreement (including the Schedules and Annexes hereto) shall be a precondition to the consummation of this transaction. 7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the Closing Date, and VPI shall have had sufficient time to review the unaudited consolidated balance sheets of the COMPANY as of the end of all fiscal quarters following the Balance Sheet Date, and the unaudited consolidated statement of income, cash flows and retained earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing no material adverse change in the financial condition of the COMPANY or the results of its operations from the financial statements as of the Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial statements shall be delivered to VPI on or before April 21, 1998, unless the Closing Date shall have occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such financial statements shall have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as noted therein). Except as noted in such financial statements, all of such financial statements will present fairly the results of operations of the COMPANY for the periods indicated thereon and shall be for such dates and time periods as required by Regulation S-X under the 1933 Act and the 1934 Act. 48 7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as set forth in the Registration Statement filed with the SEC except for such changes in authorized capital stock as are made to respond to comments made by the SEC or requirements of any exchange or automated trading system for which application is made to register the VPI Stock. 7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its commercially reasonable best efforts to effectuate the acquisition of the businesses of the Founding Companies pursuant to the Other Agreements, and the IPO. Between the date hereof and the Closing Date, VPI agrees that it will take no action except such actions which are in furtherance of the business of VPI as described in the Registration Statement. In connection with the closings of the transactions under the Other Agreements, VPI agrees that it will not waive any closing condition under any Other Agreement that would result in a Material Adverse Effect to VPI. 49 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY The obligations of STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of VPI and NEWCO contained in Section 6 hereof: 8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of VPI and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date as though such representations and warranties had been made as of that time; and a certificate to the foregoing effect dated the Pre-Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with and performed by VPI and NEWCO on or before the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects; and certificates to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of VPI shall have been delivered to the STOCKHOLDERS. 8.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of the COMPANY as a result of which the management of the COMPANY deems it inadvisable to proceed with the transactions hereunder. 50 8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have received a corporate opinion letter and a tax opinion letter from counsel for VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI. 8.5 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC and the Underwriters shall have agreed to acquire on a firm commitment basis, subject to the conditions set forth in the underwriting agreement, on terms such that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III. 8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transaction contemplated herein shall have been obtained and made, and all consents and approvals of third parties listed on Schedule 6.9 shall have been obtained. 8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no later than ten days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which VPI or NEWCO is authorized to do business, showing that each of VPI and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for VPI and NEWCO, respectively, for all periods prior to the Pre-Closing Date have been filed and paid. 8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have occurred with respect to VPI or NEWCO which would constitute a Material Adverse Effect, and VPI and/or NEWCO shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of VPI and/or NEWCO to conduct its business. 8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings 51 before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and signed by the secretary of VPI and of NEWCO, certifying the truth and correctness of attached copies of VPI's and NEWCO's respective Certificates of Incorporation (including amendments thereto), Bylaws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of VPI and NEWCO approving VPI's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate or certificates also shall be addressed to the Underwriters and copies thereof shall be delivered to the Underwriters. 8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have been afforded the opportunity to enter into an employment agreement substantially in the form of Annex VIII hereto. 8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors and Officers liability insurance in amounts that are customary and commercially reasonable. 8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant to which 6% of the outstanding shares of VPI will be made available for issuance by the Founding Companies to their employees on a pro rata basis based upon the respective consideration amounts paid by VPI under this Agreement and the Other Agreements. The exercise price of all options granted under such stock option plan as of the Closing Date will be the price per share of VPI Stock in the IPO, and all such options shall vest in four equal installments commencing on the first anniversary of the Closing Date and on each of the three anniversaries thereafter. The terms set forth in the preceding sentence and all other terms of the options shall be no less favorable than the options made available to the Other Founding Companies. 52 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO The obligations of VPI and NEWCO with respect to actions to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date of all of the following conditions. The obligations of VPI and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied shall be deemed to have been waived, except that no such waiver shall be deemed to affect the survival of the representations and warranties of the COMPANY contained in Section 5 hereof. 9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and signed by them to such effect. 9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may be, shall have been duly performed or complied with in all material respects; and the STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 NO LITIGATION. No action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit the Merger or the IPO and no governmental agency or body shall have taken any other action or made any request of VPI as a result of which the management of VPI deems it inadvisable to proceed with the transactions hereunder. 53 9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated the Pre-Closing Date and signed by the secretary or an assistant secretary of the COMPANY, certifying the truth and correctness of attached copies of the Charter Documents and resolutions of the board of directors and the STOCKHOLDERS approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. Such certificate also shall be addressed to the Underwriters and a copy thereof shall be delivered to the Underwriters. 9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets, whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (z) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS not reflecting fair market terms shall have been canceled effective prior to or as of the Closing Date. 9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in the form annexed hereto as Annex VII, and the Underwriters shall have received a copy of the same opinion addressed to them. 54 9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.24 shall have been obtained. 9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a certificate, dated as of a date no earlier than ten days prior to the Pre-Closing Date, duly issued by the appropriate governmental authority in the COMPANY's state of incorporation and, unless waived by VPI, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Pre-Closing have been filed and paid. 9.11 REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the SEC. 9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11 shall have entered into an employment agreement substantially in the form of Annex VIII hereto. 9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the Underwriters in the IPO and the acquisitions of at least eight of the Other Founding Companies with aggregate earnings before taxes of at least $8 million for the 12-month period ended December 31, 1997, pursuant to the Other Agreements shall have occurred simultaneously with the Closing Date hereunder. 9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a certificate to the effect that he or she is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 9.15 INSURANCE. VPI shall have been named as an additional insured on all insurance policies of the COMPANY, and certificates of insurance to that effect shall have been delivered to VPI. VPI shall reimburse the COMPANY for the incremental cost of having VPI so named as an additional insured. 55 9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have signed an agreement with the Underwriters, in form and substance identical to agreements signed by the Other Founding Companies and the Founding Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS covenant to hold all of the VPI Stock acquired hereunder for a period of at least 180 days after the Closing Date except for transfers to immediate family members, and trusts for the benefit of STOCKHOLDERS and/or immediate family members, who agree to be bound by such restrictions on transfer. 9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have delivered the letter of representations referenced in the tax opinion letter to be delivered pursuant to Section 8.4 hereof. 9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have terminated any qualified "defined benefit plan" (as defined in Section 3(35) of ERISA) in accordance with applicable laws and regulations. 10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING 10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall use its best efforts to have the STOCKHOLDERS released, contemporaneously with the Closing Date, from any and all guarantees on any indebtedness that they personally guaranteed and from any and all pledges of assets that they pledged to secure such indebtedness for the benefit of the COMPANY, with all such guarantees on indebtedness being assumed by VPI. In the event that VPI cannot obtain such releases from the lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such personal guarantees within 60 days after the Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the payment of any guaranties on any indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such indebtedness or obligations are related to the business of the COMPANY as being conducted at the Pre-Closing Date. 56 10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated by this Agreement or the Registration Statement, after the Closing Date, VPI shall not and shall not permit any of its subsidiaries to undertake any act that would jeopardize the status of the transaction contemplated hereby as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code, including: (a) the retirement or reacquisition, directly or indirectly, of all or part of the VPI Stock issued in connection with the transactions contemplated hereby; or (b) the entering into of financial arrangements for the benefit of the STOCKHOLDERS. 10.3 PREPARATION AND FILING OF TAX RETURNS. (i) The COMPANY shall, if possible, file or cause to be filed all separate Tax Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. All such Tax Returns shall have set forth all material items required to be set forth therein and shall have been prepared in compliance with applicable laws and shall be true, correct and complete in all material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements and books and records) required to be shown by such Tax Returns to be due. (ii) VPI shall file or cause to be filed all consolidated Tax Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess of amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the VPI Financial Statements and books and records) required to be shown by such Tax Returns to be due. (iii) Each party hereto shall, and shall cause its subsidiaries and component members of a controlled group of corporations including the COMPANY, as defined in Section 1563 of the Code, to, provide to each of the other parties hereto such cooperation 57 and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Agreement shall bear all costs of filing such Tax Returns. (iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with the tax reporting requirements of Section 1.351-3 of the Treasury Regulations promulgated under the Code, and treat the transaction as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. 10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to serve as a director of VPI effective as of the Closing Date. Representatives of the Founding Companies shall constitute a majority of the directors of VPI immediately following the Closing Date. 10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not terminate any health insurance, life insurance or 401(k) plan in effect at the COMPANY until such time as VPI is able to replace such plan with a plan that is applicable to VPI and all of its then existing subsidiaries. VPI shall have no obligation to provide replacement plans that have the same terms and provisions as the existing plans, except as may be required by ERISA or other applicable law; provided, however, that any new health insurance plan shall provide for coverage for preexisting 58 conditions for employees of the COMPANY who were covered by the COMPANY's health insurance plan immediately prior to the Closing Date or as otherwise required by law. 10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the books and records of the COMPANY existing prior to the Pre-Closing Date for a period of six years after the Pre-Closing Date and (b) to make such books and records available to the STOCKHOLDERS for any reasonable purpose. 10.7 SECURITIES COVENANTS. VPI shall meet the current public information requirements of Rule 144, promulgated by the SEC, for the two-year period following the Closing Date. In addition, unless otherwise advised by counsel, VPI agrees that it will promptly remove the restricted stock legend from the VPI Stock received by the STOCKHOLDERS pursuant to this Agreement when the restrictions against transfer under applicable securities laws have lapsed. 10.8 LICENSE OF SOURCE CODE. In the event that VPI elects (a) to increase customer support and maintenance prices for COMPANY services that are made available to COMPANY customers that are not Affiliates of VPI ("Nonaffiliated Customers"), (b) to reduce customer support and maintenance services of the COMPANY to Nonaffiliated Customers or (c) to restrict sale of or access to new software product or functionality developed by the COMPANY or VPI which would be useful to Nonaffiliated Customers in their individual non-aggregated operations and which has been developed to be used by property management companies on a stand-alone basis, any two of the STOCKHOLDERS (or their designated successors) shall have the right to disagree with such price increase, service reduction or sale or access restriction and request that the source code of (i) all software of the COMPANY then utilized by such Nonaffiliated Customers or (ii) such specific software product or functionality referenced in clause (c) above (as applicable, the "Software") be licensed by the COMPANY to a third party in order for such third party to service all such Nonaffiliated Customers. Written notice (the "Disagreement Notice") of a disagreement with such intended price increase, service reduction or sale or access restriction by any two of the STOCKHOLDERS must be given to VPI within 15 days after such STOCKHOLDERS receive actual 59 notice of such price increase, service reduction or sale or access restriction. Thereafter, a committee (the "Resolution Committee") consisting of (i) the Chief Executive Officer of VPI (or, at the Chief Executive Officer's election, the Chief Operating Officer of VPI), (ii) one of the STOCKHOLDERS (as designated by the STOCKHOLDERS) and (iii) a director of VPI mutually agreed upon by the two individuals of the Resolution Committee appointed pursuant to clauses (i) and (ii) of this sentence, shall be convened for the purpose of resolving the disagreement between the STOCKHOLDERS and VPI regarding such price increase, service reduction or sale or access restriction. If the disagreement is not resolved to the satisfaction of the Resolution Committee within 30 days after receipt by VPI of the Disagreement Notice, the STOCKHOLDERS shall have the right for 90 days thereafter to negotiate a proposed agreement (a "Proposed Agreement") with any third party for the license of the Software by VPI to such third party for the purpose of servicing the Nonaffiliated Customers, provided, however, that the STOCKHOLDERS shall be required in good faith to seek the best commercially reasonable terms obtainable for VPI. After receipt of the Proposed Agreement by VPI, VPI shall have 30 days to determine that it will not implement the price increase, service reduction or sale or access restriction referred to in the first sentence of this Section 10.8, in which case the COMPANY shall not enter into the Proposed Agreement. If VPI does not give written notice to the STOCKHOLDER who is a member of the Resolution Committee of VPI's determination that it will not implement such price increase, service reduction or sale or access restriction, the COMPANY shall enter into the Proposed Agreement. Unless otherwise agreed by VPI and a majority of the STOCKHOLDERS, the procedure set forth in this Section 10.8 shall be used to resolve any disagreement between VPI and the STOCKHOLDERS regarding Software pricing, customer service, sales and access, provided, however, that VPI and a majority of the STOCKHOLDERS may resolve any such disagreement by mutual agreement at any time. 11. INDEMNIFICATION 60 The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all times, from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating solely to the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make the statements therein not misleading, or (iv) the matters described on Schedule 11.1(iv) (relating to specifically identified matters such as ongoing claims and/or litigation), which Schedule shall be prepared by VPI, provided, however, (A) that in the case of any indemnity arising pursuant to clause (iii) such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue statement (or alleged untrue statement) was made in, or omission (or alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to VPI for inclusion in the final prospectus, and such information was 61 not so included or properly delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification obligation pursuant to this Section 11.1 to the extent attributable to a breach of any representation, warranty or agreement made herein individually by any other STOCKHOLDER. 11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the Expiration Date, from and against all losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of their representations and warranties set forth herein or on the Schedules or certificates attached hereto, (ii) any breach of any agreement on the part of VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's or NEWCO's failure to be responsible for the liabilities and obligations of the COMPANY as provided in Section 1 hereof (except to the extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to VPI, NEWCO or any of the Other Founding Companies contained in any preliminary prospectus, the Registration Statement or any prospectus forming a part thereof, or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact relating to VPI or NEWCO or any of the Other Founding Companies required to be stated therein or necessary to make the statements therein not misleading, or (v) the matters described on Schedule 11.2(v) (relating to specifically identified matters including the release of the guarantees pursuant to Section 10.1 hereof). 11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), or the commencement of any action or proceeding by a Third Person, the 62 Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle (subject to the consent of the Indemnified Party, as hereinafter provided), at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties shall use the same counsel, which shall be the counsel selected by the Indemnifying Party, provided that if counsel to the Indemnifying Party shall have a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party shall have the right to participate in such matter through counsel of its own choosing and the Indemnifying Party will reimburse the Indemnified Party for the reasonable expenses of its counsel. Further, absent a conflict, the Indemnified Party may select counsel and have such counsel participate in such matter at the sole cost of the Indemnified Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except (i) as set forth in the preceding sentence and (ii) to the extent such participation is requested in writing by the Indemnifying Party, in which event the Indemnified Party 63 shall be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim in which no admission of wrongdoing is required of the Indemnified Party and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. All settlements hereunder shall effect a complete release of the Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The parties hereto will make appropriate adjustments for insurance proceeds in determining the amount of any indemnification obligation under this Section. 11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party relating to this Agreement or the preparation of the Registration Statement and the IPO, provided, however, that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement. The obligations set forth herein are contingent upon similar obligations being incorporated in all of the Other Agreements. 11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 shall not assert any claim for indemnification hereunder against the STOCKHOLDERS until such time as, and solely to the extent 64 that, the aggregate of all claims which such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and the other persons or entities indemnified pursuant to Section 11.1 may assert and shall be indemnified for any claim under Section 11.l(iv) at any time, regardless of whether the aggregate of all claims which such persons may have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the amount of any such claim under Section 11.1(iv) shall not be counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for indemnification hereunder against VPI or NEWCO until such time as, and solely to the extent that, the aggregate of all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons or entities indemnified pursuant to Section 11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at any time, regardless of whether the aggregate of all claims which such persons may have against any of VPI and NEWCO exceeds $50,000, it being understood that the amount of any such claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No person shall be entitled to indemnification under this Section 11 if and to the extent that: (a) such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; or (b) such person receives a tax benefit as a result of the claim or loss for which indemnification is sought (i.e., the amount of such claim or loss for which indemnification is provided hereunder shall be reduced by the amount of such tax benefit). Notwithstanding any other term of this Agreement (except the proviso to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an amount which exceeds the amount of proceeds received by such STOCKHOLDER in connection with the Merger, provided that a STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied through the payment of cash or the delivery of VPI 65 Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the limitation on indemnity set forth in the second preceding sentence and the amount of any indemnity paid), VPI Stock shall be valued at its initial public offering price as set forth in the Registration Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in the consideration received by the STOCKHOLDERS pursuant to Section 3. 12. TERMINATION OF AGREEMENT 12.1 TERMINATION. This Agreement may be terminated by written notice from the party asserting termination to the other parties at any time prior to the Closing Date solely: (i) by mutual consent of the boards of directors of VPI and the COMPANY; (ii) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by VPI (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by June 30, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the other hand, if a breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein (including but not limited to the condition that the aggregate value of the cash and the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set forth on Annex III), which breach or default has a Material Adverse Effect, and the curing of such default shall not have been made on or before the Closing Date; (iv) pursuant to Section 7.8 hereof; or 66 (v) pursuant to Section 4 hereof. 12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses relating to the transactions contemplated hereby. No party hereto shall be liable to any other party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v), provided, however (and notwithstanding anything in Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided, however (and notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and expenses of its attorneys and accountants incurred in connection with the transactions contemplated by this Agreement in the event that this Agreement is terminated by VPI pursuant to Section 12.1(iii). 13. NONCOMPETITION 13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and performed all of its obligations hereunder in all material respects and the STOCKHOLDERS shall have received payment in full of the consideration described in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition Period, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, 67 or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with VPI or any of its subsidiaries, within 100 miles of the locations in which VPI or the COMPANY, or any of their subsidiaries, conduct a noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of VPI (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of VPI (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (l) year prior to that time, a customer of VPI (including the subsidiaries thereof), of the COMPANY or of any of the Other Founding Companies within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with VPI within the Territory; (iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by VPI (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate; or 68 (v) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the types of persons to whom disclosure is then presently contemplated for valid business reasons. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. 13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to VPI for which it would have no other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions and restraining orders. 13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of VPI (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of VPI (including VPI's subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such covenants be construed and enforced in accordance with the changing locations of VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then the STOCKHOLDERS will be precluded from soliciting the customers or employees from such new location and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that any STOCKHOLDER shall enter into a business or pursue other activities not in competition with VPI (including VPI's other 69 subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of Section 13.1, and in any event such new business, activities or location are not in violation of this Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities, or (iii) location, as applicable. 13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section 13.1, all of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that such STOCKHOLDER is in violation of any provision of this Section 13. The covenants contained in Section 13 shall have no effect if the transactions contemplated by this Agreement are not consummated. 13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the covenants in this Section 13 are a material and substantial part of this transaction. 70 13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI or the COMPANY pursuant to an employment agreement is terminated without cause (as defined in such employment agreement), notwithstanding the definition of "Noncompetition Period" in Section 18.17, the provisions of this Section 13 shall not be valid or enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive severance compensation under such employment agreement. In the event such employment agreement is terminated as a result of a material breach by the COMPANY of the employment agreement, the provisions of this Section 13 likewise shall not be valid or enforceable. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of the COMPANY, the Other Founding Companies, and/or VPI, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's, the Other Founding Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they shall not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of VPI, (b) following the Closing, by the STOCKHOLDERS as is required in the course of performing their duties for VPI or the Surviving Corporation and (c) to counsel and other advisors, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information is or becomes known to the public generally or to businesses operating in the noncommercial property management, rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to VPI and provide 71 VPI with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting VPI from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had in the past and currently have access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. VPI and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not use, except in connection with the transactions contemplated hereby, or disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except disclosures (a) to authorized representatives of the COMPANY, (b) to counsel and other advisors; provided, however, that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to the Other Founding Companies and their representatives pursuant to Section 7.1(a), unless (i) such information becomes known to the public generally through no fault of VPI or NEWCO, (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to disclosing any information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise required by law or such order, give two days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity within such two-day period to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against 72 the disclosing party. VPI will disclose confidential information relating to the COMPANY to the Other Founding Companies only if such companies have agreed, in advance, to treat such information as confidential. In the event of a breach or threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as such breach or threatened breach, including the recovery of damages. 14.3 DAMAGES. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 SURVIVAL. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three years from (a) the Closing Date if the transactions contemplated hereby are consummated or (b) the date hereof if the transactions contemplated hereby are not consummated. 14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any reason, VPI will cause the return to the COMPANY of all data, and all copies thereof, submitted to VPI or its agents pursuant to this Agreement. 15. TRANSFER RESTRICTIONS 15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family members who agree to be bound by the restrictions set forth in this Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree), for a period of one year after the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock received by the 73 STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear a legend substantially in the form set forth below and containing such other information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE. 15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to be bound by the restrictions set forth in Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the trustees of which so agree) and except pursuant to Section 17 hereof, regardless of whether transfers of such shares are restricted pursuant to the terms of this Agreement, during the two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell, assign, exchange, transfer, distribute or otherwise dispose of, in any transaction or series of transactions involving more than 5,000 shares (a "Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI shall have three (3) days after receipt of such notice by VPI in which to arrange for a private sale of such shares through one or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant to such arrangements; provided, however, that the terms of such sale (including commissions) are at least as favorable as the terms the STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has not successfully arranged for a private sale of such shares through one or more the Underwriters within such three (3) day period, the restrictions of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock. 74 16. SECURITIES LAW REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been registered under the 1933 Act and therefore may not be resold without compliance with the 1933 Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent that none of the shares of VPI Stock issued to such STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act, the rules and regulations of the SEC and applicable state securities laws. All of the VPI Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS. 16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to bear the economic risk of an investment in the VPI Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions and receive answers from the officers of VPI concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of VPI, the plans for the operations of the business of VPI, the business, operations and financial condition of the Founding Companies other than the COMPANY, 75 and any plans for additional acquisitions and the like. The STOCKHOLDERS have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. 17. REGISTRATION RIGHTS 17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date, whenever VPI proposes to register any VPI Stock for its own or others' account under the 1933 Act, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by VPI and (ii) registrations relating to employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the written request of any of the STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause to be included in such registration all of the VPI Stock issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests, provided that VPI shall have the right to reduce the number of shares included in such registration to the extent that inclusion of such shares could, in the reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize the status of the transactions contemplated hereby and by the Registration Statement as an exchange pursuant to which gain is not recognized under Section 351(a) of the Code. In addition, if VPI is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 17.1 that the number of shares to be sold by persons other than VPI is greater than the number of such shares which can be offered without adversely affecting the offering, VPI may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares desired to be sold by such person) to a number deemed satisfactory by such managing underwriter, provided, however, that for each such offering made by VPI after the IPO, such reduction shall be made first by reducing the number of shares to be sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the Other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements (collectively, the 76 STOCKHOLDERS and the stockholders of the other Founding Companies who receive shares of VPI Stock pursuant to the Other Agreements being referred to herein as the "Founding Stockholders"), and thereafter, if a further reduction is required, by reducing the number of shares to be sold by the Founding Stockholders on a pro rata basis based on the number of shares proposed to be registered by each of the Founding Stockholders. 17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after the Closing Date, the holders of a majority of the shares of VPI Stock issued to the Founding Stockholders pursuant to this Agreement and the Other Agreements which have not been previously registered or sold and which are not entitled to be sold under Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act may request in writing (the "Demand Registration Request") that VPI file a registration statement under the 1933 Act covering the registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements then held by such Founding Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of the Demand Registration Request, VPI shall give written notice of such request to all other Founding Stockholders and shall, as soon as practicable but in no event later than 45 days after the Demand Registration Request, file and use its best efforts to cause to become effective a registration statement covering all shares requested to be registered pursuant to this Section 17.2. VPI shall be obligated to effect only one Demand Registration for all Founding Stockholders. Notwithstanding the foregoing paragraph, following the Demand Registration Request a majority of VPI's disinterested directors (i.e., directors who have not demanded or elected to sell shares in any such public offering) may defer the filing of the registration statement for a 60-day period if such deferral is deemed by such directors to be in the best interests of VPI. If immediately prior to the Demand Registration Request VPI has fixed plans to file within 60 days after receipt of the Demand Registration Request a registration statement covering the sale of any of its securities in a public offering under the 1933 Act, no registration of the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2 until 90 days after the effective date of such 77 registration unless VPI is no longer proceeding diligently to effect such registration (in which case the delay contemplated by this sentence would not be applicable); provided that VPI shall provide the Founding Stockholders the right to participate in such public offering pursuant to, and subject to, Section 17.1 hereof. 17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the registrations under this Article 17 (including all registration, filing, qualification, legal, printer and accounting fees, but excluding underwriting commissions and discounts), shall be borne by VPI. In connection with registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts to prepare and file with the SEC as soon as reasonably practicable, a registration statement with respect to the VPI Stock and use its best efforts to cause such registration to promptly become and remain effective for a period of at least 45 days (or such shorter period during which the Founding Stockholders shall have sold all VPI Stock which they requested to be registered); (ii) use its best efforts to register and qualify the VPI Stock covered by such registration statement under applicable state securities laws as the holders shall reasonably request for the distribution for the VPI Stock; and (iii) take such other actions as are reasonable and necessary to comply with the requirements of the 1933 Act and the regulations thereunder to enable the Founding Stockholders to sell their shares pursuant thereto. 17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant to Sections 17.1 and 17.2 covering an underwritten registered public offering, VPI and each participating holder agree to enter into a written agreement with the managing underwriters in such form and containing such provisions (including indemnification provisions) as are customary in the securities business for such an arrangement between such managing underwriters and companies of VPI's size and investment stature. 17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register shares of VPI Stock held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k) (or any similar or successor provision) promulgated under the 1933 Act are available to such STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock. 78 17.6 REGISTRATION RIGHTS INDEMNIFICATION. (a) Indemnification by VPI. In the event any shares of VPI Stock received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities") are included in a registration statement under this Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify and hold harmless each seller of any Registrable Securities covered by such registration statement, its directors, officers, agents, attorneys, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director or officer or underwriter or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and VPI will reimburse such seller and each such director, officer, underwriter and controlling Person for any expenses (including but not limited to reasonable attorneys' fees) reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that VPI shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to VPI by such seller expressly for use in the preparation thereof, and provided further that VPI shall not be liable to any Person 79 who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) Indemnification by Sellers. If any Registrable Securities are included in any registration statement filed pursuant to this Section 17, each prospective seller of such securities shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 17.6) each underwriter, each Person who controls such underwriter within the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to VPI by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided that such prospective seller shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or 80 expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of any underwriter, VPI or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In no event shall the liability of any selling holder of Registrable Securities under this Section 17.6(b) be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 17.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 17.6, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, 81 without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 17.6 (with appropriate modifications) shall be given by VPI and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the 1933 Act. (e) Indemnification Payments. The indemnification required by this Section 17.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If the indemnification provided for in this Section 17.6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to 82 above shall be deemed to include, subject to the limitations set forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 17.6(f) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason on such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling holder were offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 17.6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 17.6(a) through Section 17.6(e) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 17.6(f). 18. GENERAL 18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure of this Agreement and/or any information regarding the transactions contemplated hereby or the Other Agreements may adversely affect the ability of the parties hereto and to the Other Agreements to 83 consummate the transactions contemplated hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue any press release or otherwise make any public announcement (including communications with trade publications and other media), or disclose information to any third party (except those agents or representatives of a party directly involved in the transactions contemplated hereby and except as required by law) concerning VPI, the Founding Companies or the transactions contemplated hereby or by the Other Agreements without the prior approval of VPI, the COMPANY and the STOCKHOLDERS. 18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The COMPANY shall cooperate and use its reasonable efforts to have the present officers, directors and the employees of the COMPANY cooperate with VPI on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any tax return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of VPI, and the heirs and legal representatives of the STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with respect to any person or entity not a party to or property not subject to this Agreement. 18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede any prior agreement and understanding relating to the subject matter of this Agreement, including but not limited to any letter of intent entered into by any of the parties hereto. This Agreement, upon 84 execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective officers or trustees, duly authorized by their respective Boards of Directors. 18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commission of brokers employed or alleged to have been employed by such indemnifying party. 18.7 EXPENSES. Whether or not the transactions herein contemplated shall be consummated, VPI will pay the fees, expenses and disbursements of VPI and its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by VPI under this Agreement, including the fees and expenses of Arthur Andersen, LLP (including such fees and expenses in connection with the audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI, and the costs of preparing the Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including the fees and expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by this Agreement are consummated, VPI shall reimburse 85 the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of the consideration payable pursuant to Section 3 hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby; provided, however, that the foregoing shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax opinion letter referenced in Annex VI. The COMPANY agrees that it will provide 20 hours of consultation to VPI's accountants without compensation to familiarize them with its software in order that VPI or its designee can perform financial audits more efficiently for the COMPANY and the Other Founding Companies. For consulting services beyond such 20 hours provided by the COMPANY, VPI agrees to compensate the COMPANY, from the proceeds of the IPO, at the COMPANY's customary rate. 18.8 NOTICES. All notices of communication required or permitted hereunder shall be in writing and may be given (i) by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) by delivering the same in person to an officer or agent of such party or (iii) by facsimile transmission when confirmation of receipt is received from the party being notified by the party sending such notice. (a) If to VPI, or NEWCO, addressed to them at: Vacation Properties International, Inc. c/o Capstone Partners, LLC 9 East 53rd Street New York, New York 10022 Facsimile no.: (212) 688-8209 Attention: Leonard A. Potter 86 with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 Facsimile no.: (202) 887-4288 Attention: Bruce S. Mendelsohn (b) If to the STOCKHOLDERS, addressed to them at their respective addresses set forth on Annex IV, with copies to such counsel as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: First Resort Software, Inc. 300A Aspen Airport Business Center Aspen, Colorado 81611 Facsimile no.: (970) 920-3732 Attention: Tom Leddy and marked "Personal and Confidential" or to such other address or counsel as any party hereto shall specify pursuant to this Section 18.8 from time to time. 18.9 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Delaware. 18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 18.11 TIME. Time is of the essence with respect to this Agreement. 18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be held by any court of competent jurisdiction to be invalid, illegal or unenforceable, it shall, to the extent 87 possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth herein, no right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 18.14 CAPTIONS. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the introductory paragraph of this Agreement) who will hold or who hold at least 50% of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 18.15 shall be binding upon each of the parties hereto, any other person receiving VPI Stock in connection with the Merger and each future holder of such VPI Stock. 18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed in a particular Schedule or a subsection of a particular Schedule and such item is readily apparent on its face as being applicable to another Schedule or another subsection of the same Schedule, such item shall be deemed incorporated by reference in such Schedule or such other subsection under the same Schedule. 18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized terms used in this Agreement or in any Schedule attached hereto and not otherwise defined shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. 88 "Acquired Party" means the COMPANY, any Subsidiary and any member of a Relevant Group. "Acquisition Companies" shall mean NEWCO and each of the other Delaware companies wholly-owned by VPI prior to the Closing Date. "Affiliates" shall mean, with respect to a corporation, any other person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such corporation, and shall mean, with respect to an individual, any parent, spouse or child of such individual. "Agreement" has the meaning set forth in the first paragraph hereof. "A/R Aging Reports" has the meaning set forth in Section 5.11. "Articles of Merger" shall mean those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such other changes therein as may be required by applicable state laws. "Balance Sheet Date" has the meaning set forth in Section 5.9. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Financial Statements" has the meaning set forth in Section 5.9. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Delaware GCL" has the meaning set forth in Section 1.5. "Demand Registration" has the meaning set forth in Section 17.2. "Effective Time of the Merger" shall mean the time as of which the Merger becomes effective, which is contemplated to occur on the Closing Date. 89 "Environmental Laws" has the meaning set forth in Section 5.13. "ERISA" has the meaning set forth in Section 5.20. "Expiration Date" has the meaning set forth in Section 5(A). "Founding Companies" has the meaning set forth in the third recital of this Agreement. "Founding Stockholders" has the meaning set forth in Section 17.1. "Future Sale" has the meaning set forth in Section 15.2. "Indemnification Threshold" has the meaning set forth in Section 11.5. "Indemnified Party" has the meaning set forth in Section 11.3. "Indemnifying Party" has the meaning set forth in Section 11.3. "Intellectual Property" means computer programs and databases and their associated system and user documentation; copyrights, copyright applications (if any) and copyright registrations (if any), patents and patent applications; trademarks, service marks and trade names, including registrations (if any) and applications for registration (if any) therefor; trade secrets and proprietary rights. "IPO" means the initial public offering of VPI Stock pursuant to the Registration Statement. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Documents" has the meaning set forth in Section 5.24. "Merger" means the merger of NEWCO with and into the COMPANY pursuant to this Agreement and the applicable provisions of the laws of the State of Delaware and other applicable state laws. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO. "Noncompetition Period" means the longest of the following periods: (i) three (3) years following the Closing Date; or (ii) (A) two (2) years following the date of termination of any employment agreement entered into between VPI and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or (B) in the case of a termination without cause under such 90 employment agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following the termination of such employment agreement. "Other Agreements" has the meaning set forth in the third recital of this Agreement. "Other Founding Companies" means all of the Founding Companies other than the COMPANY. "Person" means any natural person, corporation, business trust, association, company, partnership, limited liability company, joint venture or any other entity, government, agency or political subdivision. "Pre-Closing" has the meaning set forth in Section 4. "Pre-Closing Date" has the meaning set forth in Section 4. "Pricing" means the date of determination by VPI and the Underwriters of the public offering price of the shares of VPI Stock in the IPO; the parties hereto contemplate that the Pricing shall take place on the Pre-Closing Date. "Qualified Plans" has the meaning set forth in Section 5.21. "Registrable Securities" has the meaning set forth in Section 17.6. "Registration Statement" means that certain registration statement on Form S-1 covering the shares of VPI Stock to be issued in the IPO. "Relevant Group" means the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member. "Restricted Common Stock" means the common stock of VPI, par value $0.01 per share, having the restricted voting rights and such other rights, preferences, restrictions and limitations as are set forth in the Certificate of Incorporation, as amended, of VPI on the Closing Date. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. 91 "Statutory Liens" has the meaning set forth in Section 7.3. "stock" and "capital stock" and "shares" mean, when used with respect to a limited liability company unless the context otherwise requires, the membership interests of such limited liability company, and otherwise have their respective ordinary meanings. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "stockholders" means, when used with respect to a corporation, the owners of the capital stock of such corporation and means, when used with respect to a limited liability company unless the context otherwise requires, the owners of the membership interests of such limited liability company. "Subsidiary" has the meaning set forth in Section 5.6. "Surviving Corporation" shall mean the COMPANY as the surviving party in the Merger. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Returns" has the meaning set forth in Section 5.23. "Territory" has the meaning set forth in Section 13.1. "Third Person" has the meaning set forth in Section 11.3. "Transfer Taxes" has the meaning set forth in Section 18.7. "VPI" has the meaning set forth in the first paragraph of this Agreement. "VPI Charter Documents" has the meaning set forth in Section 6.1. "VPI Financial Statements" has the meaning set forth in Section 6.6. "VPI Plan of Organization" has the meaning set forth in the fourth recital of this Agreement. "VPI Stock" means the common stock, par value $.01 per share, of VPI. 92 "Underwriters" means the prospective underwriters in the IPO, as identified in the Registration Statement. [THE NEXT PAGE IS THE SIGNATURE PAGE] 93 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC. FRS ACQUISITION CORP. By:/s/ Leonard Potter ---------------------------------- Leonard Potter Vice President FIRST RESORT SOFTWARE, INC. By:/s/ Thomas A. Leddy ---------------------------------- Name: Thomas A. Leddy -------------------------- Title: President -------------------------- STOCKHOLDERS: /s/ Thomas A. Leddy - ---------------------------------- Thomas A. Leddy /s/ Evan H. Gull - ---------------------------------- Evan H. Gull /s/ Daniel Patrick Curry - ---------------------------------- Daniel Patrick Curry EX-3.1 17 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF VACATION PROPERTIES INTERNATIONAL, INC. The undersigned, Leonard A. Potter, Vice President of Vacation Properties International, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: The name of the Corporation is: Vacation Properties International, Inc. SECOND: The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware on September 11, 1997. THIRD: This Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law, the Board of Directors having duly adopted resolutions setting forth and declaring advisable this Amended and Restated Certificate of Incorporation, and in lieu of a meeting of the stockholders, written consent to this Amended and Restated Certificate of Incorporation having been given by the holders of a majority of the outstanding stock of the Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware. FOURTH: This Amended and Restated Certificate of Incorporation is being filed pursuant to Sections 242 and 245 of the Delaware General Corporation Law in order to restate the Certificate of Incorporation of the Corporation as amended to date, and also to amend further the Certificate of Incorporation to (i) increase the authorized capital stock of the Corporation, (ii) authorize the issuance of preferred stock and restricted voting common stock, and (iii) to provide terms for the election of the Board of Directors of the Corporation. FIFTH: The Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety as follows: FIRST: The name of the corporation is Vacation Properties International, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805. The name of its registered agent at such address is The Corporation Service Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 60,000,000 shares of stock, of which 10,000,000 shares, designated as preferred stock, shall have a par value of One Cent ($.01) per share (the "Preferred Stock"), and 50,000,000 shares, designated as common stock, shall have a par value of One Cent ($.01) per share (the "Common Stock"). 3,134,666 of such shares of Common Stock shall be designated as Restricted Voting Common Stock (the "Restricted Voting Common Stock"). A statement of the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of stock of the Corporation is as follows: Preferred Stock. The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more classes or series. Subject to the provisions of this Certificate of Incorporation and the limitations prescribed by law, the Board of Directors is expressly authorized by adopting resolutions to issue the shares, fix the number of shares and change the number of shares constituting any series, and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (and whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), a redemption price or prices, conversion rights and liquidation preferences of the shares constituting any class or series of the Preferred Stock, without any further action or vote by the stockholders. Common Stock. 1. Dividends. Subject to the preferred rights of the holders of shares of any class or series of Preferred Stock as provided by the Board of Directors with respect to any such class or series of Preferred Stock, the holders of the Common Stock (including Restricted Voting Common Stock) shall be entitled to receive, as and when declared by the Board of Directors out of the funds of the Corporation legally available therefor, such dividends (payable in cash, stock or otherwise) as the Board of Directors may from time to time determine, payable to stockholders of record on such dates, not exceeding 60 days preceding the dividend payment dates, as shall be fixed for such purpose by the Board of Directors in advance of payment of each particular dividend. All dividends on Common Stock shall be paid pari passu with dividends on Restricted Voting Common Stock. 2. Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after the distribution or payment to the holders of shares of any class or series of Preferred Stock as provided by the Board of Directors with respect to any such class or series of Preferred Stock, the remaining assets of the Corporation available for distribution to stockholders shall be distributed among and paid to the holders of Common Stock and Restricted Voting Common Stock ratably in proportion to the number of shares of Common Stock and Restricted Voting Common Stock held by them respectively. 3. Voting Rights. Except as otherwise required by law, each holder of shares of Common Stock shall be entitled to one vote for each share of Common Stock standing in such holder's name on the books of the Corporation. Except as otherwise required by law, each holder of shares of Restricted Voting Common Stock shall be entitled to one-half of a vote for each share of Restricted Voting Common Stock standing in such holder's name on the books of the Corporation. The holders of shares of Restricted Voting Common Stock shall have no right to vote separately as a class except as specifically required by the General Corporation Law of Delaware. 4. Conversion of the Restricted Voting Common Stock. Each share of Restricted Voting Common Stock will automatically convert into Common Stock on a share for share basis (a) in the event of a disposition of such share of Restricted Voting Common Stock by the holder thereof (other than a disposition which is a distribution by a holder to its partners or beneficial owners or a transfer to a related party of such holder (as defined in Section 267, 707, 318, and/or 4946 of the Internal 2 Revenue Code of 1986), (b) in the event any person acquires beneficial ownership of 15% or more of the outstanding shares of Common Stock of the Corporation, (c) in the event any person offers to acquire 15% or more of the outstanding shares of Common Stock of the Corporation, or (d) in the event a majority of the aggregate number of votes which may be voted by the holders of outstanding shares of Common Stock and Restricted Voting Common Stock entitled to vote approve such conversion. After December 31, 2000, the Corporation may elect to convert any outstanding shares of Restricted Voting Common Stock into shares of Common Stock in the event 80% or more of the outstanding shares of Restricted Voting Common Stock has been converted into shares of Common Stock. FIFTH: 1. Board of Directors. There shall be one class of directors of the Corporation. The directors shall be elected to hold office until the next annual meeting of the stockholders and until their successors have been duly elected and qualified. At each annual meeting of stockholders at which a quorum is present, the persons receiving a plurality of the votes cast shall be directors. No director may be removed from office by a vote of the stockholders at any time except for cause. Election of directors need not be by written ballot unless the Bylaws of the Corporation so provide. 2. Vacancies. Any vacancy on the Board of Directors resulting from death, retirement, resignation, disqualification or removal from office or other cause, as well as any vacancy resulting from an increase in the number of directors which occurs between annual meetings of the stockholders at which directors are elected, shall be filled only by a majority vote of the remaining directors then in office, though less than a quorum, except that those vacancies resulting from removal from office by a vote of the stockholders may be filled by a vote of the stockholders at the same meeting at which such removal occurs. The directors chosen to fill vacancies shall hold office for a term expiring at the end of the next annual meeting of stockholders and until their successors have been duly elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Notwithstanding the foregoing, whenever the holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolution or resolutions adopted by the Board of Directors pursuant to ARTICLE FOURTH applicable thereto, and each director so elected shall not be subject to the provisions of this ARTICLE FIFTH unless otherwise provided therein. 3. Power to Make, Alter and Repeal Bylaws. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter and repeal the Bylaws of the Corporation. 4. Amendment and Repeal of Article Five. Notwithstanding any provision of this Certificate of Incorporation and of the Bylaws, and notwithstanding the fact that a lesser percentage may be specified by Delaware law, unless such action has been approved by a majority vote of the full Board of Directors, the affirmative vote of 66 2/3 percent of the Corporation's shareholders who would be entitled to vote thereon, voting together as a single class, shall be required to amend or repeal any provision of this ARTICLE FIFTH or to adopt any provision inconsistent with this ARTICLE FIFTH. In the event such action has been previously approved by a majority vote of the full Board of Directors, the affirmative vote of a majority of the outstanding stock entitled to vote thereon shall be sufficient to amend or repeal any provision of this ARTICLE FIFTH or adopt any provision inconsistent with this ARTICLE FIFTH. 3 SIXTH: The Corporation reserves the right to amend, alter, change or repeal any provision in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute. SEVENTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. EIGHTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto. 4 IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Certificate of Incorporation on behalf of the Corporation and does verify and affirm, under penalty of perjury, that this Amended and Restated Certificate of Incorporation is the act and deed of the Corporation and that the facts stated herein are true as of this 10 day of March, 1998. Vacation Properties International, Inc. By:/s/ Leonard A. Potter ------------------------------------ Leonard A. Potter Vice President 5 EX-3.2 18 EXHIBIT 3.2 EXHIBIT 3.2 VACATION PROPERTIES INTERNATIONAL, INC. ---oo0oo--- BYLAWS ---oo0oo--- ARTICLE I OFFICES ------- Section 1.01. Registered Office. The registered office of Vacation Properties International, Inc. (hereinafter referred to as the "Corporation") shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 1.02. Additional Offices. The Corporation may also have offices at such other places, both within and outside the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ Section 2.01. Time and Place. All meetings of stockholders for the election of Directors shall be held at such time and place, either within or outside the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place either within or outside the State of Delaware as shall be stated in the notice of the meeting or in a duly executed waiver of notice of the meeting. Section 2.02. Annual Meeting. Annual meetings of stockholders shall be held for the purpose of electing a Board of Directors and transacting such other business as may properly be brought before the meeting. Section 2.03. Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date and time of such annual meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) (unless a longer period is required by law) nor more than sixty (60) days prior to the meeting. Section 2.04. Special Meeting. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board, if any, or, if the Chairman is not present (or, if there is none), by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at such meeting. Such request shall state the purpose or purposes of the proposed meeting. The person calling such meeting shall cause notice of the meeting to be given in accordance with the provisions of Section 2.05 of this Article II and of Article V. Section 2.05. Notice of Special Meeting. Written notice of a special meeting, stating the place, date and time of such special meeting and the purpose or purposes for which the meeting is called, shall be delivered either personally or mailed to his or her last address to each stockholder not less than ten (10) (unless a longer period is required by law) nor more than sixty (60) days prior to the meeting. 2 Section 2.06. List of Stockholders. The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at a place within the city where the meeting is to be held. Such place, if other than the place of the meeting, shall be specified in the notice of the meeting. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting and may be inspected by any stockholder who is present. Section 2.07. Presiding Officer. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or if the Chairman is not present (or if there is none), by the President, or, if the President is not present, by a Vice President, or, if a Vice President is not present, by such person who may have been chosen by the Board of Directors, or, if none of such persons is present, by a Chairman to be chosen by the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy. The Secretary of the Corporation, or, if the Secretary is not present, an Assistant Secretary, or, if an Assistant Secretary is not present, such person as may be chosen by the Board of Directors, shall act as secretary of meetings of stockholders, or, if none of such persons is present, the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy shall choose any person present to act as secretary of the meeting. 3 Section 2.08. Quorum and Adjournments. The holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at stockholders meetings, present in person or represented by proxy, shall be necessary to, and shall constitute a quorum for, the transaction of business at all meetings of the stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. The stockholders present or in person or represented by proxy at a duly organized meeting may continue to do business until final adjournment of such meeting whether on the same day or on a later day, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, or even if a quorum shall be present or represented at any meeting of the stockholders, the stockholders entitled to vote at such meeting present in person or represented by proxy may adjourn the meeting from time to time; provided, however, that if the holders of any class of stock of the Corporation are entitled to vote separately as a class upon any matter at such meeting, any adjournment of the meeting in respect of action of such class upon such matter shall be determined by the holders of a majority of the shares of such class present in person or represented by proxy and entitled to vote at such meeting, until a quorum shall be present or represented. Notice of the adjourned meeting need not be given if the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum is present in person or represented by proxy of any class of stock entitled to vote separately as a class, as the case may be, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. 4 Section 2.09. Voting. (a) At any meeting of stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder of record shall be entitled to one (1) vote for each share of capital stock registered in his or her name on the books of the Corporation. (b) At a meeting at which a quorum is present, all elections of Directors shall be determined by a plurality vote, and, except as otherwise provided by law or the Certificate of Incorporation, all other matters shall be determined by a vote of a majority of the shares present in person or represented by proxy and entitled to vote on such other matters. Section 2.10. Inspectors. When required by law or directed by the presiding officer or upon the demand of any stockholder entitled to vote, but not otherwise, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided at any meeting of the stockholders by two or more inspectors who may be appointed by the Board of Directors before the meeting, or if not so appointed, shall be appointed by the presiding officer at the meeting. If any person so appointed fails to appear or act, the vacancy may be filled by appointment in like manner. Section 2.11. Consent. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted by law or the Certificate of Incorporation to be taken at any meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a 5 written consent, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present or represented by proxy and voted. Such written consent shall be filed with the minutes of meetings of stockholders. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not so consented in writing. ARTICLE III DIRECTORS --------- Section 3.01. Number and Tenure. There shall be such number of Directors, no fewer than one (1), as shall from time to time be fixed by the Board of Directors at the annual meeting or at any special meeting called for such purpose. The Directors shall be elected at the annual meeting of the stockholders, except for initial Directors named in the Certificate of Incorporation or elected by the incorporator, and except as provided in Section 3.02 of this Article, and each Director elected shall hold office until his successor is elected and shall qualify or until their earlier resignation or removal. Directors need not be stockholders. Section 3.02. Vacancies. If any vacancies occur on the Board of Directors, or if any new Directorships are created, they shall be filled by a majority of the Directors then in office, though less than a quorum, or by a sole remaining Director. Each Director so chosen shall hold office until the next annual election of Directors and until his or her successor is duly elected and shall qualify. If there are no Directors in office, any officer or stockholder may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, at which meeting such vacancies shall be filled. 6 Section 3.03. Resignation. Any Director may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary of the Corporation, or, in the absence of all of the foregoing, by notice to any other Director or officer of the Corporation. Unless otherwise specified in such written notice, a resignation shall take effect upon delivery to the designated Director or officer. It shall not be necessary for a resignation to be accepted before it becomes effective. Section 3.04. Place of Meetings. The Board of Directors may hold meetings, both regular and special, either within or outside the State of Delaware. Section 3.05. Annual Meeting. Unless otherwise agreed by the newly elected Directors, the annual meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting to either incumbent or newly elected Directors shall be necessary. Section 3.06. Regular Meetings. Regular meetings of the Board of Directors may be held without notice, at such time and place as may from time to time be determined by the Board of Directors. A copy of every resolution fixing or changing the time or place of regular meetings shall be mailed to every Director at least five days before the first meeting held pursuant thereto. Section 3.07. Special Meetings. Special Meetings of the Board of Directors may be called by the Chairman of the Board or the President on at least (1) day's actual notice to each Director, if such Special Meeting is to be conducted by means of conference telephone or similar communications equipment in accordance with Section 3.11, and otherwise, upon two (2) days' 7 actual notice if such notice is delivered personally or sent by telegram. Special Meetings shall be called by the Chairman of the Board or the President in like manner and on like notice on the written request of one-half or more of the Directors then in office. The purpose of a Special Meeting of the Board of Directors need not be stated in the notice of such meeting. Any and all business other than an amendment of these Bylaws may be transacted at any special meeting, and an amendment of these Bylaws may be acted upon if the notice of the meeting shall have stated that the amendment of these Bylaws is one of the purposes of the meeting. At any meeting at which every Director shall be present, even though without any notice, any business may be transacted, including the amendment of these Bylaws. Section 3.08. Quorum and Adjournments. Unless otherwise provided by the Certificate of Incorporation, at all meetings of the Board of Directors, one-half of the total number of Directors shall constitute a quorum for the transaction of business; provided, however, that when the Board of Directors consists of one (1) Director, then one (1) Director shall constitute a quorum. If a quorum is not present at any meeting of the Board of Directors, the Directors present may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.09. Presiding Officer. Meetings of the Board of Directors shall be presided over by the Chairman of the Board of Directors, if any, or if the Chairman is not present (or if there is none), by the President, or, if the President is not present, by such person as the Board of Directors may appoint for the purpose of presiding at the meeting from which the President is absent. 8 Section 3.10. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as the unanimous vote of the Board of Directors. Section 3.11. Telephone Meetings. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 3.12. Compensation. The Board of Directors, by the affirmative vote of a majority of the Directors then in office and irrespective of the personal interest of any Director, shall have authority to establish reasonable compensation for Directors for their services as such and may, in addition, authorize reimbursement of any reasonable expenses incurred by Directors in connection with their duties. ARTICLE IV COMMITTEES ---------- Section 4.01. Committees of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one (1) or more committees, each committee to consist of one (1) or more Directors of the Corporation. The Board of Directors 9 may designate one (1) or more persons who are not Directors as additional members of any committee, but such persons shall be nonvoting members of such committee. The Board of Directors may designate one (1) or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have power or authority to amend the Certificate of Incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, elect or remove officers or Directors, or amend these Bylaws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 4.02. Minutes of Committee Meetings. Unless otherwise provided in the resolution of the Board of Directors establishing such committee, each committee shall keep minutes of action taken by it and file the same with the Secretary of the Corporation. 10 Section 4.03. Quorum. A majority of the number of Directors constituting any committee shall constitute a quorum for the transaction of business, and the affirmative vote of such Directors present at the meeting shall be required for any action of the committee; provided, however, that when a committee of one (1) member is authorized under the provisions of Section 4.01 of this Article, such one (1) member shall constitute a quorum. Section 4.04. Vacancies, Changes and Discharge. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of and to discharge any committee. Section 4.05. Compensation. The Board of Directors, by the affirmative vote of a majority of the Directors then in office and irrespective of the personal interest of any Director, shall have authority to establish reasonable compensation for committee members for their services as such and may, in addition, authorize reimbursement of any reasonable expenses incurred by committee members in connection with their duties. ARTICLE V NOTICES ------- Section 5.01. Form and Delivery. (a) Whenever, under the provisions of law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any stockholder, it shall not be construed to mean personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, telecopy, telegram or messenger addressed to such stockholder, at his or her address as it appears on the records of the Corporation. If mailed, such notice shall be deemed to be delivered 11 when deposited in the United States mail, with postage prepaid. (b) Whenever, under the provisions of law, the Certificate of Incorporation, or these Bylaws, notice is required to be given to any Director, it shall not be construed to mean personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, telecopy, telegram or messenger addressed to such Director at the usual place of residence or business of such Director as in the discretion of the person giving such notice will be likely to be received most expeditiously by such Director. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, with postage prepaid. Section 5.02. Waiver. Whenever any notice is required to be given under the provisions of law, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time for the meeting stated in such notice, shall be deemed equivalent to such notice. ARTICLE VI OFFICERS -------- Section 6.01. Designations. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President and a Secretary. The Board of Directors may also choose a Chairman of the Board, one (1) or more Vice Presidents, a Treasurer, one (1) or more Assistant Secretaries and one (1) or more Assistant Treasurers and other officers and agents as it shall deem necessary or appropriate. Any officer of the Corporation shall have the authority to affix the seal of the Corporation and to attest the affixing of the seal by his or her signature. All officers and agents of the Corporation shall exercise such powers and perform such duties as shall from time to time be determined by the Board of Directors. 12 Section 6.02. Term of Office and Removal. The Board of Directors at its annual meeting after each annual meeting of stockholders or at a special meeting called for that purpose shall choose officers and agents, if any, in accordance with the provisions of Section 6.01. Each officer of the Corporation shall hold office until his or her successor is elected and shall qualify. Any officer or agent elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the Directors then in office. Any vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term by the Board of Directors. Section 6.03. Compensation. The salaries of all officers and agents, if any, of the Corporation shall be fixed from time to time by the Board of Directors, and no officer or agent shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the Corporation. Section 6.04. Chairman of the Board and the President. The Chairman of the Board shall be the chief executive officer of the Corporation. If there is no Chairman of the Board, the President shall be the chief executive officer of the Corporation. The duties of the Chairman of the Board, and of the President at the direction of the Chairman of the Board, shall be the following: (i) Subject to the direction of the Board of Directors, to have general charge of the business, affairs and property of the Corporation and general supervision over its other officers and agents and, in general, to perform all duties incident to the office of Chairman of the Board (or President, as the case may be) and to see that all orders and resolutions of the Board of Directors are carried into effect. 13 (ii) Unless otherwise prescribed by the Board of Directors, to have full power and authority on behalf of the Corporation to attend, act and vote at any meeting of security holders of other Corporations in which the Corporation may hold securities. At such meeting the Chairman of the Board (or the President, as the case may be) shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the Corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons. (iii) To preside over meetings of the stockholders and of the Board of Directors, to call special meetings of stockholders, to be an ex-officio member of all committees of the Board of Directors, and to have such other duties as may from time to time be prescribed by the Board of Directors. Section 6.05. The Vice President. The Vice President, if any (or in the event there be more than one (1), the Vice Presidents in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the President and shall generally assist the President and perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 6.06. The Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all votes and the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for any committees of the Board of Directors, if requested by such committee. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and 14 shall perform such other duties as may from time to time be prescribed by the Board of Directors or the President, under whose supervision he or she shall act. The Secretary shall have custody of the seal of the Corporation, and the Secretary, or any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by the signature of the Secretary or any such Assistant Secretary. Section 6.07. The Assistant Secretary. The Assistant Secretary, if any (or in the event there be more than one (1), the Assistant Secretaries in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 6.08. The Treasurer. The Treasurer, if any, shall have the custody of the corporate funds and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may from time to time be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at regular meetings of the board, or whenever they may require it, an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation. Section 6.09. The Assistant Treasurer. The Assistant Treasurer, if any, (or in the event there be more than one (1), the Assistant Treasurers in the order designated, or in the absence of 15 any designation, in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 6.10. Transfer of Authority. In case of the absence of any officer or for any other reason that the Board of Directors deems sufficient, the Board of Directors may transfer the powers or duties of that officer to any other officer or to any Director or employee of the Corporation, provided a majority of the full Board of Directors concurs. Section 6.11. Giving of Bond by Officers. All officers of the Corporation, if required to do so by the Board of Directors, shall furnish bonds to the Corporation for the faithful performance of their duties, in such penalties and with such conditions and security as the Board shall require. ARTICLE VII STOCK CERTIFICATES ------------------ Section 7.01. Form and Signatures. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by or in the name of the Corporation, by the Chairman of the Board, the President or a Vice President and the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation, certifying the number and class (and series, if any) of shares owned by him or her, and bearing the seal of the Corporation. Such seal and any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may 16 be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Section 7.02. Registration of Transfer. Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or its transfer agent to issue a new certificate to the person entitled thereto, to cancel the old certificate and to record the transaction upon its books. Section 7.03. Registered Stockholders. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person who is registered on its books as the owner of shares of its capital stock to receive dividends or other distributions, to vote as such owner, and to hold liable for calls and assessments a person who is registered on its books as the owner of shares of its capital stock. The Corporation shall not be bound to recognize any equitable, legal or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by law. Section 7.04. Issuance of Certificates. No certificate shall be issued for any share until (i) consideration for such share in the form of cash, services rendered, personal or real property, leases of real property or a combination thereof in an amount not less than the par value or stated capital of such share has been received by the Corporation and (ii) the Corporation has received a binding obligation of the subscriber or purchaser to pay the balance of the subscription or purchase price. 17 Section 7.05. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to advertise the same in such manner as it shall require, and to give the Corporation a bond in such sum, or other security in such form as it may direct, as indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 7.06. Dividends. Subject to the provisions of the Certificate of Incorporation, the Board of Directors shall have power to declare and pay dividends upon shares of stock of the Corporation, but only out of funds available for the payment of dividends as provided by law. ARTICLE VIII INDEMNIFICATION --------------- Section 8.01. Directors, Officers, Employees or Agents. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other 18 enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. 19 (c) To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Article VIII, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. (d) Any indemnification under subsections (a) and (b) of this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsections (a) and (b) of this Article VIII. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion or (3) by the stockholders. (e) Expenses incurred by an officer or Director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (f) The indemnification and advancement of expenses provided by these Bylaws shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to 20 action in another capacity while holding such office. (g) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. (h) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under this Article. ARTICLE IX GENERAL PROVISIONS ------------------ Section 9.01. Fiscal Year. The fiscal year of the Corporation shall be as determined from time to time by the Board of Directors. Section 9.02. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware." The seal or any facsimile thereof may be, but need not be, unless required by law, impressed or affixed to any instrument executed by an officer of the Corporation. 21 Section 9.03. Checks, Notes, Etc. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board of Directors, countersigned by such officers of the corporation and/or other persons as the Board of Directors from time to time shall designate. Checks, drafts, bills of exchange, acceptance notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Treasurer and/or such other officers or persons as the Board of Directors from time to time may designate. Section 9.04. Loans. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board of Directors. When authorized to do so, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such other evidences of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, and any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances. Section 9.05. Contracts. Except as otherwise provided in these Bylaws or as otherwise directed by the Board of Directors, the President or any Vice President shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed 22 thereto by any of such officers or the Secretary or an Assistant Secretary. The Board of Directors, the President or any Vice President designated by the Board of Directors may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages and other instruments, either for the Corporation's own account or in a fiduciary or other capacity and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board or any such officer may be general or confined to specific instances. ARTICLE X AMENDMENTS ---------- Section 10.01. These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the stockholders or by the Board of Directors, to the extent that such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such proposed alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. 23 EX-10.1 19 EXHIBIT 10.1 VACATION PROPERTIES INTERNATIONAL, INC. 1998 LONG-TERM INCENTIVE PLAN 1. PURPOSE. The purpose of the 1998 Long-Term Incentive Plan (the "Plan") of Vacation Properties International, Inc., a Delaware corporation (the "Company"), is to advance the interests of the Company and its stockholders by providing a means to attract, retain and reward executive officers, employee directors, other key employees, non-employee and advisory directors and consultants of and service providers to the Company and its subsidiaries and to enable such persons to acquire or increase a proprietary interest in the Company, thereby promoting a closer identity of interests between such persons and the Company's stockholders. 2. DEFINITIONS. The definitions of awards under the Plan, including Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Non-employee Directors' Deferred Shares, Stock granted as a bonus or in lieu of other awards, Dividend Equivalents and Other Stock-Based Awards are set forth in Sections 6 and 8 of the Plan. Such awards, together with any other right or interest granted to a Participant under the Plan, are termed "Awards." For purposes of the Plan, the following additional terms shall be defined as set forth below: (a) "Award Agreement" means any written agreement, contract, notice or other instrument or document evidencing an Award. (b) "Beneficiary" shall mean the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant's death or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include regulations thereunder and successor provisions and regulations thereto. (e) "Committee" means a committee, as described in Section 3(a) hereof, designated by the Board to administer the Plan. (f) "Eligible Non-Employee Director" means any non-employee or advisory director of the Board who is not an employee of the Company on any date on which a nonqualified Option is to be granted under Section 8 or on which fees are to be paid under Section 8. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include rules thereunder and successor provisions and rules thereto. (h) "Fair Market Value" means, with respect to Stock, Awards, or other property, the fair market value of such Stock, Awards, or other property determined by such methods or procedures as shall be established from time to time by the Committee, provided, however, that: (i) if the Stock is listed on a national securities exchange or quoted in an interdealer quotation system, the Fair Market Value of such Stock on a given date shall be based upon the last sales price or, if unavailable, the average of the closing bid and asked prices per share of the Stock on such date (or, if there was no trading or quotation in the Stock on such date, on the next preceding date on which there was trading or quotation) as reported in the WALL STREET JOURNAL (or other reporting service approved by the Committee); or (ii) the "Fair Market Value" of Stock subject to Options granted effective upon commencement of the Initial Public Offering shall be the Initial Public Offering price of the shares so issued and sold in the Initial Public Offering, as set forth in the first final prospectus used in such offering (the provisions of clause (i) notwithstanding); or (iii) the "Fair Market Value" of Stock prior to the date of the Initial Public Offering as determined by the Board of Directors. (i) "Initial Public Offering" shall mean an initial public offering of shares of Stock in a firm commitment underwriting registered with the Securities and Exchange Commission in compliance with the provisions of the Securities Act of 1933, as amended. (j) "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code. (k) "Participant" means a person who has been granted an Award under the Plan. (l) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. (m) "Stock" means the Common Stock, $.01 par value, of the Company and such other securities as may be substituted for Stock or such other securities pursuant to Section 4. 3. ADMINISTRATION (a) Authority of the Committee. The Plan shall be administered by the Committee, which shall hold meetings at such times as may be necessary for the proper administration of the Plan. The Committee shall keep minutes of its meetings. A quorum shall consist of not fewer than two members of the Committee and a majority of a quorum may authorize any action. Any decision or determination reduced to writing and signed by a majority of all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held. Prior to the date of an Initial Public Offering, the Committee shall consist of at least two (2) directors of the Company and may consist of the entire Board. From and after the date of an Initial Public Offering, the Committee shall consist of at least two (2) directors of the Company and may consist of the entire Board; provided, however, that (A) if the Committee consists of less than the entire Board, each member shall be a "non-employee director" 2 within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and (B) to the extent necessary for any Option or Award intended to qualify as performance-based compensation under Section 162(m) of the Code to so qualify, each member of the Committee, whether or not it consists of the entire Board, shall be an "outside director" within the meaning of Section 162(m) of the Code. The Committee shall have the power from time to time: (i) to select persons to whom Awards may be granted; (ii) to determine the type or types of Awards to be granted to each such person; (iii) to determine the number of Awards to be granted, the number of shares of Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, vesting, exercisability or settlement of an Award, and waivers or accelerations thereof, performance conditions relating to an Award (including performance conditions relating to Awards not intended to be governed by Section 7(f) and waivers and modifications thereof), based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award; (iv) to determine whether, to what extent and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, or an Award may be cancelled, forfeited, or surrendered; (v) to determine whether, to what extent and under what circumstances cash, Stock, other Awards or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee or at the election of the Participant; (vi) to prescribe the form of each Award Agreement, which need not be identical for each Participant; (vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan; (viii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement or other instrument hereunder; and 3 (ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. (b) Manner of Exercise of Committee Authority. Unless authority is specifically reserved to the Board under the terms of the Plan, the Company's Certificate of Incorporation or Bylaws, or applicable law, the Committee shall have sole discretion in exercising authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all persons, including the Company, subsidiaries of the Company, Participants, any person claiming any rights under the Plan from or through any Participant and stockholders, except to the extent the Committee may subsequently modify, or take further action not consistent with, its prior action. If not specified in the Plan, the time at which the Committee must or may make any determination shall be determined by the Committee, and any such determination may thereafter by modified by the Committee (subject to Section 9(e)). The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary of the Company the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Participants not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3, if applicable, and other applicable law. (c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any subsidiary, the Company's independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on its behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation. 4. STOCK SUBJECT TO PLAN. (a) Amount of Stock Reserved. The total amount of Stock that may be subject to outstanding awards, determined immediately after the grant of any Award, shall not exceed the greater of x,xxx,xxx shares of Stock or xx% of the total number of shares of Stock outstanding at the time of such grant. Notwithstanding the foregoing, the number of shares that may be delivered upon the exercise of ISOs shall not exceed xxx,xxx, subject in each case to adjustment as provided in Section 4(c); and the number of shares that may be delivered as Restricted Stock and Deferred Stock (other than pursuant to an Award granted under Section 7(f)) shall not in the aggregate exceed xxx,xxx, provided, however, that shares subject to ISOs, Restricted Stock, or Deferred Stock Awards shall not be deemed delivered if such Awards are forfeited, expire or otherwise terminate without delivery of shares to the Participant; and further provided, that if an 4 Option granted to an Eligible Non-Employee Director expires for any reason without having been exercised in full, the shares of Stock subject to the unexercised portion of such Option will again be available for issuance under the Plan. If an Award valued by reference to Stock may only be settled in cash, the number of shares to which such Award relates shall be deemed to be Stock subject to such Award for purposes of this Section 4(a). Any shares of Stock delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares acquired in the market for a Participant's Account. (b) Annual Per-Participant Limitations. During any calendar year, no Participant may be granted Awards that may be settled by delivery of more than 100,000 shares of Stock, subject to adjustment as provided in Section 4(c). In addition, with respect to Awards that may be settled in cash (in whole or in part), no Participant may be paid during any calendar year cash amounts relating to such Awards that exceed the greater of the Fair Market Value of the number of shares of Stock set forth in the preceding sentence at the date of grant or the date of settlement of Award. This provision sets forth two separate limitations, so that Awards that may be settled solely by delivery of Stock will not operate to reduce the amount of cash-only Awards, and vice versa; nevertheless, Awards that may be settled in Stock or cash must not exceed either limitation. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Stock or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or exchange of Stock or other securities, liquidation, dissolution, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock reserved and available for Awards under Section 4(a), including shares reserved for the ISOs and Restricted and Deferred Stock, (ii) the number and kind of shares of Stock specified in the Annual Per-Participant Limitations under Section 4(b), (iii) the number and kind of shares of outstanding Restricted Stock or other outstanding Award in connection with which shares have been issued, (iv) the number and kind of shares that may be issued in respect of other outstanding Awards and (v) the exercise price, grant price or purchase price relating to any Award (or, if deemed appropriate, the Committee may make provision for a cash payment with respect to any outstanding Award). In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any subsidiary or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. The foregoing notwithstanding, no adjustments shall be authorized under this Section 4(c) with respect to ISOs or SARs in tandem therewith to the extent that such authority would cause the Plan to fail to comply with Section 422(b)(1) of the Code, and no such adjustment shall be authorized with respect to Options, SARs or other Awards subject to Section 7(f) to the extent that such authority would cause such Awards to fail to qualify as "qualified performance-based compensation" under Section 162(m)(4)(C) of the Code. 5 5. ELIGIBILITY FOR ALL AWARDS OTHER THAN THOSE GRANTED TO ELIGIBLE NON-EMPLOYEE DIRECTORS. Executive officers and other key employees of the Company and its subsidiaries, including any director or officer who is also such an employee, and persons who provide consulting or other services to the Company deemed by the Committee to be of substantial value to the Company, are eligible to be granted Awards under the Plan. In addition, a person who has been offered employment by the Company or its subsidiaries is eligible to be granted an Award under the Plan, provided that such Award shall be cancelled if such person fails to commence such employment, and no payment of value may be made in connection with such Award until such person has commenced such employment. The foregoing notwithstanding, no member of the Committee shall be eligible to be granted Awards under the Plan except as provided in Section 8. 6. SPECIFIC TERMS OF AWARDS OTHER THAN THOSE GRANTED TO ELIGIBLE NON-EMPLOYEE DIRECTORS. (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service of the Participant. Except as provided in Sections 6(f), 6(h), or 7(a), or to the extent required to comply with requirements of the Delaware General Corporation Law that lawful consideration be paid for Stock, only services may be required as consideration for the grant (but not the exercise) of any Award. (b) Options. The Committee is authorized to grant Options (including "reload" options automatically granted to offset specified exercises of Options) on the following terms and conditions ("Options"): (i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee; provided, however, that, except as provided in Section 7(a), such exercise price shall be not less than the Fair Market Value of a share on the date of grant of such Option. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards granted under other Company plans or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law), and the methods by which Stock will be delivered or deemed to be delivered to Participants. (iii) ISOS. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not 6 limited to the requirement that no ISO shall be granted more than ten years after the effective date of the Plan. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to ISOs shall be interpreted, amended, or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Section 422 of the Code, unless requested by the affected Participant. (iv) Termination of Employment. Unless otherwise determined by the Committee, upon termination of a Participant's employment with the Company and its subsidiaries, such Participant may exercise any Options during the three-month period following such termination of employment, but only to the extent such Option was exercisable immediately prior to such termination of employment. Notwithstanding the foregoing, if the Committee determines that such termination is for cause, all Options held by the Participant shall terminate as of the termination of employment. (c) Stock Appreciation Rights. The Committee is authorized to grant SARs on the following terms and conditions ("SARs"): (i) Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise (or, if the Committee shall so determine in the case of any such right other than one related to an ISO, the Fair Market Value of one share at any time during a specified period before or after the date of exercise), over (B) the grant price of the SAR as determined by the Committee as of the date of grant of the SAR, which, except as provided in Section 7(a), shall be not less than the Fair Market Value of one share of Stock on the date of grant. (ii) Other Terms. The Committee shall determine the time or times at which an SAR may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Limited SARs that may only be exercised upon the occurrence of a Change in Control may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. Limited SARs may be either freestanding or in tandem with other Awards. (d) Restricted Stock. The Committee is authorized to grant Restricted Stock on the following terms and conditions ("Restricted Stock"): (i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, 7 under such circumstances, in such installments, or otherwise, as the Committee may determine. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock or the right to receive dividends thereon. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service (as determined under criteria established by the Committee) during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of termination resulting from specified causes. (iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates may bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Company may retain physical possession of the certificate, and the Participant shall have delivered a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (iv) Dividends. Dividends paid on Restricted Stock shall be either paid at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or the payment of such dividends shall be deferred and/or the amount or value thereof automatically reinvested in additional Restricted Stock, other Awards, or other investment vehicles, as the Committee shall determine or permit the Participant to elect. Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed, unless otherwise determined by the Committee. (e) Deferred Stock. The Committee is authorized to grant Deferred Stock subject to the following terms and conditions ("Deferred Stock"): (i) Award and Restrictions. Delivery of Stock will occur upon expiration of the deferral period specified for an Award of Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at 8 earlier specified times, separately or in combination, in installments or otherwise, as the Committee may determine. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Deferred Stock), all Deferred Stock that is at that time subject to such forfeiture conditions shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will be waived in whole or in part in the event of termination resulting from specified causes. (f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company obligations to pay cash under other plans or compensatory arrangements. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents entitling the Participant to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock ("Dividend Equivalents"). Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify. (h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock and factors that may influence the value of Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries ("Other Stock Based Awards"). The Committee shall determine the terms and conditions of such Awards. Stock issued pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may be granted pursuant to this Section 6(h). 9 7. CERTAIN PROVISIONS APPLICABLE TO AWARDS OTHER THAN THOSE GRANTED TO ELIGIBLE NON-EMPLOYEE DIRECTORS. (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Company, any subsidiary or any business entity to be acquired by the Company or a subsidiary, or any other right of a Participant to receive payment from the Company or any subsidiary. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. (b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any ISO or an SAR granted in tandem therewith exceed a period of ten years from the date of its grant (or such shorter period as may be applicable under Section 422 of the Code). (c) Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a subsidiary upon the grant, exercise or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments or on a deferred basis. Such payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments denominated in Stock. (d) Loan Provisions. With the consent of the Committee, and subject at all times to, and only to the extent, if any, permitted under and in accordance with, laws and regulations and other binding obligations or provisions applicable to the Company, the Company may make, guarantee or arrange for a loan or loans to a Participant with respect to the exercise of any Option or other payment in connection with any Award, including the payment by a Participant of any or all federal, state or local income or other taxes due in connection with any Award. Subject to such limitations, the Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms and provisions of any such loan or loans, including the interest rate to be charged in respect of any such loan or loans, whether the loan or loans are to be with or without recourse against the borrower, the terms on which the loan is to be repaid and conditions, if any, under which the loan or loans may be forgiven. (e) Performance-Based Awards. The Committee may, in its discretion, designate any Award the exercisability or settlement of which is subject to the achievement of performance conditions as a performance-based Award subject to this Section 7(e), in order to qualify such Award as "qualified performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder. The performance objectives for an Award subject to this Section 7(e) shall consist of one or more business criteria and a targeted level or levels of performance with respect to such criteria, as specified by the Committee but subject to this 10 Section 7(e). Performance objectives shall be objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of the Code. Business criteria used by the Committee in establishing performance objectives for Awards subject to this Section 7(e) shall be selected exclusively from among the following: (1) Annual return on capital; (2) Annual earnings per share; (3) Annual cash flow provided by operations; (4) Changes in annual revenues; and/or (5) Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals, cost targets, and goals relating to acquisitions or divestitures. The levels of performance required with respect to such business criteria may be expressed in absolute or relative levels. Achievement of performance objectives with respect to such Awards shall be measured over a period of not less than one year nor more than five years, as the Committee may specify. Performance objectives may differ for such Awards to different Participants. The Committee shall specify the weighting to be given to each performance objective for purposes of determining the final amount payable with respect to any such Award. The Committee may, in its discretion, reduce the amount of a payout otherwise to be made in connection with an Award subject to this Section 7(e), but may not exercise discretion to increase such amount, and the Committee may consider other performance criteria in exercising such discretion. All determinations by the Committee as to the achievement of performance objectives shall be in writing. The Committee may not delegate any responsibility with respect to an Award subject to this Section 7(e). (f) Acceleration Upon a Change of Control. Pursuant to the terms of an individual Award Agreement, the Committee, may in its sole discretion, grant Awards which provide for adjustment (as determined by the Committee, in its sole discretion) in the event of a "change of control" (as such term may be defined by the Committee, in its sole discretion). 8. NON-EMPLOYEE DIRECTORS OPTIONS AND DEFERRED SHARES. (a) Eligibility. Each director who is an Eligible Non-Employee Director on any date on which an Option is to be granted under Section 8(b) or on which fees are to be paid which could be received in the form of Stock or deferred in the form of Deferred Shares under Section 8(c), will be granted a nonqualified Option under Section 8(b) or may elect to receive fees in the form of shares of Stock or defer fees in the form of Deferred Shares under Section 8(c). (b) Options. An Option to purchase xx,xxx shares of Stock will be automatically granted, (i) at the commencement of the Initial Public Offering, to each person who is serving as 11 an Eligible Non-Employee Director at that time or who becomes an Eligible Non-Employee Director of the Company at that time, and thereafter (ii) at the effective date of initial election to the Board, to each person so elected or appointed who is eligible under Section 8(a) at that date. In addition, an Option to purchase x,xxx share of stocks, will be automatically granted, at the close of business of each annual meeting of stockholders of the Company, to each director who is an Eligible Non-Employer Director at the close of business of such annual meeting. Notwithstanding the foregoing, any person who was automatically granted an Option to purchase xx,xxx shares of stock at the effective date of initial election or appointment to the Board shall not be automatically granted an Option to purchase x,xxx shares of stock at the first annual meeting of stockholders following such initial election if such annual meeting takes place within three months of the effective date of such person's initial election to the Board. (i) Exercise Price. The exercise price per share of Stock purchasable upon exercise of an Option will be equal to 100% of the Fair Market Value of a share of Stock on the date of grant of the Option. (ii) Option Expiration. Options granted under this Section 8(b) will expire at the earlier of (i) 10 years after the date of grant or (ii) one year after the date the Participant ceases to serve as an Eligible Non-Employee Director of the Company for any reason. (iii) Exercisability. Each Option granted under this Section 8(b) may be exercised commencing immediately upon its grant. (iv) Method of Exercise. A Participant may exercise an Option, in whole or in part, at such time as it is exercisable and prior to its expiration, by giving written notice of exercise to the Secretary of the Company, specifying the Option to be exercised and the number of shares of Stock to be purchased, and paying in full the exercise price in cash (including by check) or by surrender of shares of Stock already owned by the Participant (except for shares of Stock acquired from the Company by exercise of an option less than six months before the date of surrender) having a Fair Market Value at the time of exercise equal to the exercise price, or by a combination of cash and shares of Stock. (c) Receipt of Stock or Deferred Shares in Lieu of Fees. Each Eligible Non-Employee Director of the Company may elect to be paid fees, in his or her capacity as an Eligible Non-Employee Director (including annual retainer fees for service on the Board, fees for service on a Board committee, fees for service as chairman of a Board committee, and any other fees paid to directors) in the form of shares of Stock or Deferred Shares in lieu of cash payment of such fees at the date any such fee is otherwise payable. If so elected, payment of fees in the form of shares of Stock or Deferred Shares shall be made in accordance with this Section 8(c). (i) Elections. Each Eligible Non-Employee Director who elects to be paid fees for a given calendar year in the form of shares of Stock or to defer such payment of fees in the form of Deferred Shares for such year must file an irrevocable written election with the Secretary of the Company no later than December 31 of the year preceding such calendar year; PROVIDED, that any newly elected or appointed Eligible Non-Employee Director may file an election for any year not later than 30 days after the date such person first became an Eligible Non-Employee Director, and an Eligible Non-Employee Director may file an 12 election for the year in which the Plan becomes effective not later than 30 days after the date of effectiveness. An election by an Eligible Non-Employee Director shall be deemed to be continuing and therefore applicable to subsequent Plan years unless the Eligible Non-Employee Director revokes or changes such election by filing a new election form by the due date for such form specified in this Section 8(c)(i). The election must specify the following: (a) a percentage of fees to be received in the form of shares of Stock or deferred in the form of Deferred Shares under the Plan; and (b) in the case of a deferral, the period or periods during which settlement of Deferred Shares will be deferred (subject to such limitations as may be specified by counsel to the Company). (ii) Payment of Fees in the Form of Shares of Stock. At any date on which fees are payable to an Eligible Non-Employee Director who has elected to receive such fees in the form of shares of Stock, the Company will issue to such Eligible Non-Employee Director, or to a designated third party for the account of such Eligible Non-Employee Director, a number of shares of Stock having an aggregate Fair Market Value at that date equal to the fees, or as nearly as possible equal to the fees (but in no event greater than the fees), that would have been payable at such date but for the Eligible Non-Employee Director 's election to receive shares of Stock in lieu thereof. If the shares of Stock are to be credited to an account maintained by the Eligible Non-Employee Director and to the extent reasonably practicable without requiring the actual issuance of fractional shares of Stock, the Company shall cause fractional shares of Stock to be credited to the Eligible Non-Employee Director 's account. If fractional shares of Stock are not so credited, any part of the Eligible Non-Employee Director 's fees not paid in the form of whole shares of Stock will be payable in cash to the Eligible Non-Employee Director (either paid separately or included in a subsequent payment of fees, including a subsequent payment of fees subject to an election under this Section 8(c)). (iii) Deferral of Fees in the Form of Deferred Shares. The Company will establish a deferral account for each Eligible Non-Employee Director who elects to defer fees in the form of Deferred Shares under this Section 8(c). At any date on which fees are payable to an Eligible Non-Employee Director who has elected to defer fees in the form of Deferred Shares, the Company will credit such Eligible Non-Employee Director 's deferral account with a number of Deferred Shares equal to the number of shares of Stock having an aggregate Fair Market Value at that date equal to the fees that otherwise would have been payable at such date but for the Eligible Non-Employee Director 's election to defer receipt of such fees in the form of Deferred Shares. The amount of Deferred Shares so credited shall include fractional shares of Stock calculated to at least three decimal places. (iv) Crediting of Dividend Equivalents. Whenever dividends are paid or distributions made with respect to shares of Stock, an Eligible Non-Employee Director to whom Deferred Shares are then credited in a deferral account shall be entitled to receive, as dividend equivalents, an amount equal in value to the amount of the dividend paid or property distributed on a single share of Stock multiplied by the number of Deferred Shares (including any fractional Deferred Share) credited to his or her deferral account as of the record date for such dividend or distribution. Such dividend equivalents shall be credited to the Eligible Non-Employee Director's 13 deferral account as a number of Deferred Shares determined by dividing the aggregate value of such dividend equivalents by the Fair Market Value of a share of Stock at the payment date of the dividend or distribution. (v) Settlement of Deferred Shares. The Company will settle the Eligible Non-Employee Director 's deferral account by delivering to the Eligible Non-Employee Director (or his or her beneficiary) a number of shares of Stock equal to the number of whole Deferred Shares then credited to his or her deferral account (or a specified portion in the event of any partial settlement), together with cash in lieu of any fractional share of Stock remaining at a time that less than one whole Deferred Share is credited to such deferral account. Such settlement shall be made at the time or times specified in the Eligible Non-Employee Director's election filed in accordance with Section 8(c)(i); provided, however, that a Eligible Non-Employee Director may further defer settlement of Deferred Shares if counsel to the Company determines that such further deferral likely would be effective under applicable federal income tax laws and regulations. (vi) Nonforfeitability. The interest of each Eligible Non-Employee Director in any fees paid in the form of shares of Stock or Deferred Shares (and any deferral account relating thereto) at all times will be nonforfeitable. 9. GENERAL PROVISIONS. (a) Compliance With Laws and Obligations. The Company shall not be obligated to issue or deliver Stock in connection with any Award or take any other action under the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other law, regulation or contractual obligation of the Company until the Company is satisfied that such laws, regulations, and other obligations of the Company have been complied with in full. Certificates representing shares of Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations and other obligations of the Company, including any requirement that a legend or legends be placed thereon. (b) Limitations on Transferability. Awards and other rights under the Plan will not be transferable by a Participant except by will or the laws of descent and distribution or to a Beneficiary in the event of the Participant's death, and, if exercisable, shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of the Award (other than an ISO) to be granted to a Participant to be on terms which permit transfer by such Participant to (i) the spouse, children or grandchildren of such Participant ("Immediate Family Members"), (ii) a trust or trusts for exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, provided that (x) there may be no consideration for any such transfer, (y) the Award agreement pursuant to which such Awards are granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of 14 transferred Awards shall be prohibited except those occurring by laws of descent and distribution. Following transfer, any such Awards shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of the Plan, the term Participant shall be deemed to refer to the transferee. The events of termination of employment set forth in Section 6 hereof shall continue to be applied with respect to the original Participant, following which the options shall be exercisable by the transferee only to the extent and for the periods specified in Section 6. Awards and other rights under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors. (c) No Right to Continued Employment or Service or to Continue as an Eligible Non-Employee Director. Neither the Plan nor any action taken hereunder shall be construed as giving any employee or other person or any Eligible Non-Employee Director the right to be retained in the employ or service of the Company or any of its subsidiaries or as an Eligible Non-Employee Director, nor shall it interfere in any way with the right of the Company or any of its subsidiaries to terminate any employee's employment or other person's service at any time. (d) Taxes. The Company and any subsidiary is authorized to withhold from any Award granted or to be settled, any delivery of Stock in connection with an Award, any other payment relating to an Award or any payroll or other payment to a Participant amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations. (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of stockholders or Participants, except that any such action shall be subject to the approval of the Company's stockholders at or before the next annual meeting of stockholders for which the record date is after such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any Award theretofore granted to him. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement relating thereto; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under such Award. (f) No Rights to Awards; No Stockholder Rights. No Participant or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants and employees (other than as set forth herein with respect 15 to Eligible Non-Employee Directors). No Award shall confer on any Participant any of the rights of a stockholder of the Company unless and until Stock is duly issued or transferred and delivered to the Participant in accordance with the terms of the Award or, in the case of an Option, the Option is duly exercised. (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Stock, other Awards, or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensatory arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. (i) No fractional shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) Compliance with Code Section 162(m). It is the intent of the Company that employee Options, SARs and other Awards designated as Awards subject to Section 7(e) shall constitute "qualified performance-based compensation" within the meaning of Code Section 162(m). Accordingly, if any provision of the Plan or any Award Agreement relating to such an Award does not comply or is inconsistent with the requirements of Code Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the performance objectives. (k) Governing Law. The validity, construction and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of [Delaware], without giving effect to principles of conflicts of laws, and applicable federal law. (l) Effective Date; Plan Termination. The Plan shall become effective as of the date of its adoption by the Board, subject to stockholder approval prior to the commencement of the Initial Public Offering, and shall continue in effect until terminated by the Board. EX-10.6 20 EXHIBIT 10.6 EMPLOYMENT AGREEMENT (Luis Alonso) This Employment Agreement (the "Agreement"), by and among (i) Vacation Properties International, Inc., a Delaware corporation ("VPI"), (ii) Collection of Fine Properties, Inc., a Colorado corporation and a wholly-owned subsidiary of VPI (the "Company") and (iii) Luis Alonso ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management and rental services and hotel management services. B. Employee has served as the President of the Company and of Ten Mile Holdings, Ltd., a Colorado corporation and wholly-owned subsidiary of VPI ("Ten Mile"), as an employee at will, prior to the date hereof. C. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby extends an agreement to employ and hereby employs Employee as President of the Company and as President of Ten Mile, for the fixed term set forth in Section 5 hereof, subject to the terms hereof. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President of such companies and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) and paragraph 3 hereof, agrees to devote Employee's working time, attention, and efforts to promote and further the business of the Company, in a manner consistent with past practice. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments or participating in other activities in a manner consistent with past practices (provided such practices comply with paragraph 3 hereof), in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $48,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of six (6) months immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: 2 (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management or rental business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management or rental business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management or rental services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management or rental business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit (A) Employee from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter; (B) Employee, if and to the extent he as of the date hereof owns and operates certain businesses (other than the businesses of the Company or VPI) engaged in, without limitation, development of condominium and other property, ownership of real property, ownership of hospitality facilities, real estate brokerage, ownership of rental properties and general contractor construction, from continuing to own and operate such businesses; or (C) Employee, if and to the extent he or she manages properties outside of Summit County, Colorado, owned and controlled by Employee from continuing to manage such properties. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, 3 Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new location(s) and from directly competing within 100 miles of such new location(s) through the term of the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of paragraph 3(a), and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3 4. PLACE OF PERFORMANCE. Employee shall not be required to relocate as a condition for continued employment hereunder. 4 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for eighteen (18) months, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial eighteen month period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall not receive any severance compensation under Section 5(d) hereof or otherwise. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for "good cause", which shall be defined as: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder, and Employee's failure to cure within such ten (10) day period; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall not receive any severance compensation under Section 5(d) hereof or otherwise. (d) Without Good Cause. Employee may only be terminated without "good cause" (as defined in paragraph 5(c) above) by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to 5 continue to receive from the Company, as severance compensation, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever period is longer. Should Employee be terminated by the Company without good cause at any time during the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not be valid or enforceable. (e) By Employee. (i) At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. (ii) If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall be valid or enforceable if Employee's resignation or termination occurs pursuant to this paragraph 5(e)(ii). (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined in Section 12(e) hereof) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms; except that the Employee's obligations under paragraph 3 shall not survive, as otherwise provided for herein, in the event of termination (i) by the Company without good cause pursuant to paragraph 5(d) hereof, provided Employee waives any right to severance compensation in accordance with the terms of such paragraph 5(d); (ii) by Employee for good reason pursuant to paragraph 5(e)(ii) hereof; or (iii) on a change in control pursuant to paragraphs 5(f) and 12 hereof, provided Employee waives any right to severance compensation in accordance with the terms of paragraph 12(c) hereof. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their 6 discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not 7 limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without good cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of six (6) months from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. 8 (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). 9 (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Employee: Luis Alonso c/o Collection of Fine Properties, Inc. 319 North Main Street Breckenridge, Colorado 80424 Marked: "Personal and Confidential" Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 10 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Colorado. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Collection of Fine Properties, Inc. Ten Mile Holdings, Ltd. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Vacation Properties International, Inc., a Delaware corporation By: --------------------------------- Name: ------------------------------- Title: ------------------------------ /s/ Luis Alonso ------------------------------------ Luis Alonso, Individually EX-10.7 21 EXHIBIT 10.7 EMPLOYMENT AGREEMENT (Douglas R. Brindley) This Employment Agreement (the "Agreement"), by and among (i) Vacation Properties International, Inc., a Delaware corporation ("VPI"), (ii) Brindley & Brindley Realty & Development, Inc., and B&B On the Beach, Inc., each a North Carolina corporation and a wholly-owned subsidiary of VPI (collectively, the "Company"), and (iii) Douglas R. Brindley ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management, rental and sales services and hotel management services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as President of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $84,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, within 100 miles of the locations in which the Company or VPI or 2 any of the Company's or VPI's subsidiaries conducts any noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof), within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) from the date hereof through the Noncompetition Period. 3 It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 4 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one 5 (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VP or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 6 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 7 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given 8 sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. 9 (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Employee: Douglas S. Brindley 102 Old Duck Road Duck, North Carolina 27949 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 10 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Tennessee. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Brindley & Brindley Realty and Development, Inc. B&B On the Beach, Inc. By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ Vacation Properties International, Inc., a Delaware corporation By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ /s/ Douglas R. Brindley ------------------------------- Douglas R. Brindley, Individually 12 EX-10.8 22 EXHIBIT 10.8 EMPLOYMENT AGREEMENT (Paul T. Dobson) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), Maui Condominium & Home Realty, Inc., a Hawaii corporation and a wholly-owned subsidiary of VPI (the "Company"), and Paul T. Dobson ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management and rental services and hotel management services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as Vice President and Secretary of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Vice President and Secretary of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $50,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management or rental business or hotel management business in direct competition with the Company or VPI or any subsidiary of either 2 the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management or rental business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management or rental services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management or rental business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) 3 establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation 4 with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a 5 termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 7 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 8 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction 9 which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan 10 To Employee: Paul T. Dobson c/o Maui Condominium & Home Realty, Inc. 2511 South Kihei Road P.O. Box 1840 Kihei, Hawaii 96753 Marked: "Personal and Confidential" Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Tennessee. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Maui Condominium & Home Realty, Inc. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- /s/ Paul T. Dobson ------------------------------- Paul T. Dobson, Individually 12 EX-10.9 23 EXHIBIT 10.9 EMPLOYMENT AGREEMENT (Sharon Benson Doucette) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), The Maury People, Inc., a Massachusetts corporation and a wholly-owned subsidiary of VPI (the "Company"), and Sharon Benson Doucette ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property rental and sales services. B. Employee has served as the President of the Company, as an employee at will, prior to the date hereof. C. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby extends an agreement to employ and hereby employs Employee as President of the Company for the fixed term as set forth in Section 5 hereof and subject to the terms hereof. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President of the Company, consistent with past practice of Employee, and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company, consistent with past practice of Employee. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $75,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. In addition, for any sales of properties during the Term for which Employee personally acts as listing and/or selling real estate broker, as applicable, Employee shall receive a commission equal to 60% of the portion of the gross commission due to the Company for which she is personally responsible on such sales of property for which Employee personally acted as listing and/or selling real estate broker, as applicable, during any year within the Term, until such gross commissions retained by the Company total $75,000 in any such year; thereafter Employee shall receive a commission equal to 65% of the portion of such gross commissions retained by the Company for which she is personally responsible, until such gross commissions retained by the Company total $100,000 in any such year; and thereafter Employee, shall receive a commission equal to 70% of the portion of such gross commission retained by the Company for which she is personally responsible in any such year. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) An amount of vacation time consistent with past practice of Employee, provided, however, that any such vacation, paid or unpaid, shall be consistent with adequate performance of all duties and obligations of Employee, including as set forth in Section 1 and Section 5(c) hereof, and provided further, that in the event Employee's vacation time or any vacation by Employee causes or contributes to failure by Employee to adequately perform such duties, it shall constitute "Good Cause" for termination pursuant to Section 5(c). 2 (iv) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, (A) within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries (except the Company as long as the Company is located on Nantucket Island) conducts a noncommercial property management, rental or sales business or hotel management business or (B) within the geographic boundary of Nantucket Island as long as the Company is located on Nantucket Island (the geographic areas set forth in the foregoing clauses (A) and (B) are collectively herein referred to as the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. 3 Notwithstanding anything in this Section 3 to the contrary, the foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter, or (B) engaging in business as a real estate broker other than as an employee of the Company while employed by the Company, in any location other than Nantucket Island after termination of Employee's employment with the Company. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by 5 the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1), (2) or (4), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. 6 Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' 7 fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount 8 calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); 9 (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan 10 To Employee: Sharon Benson Doucette c/o The Maury People, Inc. 35 Main Street Nantucket Island, MA 02554 Marked: "Personal and Confidential Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the Commonwealth of Massachusetts. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. The Maury People, Inc. By: ------------------------------------------------ Name: ----------------------------------------------- Title: --------------------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------------------ Name: --------------------------------------------- Title: --------------------------------------------- /s/ Sharon Benson Doucette -------------------------------------------------- Sharon Benson Doucette, Individually EX-10.10 24 EXHIBIT 10.10 EMPLOYMENT AGREEMENT (Evan H. Gull) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), First Resort Software, Inc., a Colorado corporation and a wholly-owned subsidiary of VPI (the "Company"), and Evan H. Gull ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management, rental and sales services and hotel management services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as Vice President of Development of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Vice President of Development of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $50,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of 2 either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) 3 establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation 4 with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a 5 termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 7 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; 8 however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities 9 of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan 10 To Employee: Evan H. Gull c/o First Resort Software, Inc. 300A Aspen Airport Business Center Aspen, Colorado 81611 Marked: "Personal and Confidential" Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Tennessee. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. First Resort Software, Inc. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- /s/ Evan H. Gull ---------------------------------------- Evan H. Gull, Individually 12 EX-10.11 25 EXHIBIT 10.11 EMPLOYMENT AGREEMENT (Heidi O'Leary Houston) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), Houston and O'Leary Company, a Colorado corporation and a wholly-owned subsidiary of VPI (the "Company"), and Heidi O'Leary Houston ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management, rental and sales services and hotel management services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as President of the Company to perform the duties described herein at the Company's offices in Aspen, Colorado. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments or engaging in community affairs in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $150,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. Such base salary shall not be decreased during the Term hereof or prior to any termination pursuant to the terms of Section 5 hereof. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the performance and other criteria under which Employee and other officers and key employees of the Company will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred under the circumstances by Employee in the performance of Employee's services pursuant to this Agreement and consistent with past practice. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) Six weeks' paid vacation time, provided, however, that any such vacation, paid or unpaid, shall be consistent with adequate performance of all duties and obligations of Employee, including as set forth in paragraph 1 hereof, and provided further, that nothing contained in this paragraph 2(c)(iii) shall be construed as a limitation of any rights of termination for good cause pursuant to and in accordance with paragraph 5(c)(2) hereof. (iv) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time (e.g., any pension or profit sharing plans if and to the extent adopted by the Company, if Employee meets all eligibility requirements thereof and consistent with the terms thereof). 2 (v) The Company shall provide the Employee with a new automobile selected by the Employee to be leased by the Company and replaced by a new automobile selected by Employee every two years and the Company shall pay all expenses associated with such automobiles (e.g., gas, parking, repair costs, licensing and insurance), in an amount as budgeted and consistent with past practices, up to a maximum total payment of $15,000 per year for all such payments and expenses. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. 3 Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter (B) engaging in noncommercial property management, rental or sales business or hotel management business only with respect to her primary personal residence or any real property in which she has a noncontrolling interest such that she is unable to direct management, retail or sales business or hotel management business relating to such real property to the Company or VPI or (C) directly or indirectly (e.g., personally or through a partnership or limited liability company) investing in any real property or, in the event that Employee is no longer employed by the Company, from acting as a real estate broker in any location other than Aspen, Colorado and the 25-mile area around Aspen, Colorado, or with respect to any real property in which Employee has invested. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) Provided that the Company and VPI have complied with and performed all obligations hereunder in all material respects, all of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether 4 predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. If Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided that a doctor selected by the Company and reasonably acceptable to Employee certifies that Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, in addition to any rights under Section 5(e) below, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be limited to: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful 5 dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination first must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is first approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company within ten (10) calendar days of the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as (i) the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or (ii) any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated by Employee for good reason as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the Term or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation to defend the Company and Employee, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 7 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to reasonable attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform all of the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be 8 double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the 9 transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMMISSIONS. The parties agree that Employee has in the past, and may in the future, directly or indirectly (e.g., personally or through a partnership, corporation, limited liability company or otherwise, such entity being referred to as an "Employee Entity") invest in real property. The parties further agree that (1) the Company shall, upon request, on not more than two occasions in any calendar year (or more frequently with the express written consent of VPI, which consent shall not be unreasonably withheld by VPI after its consideration of all the facts and circumstances of each case with respect to which such consent is sought, including the past practice of the Employee and the Company, the frequency of such requests and the impact on the Company and VPI of granting or not granting such consent) waive any rights to any brokerage commission to which the Company would otherwise be entitled in connection with such purchase (an "Employee Entity Purchase") and (2) Employee shall be permitted to use such waiver of such commission by the Company in order to receive (personally, and not as an employee of the Company) an interest in any real property acquired pursuant to an Employee Entity Purchase; provided that (a) all cash or other consideration received or to be received by Employee as a result of any such waiver of such commission by the Company shall not be retained by Employee and must be fully invested by Employee in such real property or Employee Entity in connection with the subsequent sale of any Employee Entity Property and (c) Employee shall be responsible for any taxes (income or otherwise) payable by the Employee or the Company that arise in connection with the waiver of a commission with respect to which the Employee receives a personal benefit as described herein. 14. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 15. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Employee: Heidi O'Leary Houston c/o Houston and O'Leary Company 620 East Hyman Avenue Aspen, Colorado 81611 Marked: "Personal and Confidential" 10 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 15. 16. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held by a court or other authority of competent jurisdiction to be invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 17. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Aspen, Colorado in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 18 GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Colorado. 19. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Houston and O'Leary Company By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- /s/ Heidi O'Leary Houston ---------------------------------------- Heidi O'Leary Houston, Individually 12 EX-10.12 26 EXHIBIT 10.12 EMPLOYMENT AGREEMENT (Daniel L. Meehan) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), Resort Property Management, Inc., a Utah corporation and a wholly-owned subsidiary of VPI (the "Company"), and Daniel L. Meehan ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management and rental services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as President of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) If, at any time during the Term (as defined) hereof, the General Manager of the Company ceases to perform his or her duties as General Manager for any reason, then Employee shall become the General Manager of the Company and assume all the obligations, responsibilities and duties, and receive the compensation and benefits of such previous General Manager for the remaining period of such previous General Manager's term of employment. (c) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (d) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $0 (zero) per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly, so long as Employee is acting as President; provided, however, that if and when Employee becomes the General Manager of the Company pursuant to Section 1(b) hereof, then Employee shall receive the compensation and benefits of such previous General Manager for the period of assumption. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, 2 for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (B) engaging in the hotel management business in any location other than in Park City, Utah, and the 25-mile area around Park City, Utah. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. 3 (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other 4 purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful 5 dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 7 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be 8 double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the 9 transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Employee: Daniel L. Meehan c/o Resort Property Management, Inc. 750 Kearns Boulevard P.O. Box 3808 Park City, Utah 84060 Marked: "Personal and Confidential" 10 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Tennessee. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Resort Property Management, Inc. By: ----------------------------------------------------- Name: --------------------------------------------------- Title: -------------------------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ----------------------------------------------------- Name: --------------------------------------------------- Title: -------------------------------------------------- /s/ Daniel L. Meehan ------------------------------------------------------- Daniel L. Meehan, Individually EX-10.13 27 EXHIBIT 10.13 MANAGEMENT SERVICES AGREEMENT This Management Services Agreement (the "Agreement"), by and among (i) Vacation Properties International, Inc., a Delaware corporation ("VPI"), (ii) Whistler Chalets Limited (the "Company"), a British Columbia corporation and a wholly-owned subsidiary of Whistler Chalet Holding Corp. ("Whistler Holding"), a Canadian corporation and a subsidiary of VPI, (iii) Whistler Blackcomb Central Reservations, Inc., a British Columbia corporation (the "Management Company"), and (iv) J. Patrick McCurdy (or such other person as shall be appointed to such position by Management Company, if acceptable to and consented to in writing by the Company, "Manager"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing residential property management, rental and sales services and hotel management services. B. Management Company is retained hereunder by the Company in a confidential relationship wherein Management Company and Manager, in the course of providing management services to the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. MANAGEMEMENT SERVICES AND DUTIES. (a) The Company hereby retains Management Company to provide Manager to perform the services and duties of a President of the Company. As such, Manager shall have responsibilities, duties and authority reasonably accorded to and expected of a President of the Company and will report directly to the Board of Directors of the Company (the "Board"). Management Company and Manager hereby accept such obligations upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, Manager agrees to devote Manager's full working time, attention, and efforts to promote and further the business of the Company. (b) Manager shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Neither Management Company nor Manager shall, during the term of their respective provision of services hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with their duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Manager from making personal investments in such form or manner as will neither require Manager's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. FEES. For all services rendered by Management Company and Manager, the Company shall compensate Management Company as follows: (a) Base Management Fee. The base management fee to Management Company shall be Canadian $60,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Management Company will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Management Company shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Company shall reimburse Management Company for payment of all premiums for coverage for Manager under health, hospitalization, disability, dental, life and other insurance plans, such benefits provided indirectly to Manager under this clause shall be at least equal to such benefits provided to VPI executives. (ii) Reimbursement to Management Company for all necessary and customary business travel and other out-of-pocket expenses reasonably incurred by Management Company and/or Manager in the performance of Management Company and Manager's services pursuant to this Agreement, plus additional reimbursements to Management Company of up to Canadian $15,000 of expenses incurred by Manager at his discretion. All reimbursable expenses shall be appropriately documented in reasonable detail by Management Company and/or Manager, as the case may be, upon submission of any request for reimbursement, and in a format, time and manner consistent with the Company's expense reporting policy. (iii) The Company shall reimburse Management Company for the provision of such executive perquisites as may be available to or deemed appropriate for Manager by the Board. 2 3. NON-COMPETITION. (a) Neither Management Company nor Manager shall, during the period of their performance of services with the Company, and for a period of two (2) years immediately following the termination of (x) in the case of Management Company, Management Company's services or (y) in the case of any Manager, such Manager's services under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any residential property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any residential property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Manager shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing residential property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Management Company's or Manager's own behalf or on behalf of any competitor in the residential property management, rental or sales business or hotel management business, which candidate, to Manager's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Manager's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Management Company or Manager from acquiring as an investment not more than two percent (2%) of the capital 3 stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Management Company and Manager each agree that the foregoing covenant may be enforced by VPI or the Company in the event of breach by either of them, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Management Company and Manager in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI, Management Company and Manager that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Management Company and Manager will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Management Company or Manager, as the case may be, shall cease to be retained hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Management Company's or Manager's obligations, as the case may be, under this paragraph 3, if any, Management Company or Manager, as the case may be, shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Management Company and/or Manager against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Management Company and Manager made in this paragraph 3 4 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Management Company or Manager, as the case may be, is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. Manager shall not be required to relocate for performance of services hereunder. 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Management Company's services may be terminated in any one of the following ways: (a) Death. The death of Manager shall immediately terminate this Agreement with no severance compensation due to Manager's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Manager shall have been absent from Manager's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Management Company's obligations hereunder provided Manager is unable to resume Manager's full-time duties at the conclusion of such thirty (30) day notice period. Also, Management Company may terminate Management Company's and Manager's obligations hereunder if Manager's health should become impaired to an extent that makes the continued performance of Manager's duties hereunder hazardous to Manager's physical or mental health or life, provided that Management Company shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Manager shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Manager or Manager's doctor and such doctor shall have concurred in the conclusion of Manager's doctor. In the event this Agreement is terminated as a result of Manager's disability, neither Management Company nor Manager shall have any right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Management Company for good cause, which shall be: (1) Management Company's or Manager's willful, material, and irreparable breach of this Agreement; (2) Management Company's or Manager's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Management Company's or Manager's material duties and responsibilities hereunder; (3) Management Company's or Manager's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Management Company's or Manager's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol 5 abuse or illegal drug use by Manager, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, neither Management Company nor Manager shall have any right to any severance compensation. (d) Without Good Cause. Management Company and Manager may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Management Company and Manager be terminated by the Company without good cause during the Term, Management Company shall be entitled to continue to receive from the Company the base management fee at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Management Company and Manager be terminated by the Company without good cause at any time during or after the Term, Management Company shall be entitled to waive Management Company's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Management Company. At any time after the commencement of services, Management Company may, without "good reason" (as defined below), terminate this Agreement and Management Company's and Manager's obligations without good reason, effective thirty (30) days after written notice is provided to the Company. If Management Company resigns or otherwise terminates Management Company's and Manager's obligations without good reason, Management Company shall receive no severance compensation. If Management Company's termination is for good reason (defined as the Company's failure to pay Management Company on a timely basis the amounts to which it is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Management Company may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Management Company and Manager to enforce their rights hereunder in addition to any severance compensation to which Management Company may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI, the Company, Management Company or Whistler Holding. In the event of a "Change in Control" (as defined below) of VPI, the Company, Management Company or Whistler Holding during the Term, refer to paragraphs 12 & 13 below. (g) No Severance Compensation Directly to Manager. Severance compensation, if any, is to be paid only to Management Company, and Manager shall have no right to receive any severance compensation in any event. Upon termination of this Agreement for any reason provided above, Management Company shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and 6 payable to Management Company only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, Management Company and Manager under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Management Company's and Manager's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Management Company and/or Manager by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Management Company and/or Manager shall be delivered promptly to the Company without request by it upon termination of Management Company's and Manager's services hereunder. 7. INVENTIONS. Management Company and/or Manager shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Management Company and/or Manager, solely or jointly with another, during the Term or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Management Company and/or Manager conceives as a result of Manager's relationship with the Company. Management Company and Manager hereby assign and agree to assign all of Management Company's and/or Manager's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Management Company and/or Manager, as the case may be, shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Management Company and Manager agree that they will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Management Company or Manager is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than 7 an action by the Company or VPI against Management Company or Manager), by reason of the fact that Management Company or Manager is or was performing services under this Agreement, then the Company shall indemnify Management Company or Manager, as the case may be, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Management Company or Manager in connection therewith. In the event that Management Company or Manager and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Management Company and/or Manager, as the case may be, agree(s) to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Management Company or Manager, Management Company or Manager may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Management Company and Manager hereby represent and warrant to the Company that the execution of this Agreement by Management Company and Manager and their being retained by the Company and the performance of their duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Management Company and Manager each agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Management Company or Manager and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Management Company and Manager each understands that they have been selected for provision of management services by the Company on the basis of Manager's personal qualifications, experience and skills. Neither Management Company nor Manager, therefore, shall assign all or any portion of their performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL OF COMPANY AND/OR VPI. (a) Unless Management Company and/or Manager elect to terminate this Agreement pursuant to (c) below, Management Company and/or Manager understand and acknowledge that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Management Company and/or Manager have not received written notice at least five (5) business days 8 prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Manager shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Management Company and/or Manager may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Manager shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Manager shall have the right to waive Manager's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Manager must be paid in full by the Company at or prior to such closing. Further, Manager will be given sufficient time and opportunity to elect whether to exercise all or any of Manager's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Manager may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Manager so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public 9 offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Management Company and Manager must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. 13. CHANGE IN CONTROL OF MANAGEMENT COMPANY AND/OR WHISTLER HOLDING. In any Management Company Change in Control situation, Company may elect to terminate this Agreement by providing written notice to the Management Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(c) will apply as though the Management Company had terminated the Agreement with good cause during the Term. (a) A "Management Company Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than Whistler Holding or an employee benefit plan of Whistler Holding, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Management Company or Whistler Holding and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Management Company or Whistler Holding; 10 (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of Management Company or Whistler Holding: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of Management Company or Whistler Holding (the "Original Whistler Directors"); (B) the individuals who thereafter are elected to the Board of Directors of Management Company or Whistler Holding and whose election, or nomination for election, to the Board of Directors of Management Company or Whistler Holding was approved by a vote of at least two-thirds (2/3) of the Original Whistler Directors then still in office (such directors becoming "Additional Original Whistler Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of Management Company or Whistler Holding and whose election, or nomination for election, to the Board of Directors of Management Company or Whistler Holding was approved by a vote of at least two-thirds (2/3) of the Original Whistler Directors and Additional Original Whistler Directors then still in office (such directors also becoming "Additional Original Whistler Directors" immediately following their election); (iii) the stockholders of Management Company or Whistler Holding shall approve a merger, consolidation, recapitalization or reorganization of Management Company Whistler Holding, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of Management Company or Whistler Holding immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of Management Company or Whistler Holding shall approve a plan of complete liquidation of Management Company or Whistler Holding or an agreement for the sale or disposition by Management Company or Whistler Holding of all or a substantial portion of Management Company's or Whistler Holding's assets (i.e., 50% or more of the total assets of Management Company or Whistler Holding). (b) Company must be notified in writing by the Management Company at any time that the Management Company anticipates that a Management Company Change in Control may take place. 14. COMPLETE AGREEMENT. This Agreement is not a promise to retain future services. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI, Management Company and Manager, and neither Management Company nor Manager has any oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company, Management Company and Manager and of all the terms of this 11 Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company, Management Company and Manager, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 15. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Management Company and/or Manager: J. Patrick McCurdy c/o Whistler Chalets Limited Suite 216 4368 Main Street Whistler, British Columbia Canada V0N 1B4 Marked: "Personal and Confidential" Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 15. 16. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 12 17. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Management Company and/or Manager, as the case may be, was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 18. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the province of British Columbia. 19. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 13 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Whistler Chalets Limited By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- Whistler Blackcomb Central Reservations, Inc. By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- /s/ J. Patrick McCurdy ---------------------------------------------------- J. Patrick McCurdy, Individually 14 EX-10.14 28 EXHIBIT 10.14 EMPLOYMENT AGREEMENT (Andre S. Tatibouet) This Employment Agreement (the "Agreement"), by and among Vacation Properties International, Inc., a Delaware corporation ("VPI"), Hotel Corporation of the Pacific, Inc. a Hawaii corporation and a wholly-owned subsidiary of VPI (the "Company"), and Andre S. Tatibouet ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S --------------- A. As of the date of this Agreement, the Company is engaged primarily in the business of providing condominium property management and hotel management services. B. Employee has served as the Chief Executive Officer of the Company, as an employee at will, since its inception. C. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S ------------------- In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby extends an agreement to employ Employee as Chief Executive Officer of the Company for the fixed term set forth in Section 5 hereof, subject to the terms hereof. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Chief Executive Officer of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's working time, attention, and efforts to promote and further the business of the Company, consistent with the past practice of Employee. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee may, during the term of his or her employment hereunder, engage in other business activities pursued for gain, profit or other pecuniary advantage, provided that any such activity does not interfere with Employee's duties and responsibilities hereunder and that any such activity is also permitted under Section 3 hereof. The foregoing limitations shall not be construed as prohibiting Employee from making investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $120,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: 2 (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any condominium property management business in the United States or hotel management business in the State of Hawaii (with respect to condominium property management business in the United States or with respect to hotel management business in the State of Hawaii, as applicable, the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing condominium property management services, or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, with respect to business in the Territory, in the condominium property management or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter, (B) engaging in any business, other than the business of the Company or VPI, currently owned by Employee, including without limitation the business of AST International, L.L.C. or Northwest Lodging, Inc., (C) engaging in the hotel management business outside the State of Hawaii, or (D) engaging in licensing or franchising activities through AST Brands, LLC or any other business entity, including licensing of the name "Aston Hotels & Resorts," provided that such licensing or franchising activities do not contravene the provisions of Section 10.8 of that certain Agreement and Plan of Organization, dated as of March 11, 1998, by and among VPI, the Company, Employee and the other parties thereto. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, 3 Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) The parties agree that Employee's residence shall be in Honolulu, Hawaii. Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable 4 relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten 5 (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and 6 Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services for the Company as an officer, director or employee of the Company, then the Company shall indemnify Employee against all expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest 7 that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of 8 the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction 9 if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan 10 To Employee: Andre S. Tatibouet c/o Hotel Corporation of the Pacific, Inc. ANA Kalakaua Center 2155 Kalakaua Avenue Suite 500 Honolulu, Hawaii 96815 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Honolulu, Hawaii, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Hawaii. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Hotel Corporation of the Pacific, Inc. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- /s/ Andre S. Tatibouet ------------------------------- Andre S. Tatibouet, Individually EX-10.15 29 EXHIBIT 10.15 EMPLOYMENT AGREEMENT (Hans F. Trupp) This Employment Agreement (the "Agreement"), by and among (i) Vacation Properties International, Inc., a Delaware corporation ("VPI"), (ii) Trupp Hodnett Enterprises, Inc. and THE Management Company, each a Georgia corporation and a wholly-owned subsidiary of VPI (collectively, the "Company"), and (iii) Hans F. Trupp ("Employee"), is hereby entered into as of this [___] day of [________], 1998, and shall be effective as of the date of the consummation of the initial public offering of the common stock of VPI. R E C I T A L S A. As of the date of this Agreement, the Company is engaged primarily in the business of providing noncommercial property management, rental and sales services and hotel management services. B. Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to the Company's and VPI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and VPI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and VPI; this information is a trade secret and constitutes the valuable good will of the Company and VPI. A G R E E M E N T S In consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, the parties hereto hereby agree as follows: 1. EMPLOYMENT AND DUTIES. (a) The Company hereby employs Employee as Chairman of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Chairman of the Company and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working time, attention, and efforts to promote and further the business of the Company. (b) Employee shall faithfully adhere to, execute and fulfill all policies established by the Company. (c) Employee shall not, during the term of his or her employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage if such activity interferes with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require Employee's services in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof. 2. COMPENSATION. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary. The base salary payable to Employee shall be $120,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less frequently than monthly. Employee hereby waives any commissions as a real estate agent or broker that Employee may be entitled to receive during the Term. (b) Incentive Bonus Plan. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan (which may be VPI's Incentive Bonus Plan) setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. (c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee under health, hospitalization, disability, dental, life and other insurance plans that the Company or VPI may have in effect from time to time, benefits provided to Employee under this clause (i) to be at least equal to such benefits provided to VPI executives. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of Employee's services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide or VPI-wide employee benefits as available from time to time. 3. NON-COMPETITION. (a) Employee shall not, during the period of Employee's employment with the Company, and for a period of two (2) years immediately following the termination of Employee's employment under this Agreement (the "Noncompetition Period"), for any reason whatsoever, directly or indirectly, for himself or herself or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (i) engage, as an officer, director, shareholder, owner, partner, joint venturer or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any noncommercial property management, rental or sales business or hotel management business in direct competition with the Company or VPI or any subsidiary of 2 either the Company or VPI, within 100 miles of the locations in which the Company or VPI or any of the Company's or VPI's subsidiaries conducts any noncommercial property management, rental or sales business or hotel management business (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of the Company or VPI (including the respective subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or VPI (including the respective subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his or her immediate family; (iii) call upon any person or entity which is at that time, or which has been, within one (1) year prior to that time, a customer of the Company or VPI (including the respective subsidiaries thereof) within the Territory for the purpose of providing noncommercial property management, rental or sales services or hotel management services to property owners and/or renters in direct competition with the Company or VPI or any subsidiary of the Company or VPI within the Territory; or (iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor in the noncommercial property management, rental or sales business or hotel management business, which candidate, to Employee's actual knowledge after due inquiry, was called upon by the Company or VPI (including the respective subsidiaries thereof) or for which, to Employee's actual knowledge after due inquiry, the Company or VPI (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity, unless the Company or VPI (or any subsidiary thereof) has expressly declined to pursue such acquisition candidate or at least one (1) year has elapsed since the Company or VPI (or any subsidiary thereof) has taken any action with respect to pursuing such acquisition candidate. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring as an investment not more than two percent (2%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter or (B) owning noncommercial property if such property is managed by the Company. (b) Because of the difficulty of measuring economic losses to the Company and VPI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company and VPI for which they would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by VPI or the Company in the event of breach by him or her, by injunctions and restraining orders. (c) It is agreed by the parties hereto that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company or VPI (including VPI's other subsidiaries) on the date of the execution of this Agreement and the current plans of the Company or VPI (including VPI's other subsidiaries); but it is also the intent of the Company, VPI and Employee that such covenants be construed and enforced in accordance with the changing locations of the Company and VPI (including VPI's other subsidiaries) throughout the Noncompetition Period. For example, if, during the Noncompetition Period, the Company or VPI (including VPI's other subsidiaries) establishes new locations for its current activities or business in addition to the locations currently 3 established therefor, then Employee will be precluded from soliciting customers or employees from such new locations and from directly competing within 100 miles of such new locations through the Noncompetition Period. It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company or VPI (including VPI's other subsidiaries), or similar activities, or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. (d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company or VPI (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by VPI or the Company of such covenants. It is specifically agreed that the Noncompetition Period, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which a court of competent jurisdiction or other arbitrator or mediator has determined that Employee is in violation of any provision of this paragraph 3. 4. PLACE OF PERFORMANCE. (a) Employee understands that he or she may be requested by the Board or VPI to relocate from Employee's present residence to another geographic location in order to more efficiently carry out Employee's duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay all reasonable relocation costs to move Employee, Employee's immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, reasonable expenses related to pre-move visits to search for a new residence, investigate schools or for other purposes; reasonable temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur if any unreimbursed relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use Employee's best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and Employee's family. 4 (b) Notwithstanding the above, if Employee is requested by the Board or VPI to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c). 5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall begin on the date hereof and continue for three (3) years, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions contained herein in effect as of the time of renewal (such initial three year period and any extensions thereof being referred to herein as the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate this Agreement with no severance compensation due to Employee's estate. (b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from Employee's full-time duties hereunder for one hundred twenty (120) consecutive days, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such one hundred twenty (120) day period, but which shall not be effective earlier than the last day of such one hundred twenty (120) day period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume Employee's full-time duties at the conclusion of such thirty (30) day notice period. Also, Employee may terminate Employee's employment hereunder if his or her health should become impaired to an extent that makes the continued performance of Employee's duties hereunder hazardous to Employee's physical or mental health or life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall have no right to any severance compensation. (c) Good Cause. The Company may terminate the Agreement ten (10) days after delivery of written notice to Employee for good cause, which shall be: (1) Employee's willful, material, and irreparable breach of this Agreement; (2) Employee's failure to adequately perform, continuing for ten (10) days after receipt of written notice stating the alleged failure with reasonable specificity and the need to cure, any of Employee's material duties and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or misconduct which adversely affects the operations or reputation of the Company or VPI; (4) Employee's conviction in a court of competent jurisdiction of a felony or any misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by Employee, provided that in the case of any termination pursuant to clauses (1) or (2), such termination must be approved by at least two-thirds of the members of the Board of Directors of VPI. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. 5 (d) Without Good Cause. Employee may only be terminated without good cause by the Company during the Term hereof if such termination is approved by at least two-thirds of the members of the Board of Directors of VPI. Should Employee be terminated by the Company without good cause during the Term, Employee shall be entitled to continue to receive from the Company the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever period is longer. Any termination without good cause by the Company shall operate to shorten the Noncompetition Period to one (1) year immediately following the date of such termination. Further, should Employee be terminated by the Company without good cause at any time during or after the Term, Employee shall be entitled to waive Employee's right to receive severance compensation (by a written waiver delivered to the Company on the effective date of termination), and, in such case, the non-competition provisions of paragraph 3 shall not apply. (e) By Employee. At any time after the commencement of employment, Employee may, without "good reason" (as defined below), terminate this Agreement and Employee's employment without good reason, effective thirty (30) days after written notice is provided to the Company. If Employee resigns or otherwise terminates Employee's employment without good reason, Employee shall receive no severance compensation. If Employee's resignation or other termination by Employee is for good reason (defined as the Company's failure to pay Employee on a timely basis the amounts to which he or she is entitled under this Agreement or as a result of any other material breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below), the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder in addition to any severance compensation to which Employee may be entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall apply in the event this Agreement is terminated as a result of such a breach by the Company. (f) Change in Control of VPI or the Company. In the event of a "Change in Control" (as defined below) of VPI or the Company during the Term, refer to paragraph 12 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 12 hereof. All other rights and obligations of VPI, the Company, and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their terms. 6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, VPI or their representatives, vendors or customers which pertain to the business of the Company or VPI shall be and remain the property of the Company or VPI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and 6 other similar data pertaining to the business, activities or future plans of the Company or VPI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 7. INVENTIONS. Employee shall disclose promptly to VPI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company or VPI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all of Employee's interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 8. TRADE SECRETS. Employee agrees that he or she will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or VPI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or VPI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 9. INDEMNIFICATION. In the event Employee is made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company or VPI against Employee), by reason of the fact that Employee is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company or VPI agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by VPI shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company or VPI shall pay all reasonable attorneys' fees and expenses of such separate counsel. 10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his or her employment by the Company and the performance of Employee's duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including but not limited to attorneys' fees and expenses of investigation, by any such third party that such third party may 7 now have or may hereafter come to have against the Company based upon or arising out of any noncompetition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 11. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee, therefore, shall not assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. CHANGE IN CONTROL. (a) Unless Employee elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company and/or VPI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company and/or VPI hereunder or that the Company and/or VPI may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term, then the provisions of this paragraph 12 shall be applicable. (b) In the event of a pending Change in Control wherein the Company and/or VPI and Employee have not received written notice at least five (5) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's and/or VPI's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's and/or VPI's obligations under this Agreement in the same manner and to the same extent that the Company and/or VPI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by the Company without cause during the Term and the applicable portions of paragraph 5(d) will apply; however, under such circumstances, the amount of the severance payment due to Employee shall be triple the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall not apply. (c) In any Change in Control situation, Employee may elect to terminate this Agreement by providing written notice to the Company at least five (5) business days prior to the anticipated closing of the transaction giving rise to the Change in Control. In such case, the applicable provisions of paragraph 5(d) will apply as though the Company had terminated the Agreement without cause during the Term; however, under such circumstances, the amount of the severance payment due to Employee shall be double the amount calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition provisions of paragraph 3 shall all apply for a period of two (2) years from the effective date of termination. Employee shall have the right to waive Employee's right to receive the severance compensation payable under this paragraph 12(c) (by a written waiver delivered to the Company on or before the effective date of the termination), in which case the noncompetition provisions of paragraph 3 shall not apply. 8 (d) For purposes of applying paragraph 5 hereof under the circumstances described in (b) and (c) above, the effective date of termination will be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at or prior to such closing. Further, Employee will be given sufficient time and opportunity to elect whether to exercise all or any of Employee's vested options to purchase VPI Common Stock, including any options with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive Plan, such that Employee may convert the options to shares of VPI Common Stock at or prior to the closing of the transaction giving rise to the Change in Control, if Employee so desires. (e) A "Change in Control" shall be deemed to have occurred if any of the following shall have occurred unless the transaction or event shall have been approved by at least two-thirds (2/3) of the Board of Directors of VPI: (i) any person or entity, other than VPI or an employee benefit plan of VPI, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company or VPI and immediately after such acquisition such person or entity is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding voting securities of the Company or VPI; (ii) the following individuals no longer constitute a majority of the members of the Board of Directors of VPI: (A) the individuals who, as of the closing date of VPI's initial public offering, constitute the Board of Directors of VPI (the "Original Directors"); (B) the individuals who thereafter are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election); and (C) the individuals who are elected to the Board of Directors of VPI and whose election, or nomination for election, to the Board of Directors of VPI was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election); (iii) the stockholders of VPI shall approve a merger, consolidation, recapitalization or reorganization of VPI, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of VPI immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of VPI shall approve a plan of complete liquidation of VPI or an agreement for the sale or disposition by VPI of all or a substantial portion of VPI's assets (i.e., 50% or more of the total assets of VPI). 9 (f) Employee must be notified in writing by the Company at any time that the Company anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by the Company or its successor for any excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as a result of any Change in Control. Such amount will be due and payable by the Company or its successor within ten (10) days after Employee delivers a written request for reimbursement accompanied by a copy of Employee's tax return(s) showing the excise tax actually incurred by Employee. 13. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. This Agreement supersedes any other agreements or understandings, written or oral, among the Company, VPI and Employee, and Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This written Agreement may not be later modified except by a written instrument signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a written instrument signed by the party waiving the benefit of such term. 14. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: Vacation Properties International, Inc. 1355-B Lynnfield Road, Suite 245 Memphis, Tennessee 38119 Attn.: David C. Sullivan To Employee: Hans F. Trupp c/o Trupp Hodness Enterprises, Inc. 520 Ocean Boulevard St. Simons Island, Georgia 31522 Marked: "Personal and Confidential" Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 10 15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Tennessee. 18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Trupp Hodnett Enterprises, Inc. THE Management Company By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- Vacation Properties International, Inc., a Delaware corporation By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- --------------------------------------------- Hans F. Trupp, Individually 12 EX-10.18 30 EXHIBIT 10.18 EXHIBIT 10.18 PROMISSORY NOTE --------------- Bethesda, Maryland January 8, 1998 FOR VALUE RECEIVED, Vacation Properties International, Inc., a Delaware corporation ("Borrower"), unconditionally promises to pay to the order of VPI Funding, LLC, a Delaware limited liability company ("Lender"), without offset, at its offices at c/o Alpine Consolidated II, LLC, 2927 44th Street, N.W., Washington, DC 20016, or at such other place as the holder of this Note may designate in writing, on demand, the principal sum set forth below in the last entry on the Schedule of Advances and Payments of Principal (the "Schedule") as "Principal Amount Outstanding," with interest payable on the 1st day of each month beginning February 2, 1998, and at maturity on the unpaid principal of such sum until repaid in full. All payments made on this Note shall be applied first to accrued interest and then to principal. In no event shall the principal sum set forth below in the last entry on the Schedule as the Principal Amount Outstanding exceed the amount set forth below in the last entry on the Schedule as the Total Borrowings Cap. Lender and Borrower initially intend that the principal amount available hereunder will be $1,000,000. Such $1,000,000 amount, however, may be increased from time to time as Lender and Borrower shall mutually agree in writing, as shall be set forth in the last entry on the Schedule under Total Borrowings Cap. Interest on this Note with respect to each advance made hereunder shall accrue at the rate per annum set forth below in the entry on the Schedule as the Interest Rate for such advance. Borrower understands and agrees that any officer or authorized employee of Lender may make entries on the Schedule of this Note and on any additional schedules attached hereto upon receipt of written or telephonic instructions of any one reasonably believed by such officer or authorized employee to be an authorized agent of Borrower. Borrower shall indemnify and hold Lender harmless from and against any and all claims, damages, losses, costs and expenses (including attorneys' fees) that may arise or be created by the acceptance of instructions for making or paying advances by telephone. The happening of any of the following events shall constitute an event of default: A. The failure to make when due any installment or other payment described herein, whether of principal, interest, late charges or otherwise; B. The dissolution or termination of existence of Borrower; C. The inability of Borrower to pay its debts when due, the insolvency of Borrower, the application for the appointment of a receiver or custodian for Borrower or the property - 1 - of Borrower, the entry of an order for relief of the filing of a petition by or against Borrower under the provisions of any bankruptcy or insolvency law, or any assignment for the benefit of creditors by or against Borrower; D. The entry of a judgment against Borrower or the issuance or service of any attachment, levy or garnishment against Borrower or the property of Borrower; E. The determination by Lender that a material adverse change in the financial condition of Borrower has occurred since the date hereof, or if Lender deems itself insecure or otherwise in good faith believes that the prospect of payment or performance is impaired; F. The failure of Borrower to perform any obligation to Lender hereunder or under the terms of any other obligation of Borrower to Lender; or G. The default by Borrower in any agreement for borrowed money, whether owed to Lender or to a third person. Upon the happening of any event of default, this Note shall, at the sole option of Lender, become immediately due and payable without notice to or demand on Borrower. In the event Borrower fails to pay any installment of interest or otherwise fails to repay this Note within seven (7) days of its due date, Borrower agrees to pay Lender on demand a late charge of five percent (5%) of the overdue payment. Borrower hereby expressly waives presentment, demand, protest and notice of dishonor, and waives the benefit of all homestead and similar exemptions as to this debt. If after default, this Note is placed in the hands of an attorney for collection, Borrower agrees to pay all reasonable attorneys' fees incurred by Lender. Any failure or delay by Lender to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other rights at any time. - 2 - SCHEDULE OF ADVANCES AND PAYMENTS OF PRINCIPAL ----------------------------------------------
PRINCIPAL TOTAL APPROVING INTEREST AMOUNT BORROWINGS PERSON'S DATE ADVANCES RATE PAYMENTS OUTSTANDING CAP INITIALS - ----------------------------------------------------------------------------------------------- 1/8/98 $349,000 - ----------------------------------------------------------------------------------------------- 2/28/98 $300,000 - ----------------------------------------------------------------------------------------------- 3/6/98 $370,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
The aggregate principal amount outstanding shown on the Schedule shall be prima facie evidence of the principal amount owing and unpaid on this Note. The failure to record the date and amount of any advance on the Schedule shall not, however, limit or otherwise effect the obligations of Borrower under this Note to repay the principal amount of the advance together with all interest accruing thereon. The provisions of this Note shall be construed and interpreted, and all rights and obligations of the parties hereunder determined in accordance with the laws of the State of Maryland. - 3 - IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the day and year first above written. VACATION PROPERTIES INTERNATIONAL, INC., a Delaware corporation By:/s/ Elan Blutinger ------------------------------ Elan Blutinger President ACKNOWLEDGED: VPI FUNDING, LLC a Delaware limited liability company By:/s/ Elan Blutinger --------------------------------- Elan Blutinger Manager EX-23.1 31 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS' As Independent Public Accountants, we hereby consent to the use of our reports for Vacation Properties International, Inc. dated March 11, 1998, Hotel Corporation of the Pacific, Inc., dated February 6, 1998, Brindley & Brindley Realty Development, Inc., and B & B on the Beach, Inc., dated January 30, 1998, First Resort Software, Inc. dated January 30, 1998, Houston and O'Leary Company dated January 30, 1998, The Maury People, Inc., dated January 30, 1998, Howey Acquisition, Inc. dated January 30, 1998, Priscilla Murphy Realty, Inc. dated January 30, 1998, Resort Property Management, Inc. dated January 30, 1998, Telluride Resort Accommodations, Inc. dated January 30, 1998, and Trupp-Hodnett Enterprises, Inc. and THE Management Company dated January 16, 1998 and all references to our Firm included in or made a part of this Registration Statement. Arthur Andersen LLP Houston, TX March 12, 1998 EX-23.2 32 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS' As independent public accountants, we hereby consent to the use of our reports for Coastal Resorts Management Inc., and Coastal Resorts Realty, LLC dated January 29, 1998, and Interstate Realty Company, Inc. and Sea Colony Management, Inc. dated January 29, 1998, and all references to our Firm included in or made part of this Registration Statement. Arthur Andersen LLP Washington, D.C. March 12, 1998 EX-23.3 33 EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS' As independent auditor's, we hereby consent to the use of our report for Collection of Fine Properties, Inc. dated January 23, 1998 and to all references to our Firm included in or made part of this Registration Statement. Morrison, Brown, Argiz and Company Denver, Colorado March 12, 1998 EX-23.5 34 EXHIBIT 23.5 CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 11, 1998 /s/ David C. Sullivan ------------------------- David C. Sullivan CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Luis Alonso ------------------------- Luis Alonso CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Park Brady ------------------------- Park Brady CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Douglas R. Brindley ------------------------- Douglas R. Brindley CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Paul T. Dobson ------------------------- Paul T. Dobson CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Sharon Benson Doucette -------------------------- Sharon Benson Doucette CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Joshua M. Freeman ------------------------- Joshua M. Freeman CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Evan H. Gull ------------------------- Evan H. Gull CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Charles O. Howey ------------------------- Charles O. Howey CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Heidi O'Leary Houston ------------------------- Heidi O'Leary Houston CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Daniel L. Meehan ------------------------- Daniel L. Meehan CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ J. Patrick McCurdy ------------------------- J. Patrick McCurdy CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Andre S. Tatibouet ------------------------- Andre S. Tatibouet CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Hans F. Trupp ------------------------- Hans F. Trupp CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Michael D. Rose ------------------------- Michael D. Rose CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Elan J. Blutinger ------------------------- Elan J. Blutinger CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ D. Fraser Bullock ------------------------- D. Fraser Bullock CONSENT OF PERSON NAMED TO BECOME A DIRECTOR Pursuant to Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), I hereby consent to the use of my name and any references to me as a person nominated to become a director of Vacation Properties International, Inc. ("VPI") in the Prospectus constituting a part of VPI's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission pursuant to the Securities Act. Dated: March 10, 1998 /s/ Leonard A. Potter ------------------------- Leonard A. Potter EX-27 35 FDS --
5 (Replace this text with the legend) 1057507 VACATION PROPERTIES INTERNATIONAL, INC. 1,000 U.S. Dollars 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 1.000 9,677 0 4,245 0 46 32,678 5,660 0 115,504 93,245 0 0 0 93 18,301 115,504 0 60,843 0 0 158 0 88 14,030 6,541 7,489 0 0 0 7,489 0.50 0.50
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