TABLE OF CONTENTS

 

		Page
ARTICLE 1 PURCHASE AND SALE OF SHARES		1
1.1	Transfer of Shares	1
ARTICLE 2 CONSIDERATION		1
2.1	Purchase Price	1
2.2	Purchase Price Adjustment	2
ARTICLE 3 CLOSING; OBLIGATIONS OF THE PARTIES		4
3.1	Closing Date	4
3.2	Obligations of the Parties at the Closing	4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GEC AND SELLER		5
4.1	Status	5
4.2	Authority	5
4.3	No Conflict; Required Filings and Consents	5
4.4	Capitalization	6
4.5	Financial Statements	8
4.6	Title to Assets and Properties	8
4.7	Material Contracts	9
4.8	Real Property; Leases; Managed Property	10
4.9	Intellectual Property; Information Systems	11
4.10	Litigation; Claims and Proceedings	13
4.11	Environmental Safety and Health Matters	13
4.12	Compliance with Law; Licenses and Permits	14
4.13	Employee Matters and Benefit Plans	14
4.14	Taxes	16
4.15	Absence of Undisclosed Liabilities; Capital Commitments	18
4.16	Absence of Certain Changes	19
4.17	Labor Matters	19
4.18	Finder’s Fee	19
4.19	Insurance	20
4.20	Accounts Receivable	20
4.21	Related Party Transactions	20
4.22	Books and Records	20
4.23	Hawaiian Operations	20
4.24	Payment Card Industry Data Security Standard	20
4.25	Amendment to Waimea Plantation Cottages Management Agreement	21
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF INTERVAL AND PURCHASER		21
5.1	Corporate Status	21
5.2	Authority	21
5.3	No Conflict	21
5.4	Compliance with Law	22
5.5	Consents	22
5.6	Sufficient Funds	22
5.7	Finder’s Fee	22

 

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		Page
5.8	No Reliance	23
5.9	Investment Intent	23
5.10	Litigation, Claims and Proceedings	23
ARTICLE 6 COVENANTS		23
6.1	Interim Operations of the Companies	23
6.2	Consents	26
6.3	Publicity	27
6.4	Access to Records and Properties	27
6.5	Further Action	28
6.6	Expenses	28
6.7	Notification of Certain Matters	28
6.8	Employee Benefit Plans	28
6.9	Intercompany Indebtedness	30
6.10	Debt and Guaranties	30
6.11	Supplements to Disclosure Schedule	30
6.12	Guaranties by GEC and Interval	31
6.13	Retention and Access to Books and Records	31
6.14	Non-Competition; Non-Solicit and Confidentiality	32
6.15	RHAC Holdings, LLC; Waipouli Holdings LLC	35
ARTICLE 7 CLOSING CONDITIONS		36
7.1	Conditions to Obligations of Seller and Purchaser to Consummate the Transaction	36
7.2	Additional Conditions to Obligations of Purchaser	36
7.3	Additional Conditions to Obligations of Seller	38
ARTICLE 8 CERTAIN TAX MATTERS		38
8.1	Tax Indemnity Obligations	38
8.2	Responsibility for Filing Tax Returns	39
8.3	Cooperation on Tax Matters	40
8.4	Refunds and Tax Benefits	41
8.5	Section 338(h)(10) Election and Purchase Price Allocation	41
8.6	Transfer Taxes	42
8.7	Termination of Tax Sharing Agreements	42
8.8	Tax Proceedings	43
8.9	Treatment of Indemnity Payment	43
8.10	Withholding	43
8.11	Conflict with Article 10	43
ARTICLE 9 TERMINATION		44
9.1	Termination	44
9.2	Effect of Termination and Abandonment	44
ARTICLE 10 INDEMNIFICATION		44
10.1	Survival of Representations and Warranties	44
10.2	Indemnification Provisions for Benefit of Purchaser	45
10.3	Indemnification Provisions for Benefit of Seller	45

 

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		Page
10.4	Procedure for Matters Involving Third Parties	46
10.5	Limitations on Seller’s and GEC’s Indemnification Liability	46
10.6	Limitations on Purchaser’s Indemnification Liability	47
10.7	Determination of Losses	47
10.8	Exclusive Remedy	48
10.9	Indemnification Obligations of Seller	48
ARTICLE 11 MISCELLANEOUS		48
11.1	Notices	48
11.2	Certain Definitions; Interpretation	49
11.3	Severability	52
11.4	Entire Agreement; No Third-Party Beneficiaries	53
11.5	Amendment; Waiver	53
11.6	Binding Effect; Assignment	53
11.7	Disclosure Schedule	53
11.8	Governing Law; Jurisdiction	53
11.9	Construction	54
11.10	Counterparts	54
11.11	Enforcement	54

 

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Term		Section		Page
Interval		Preamble		1
IRS		Section 4.13(a)		15
Law		Section 11.2(a)(xii)		49
License Agreement		Section 7.2(i)		36
LLC Conversion		Section 8.5(a)		41
Losses		Section 10.2		44
Material Adverse Effect		Section 6.11		30
Material Contract		Section 4.7		9
Multiemployer Plan		Section 4.13(e)		16
PCI DSS		Section 4.24		20
Permit		Section 11.2(a)(xiii)		49
Permitted Encumbrances		Section 4.6		8
Person		Section 11.2(a)(xiv)		50
Plans		Section 4.13(a)		14
Purchase Price		Section 2.1		1
Purchaser Indemnified Parties		Section 10.2		44
Purchaser Material Adverse Effect		Section 11.2(a)(xv)		50
Purchaser		Preamble		1
Real Property		Section 4.8		10
Reference Balance Sheet		Section 4.5(a)		8
Registered Intellectual Property		Section 4.9		11
Related Person		Section 4.21		20
RQIH		Preamble		1
RQIH Shares		Section 1.1		1
RQRE		Preamble		1
RQRE Shares		Section 1.1		1
Section 338(h)(10) Elections		Section 8.5(a)		40
Seller Indemnified Parties		Section 10.3		44
Seller Material Adverse Effect		Section 11.2(a)(xvi)		50
Seller		Preamble		1
Shares		Section 1.1		1
Specified Properties		Section 4.8(f)		11
Straddle Periods		Section 8.1(a)		38
Subsidiary		Section 11.2(a)(xvii)		50
Tax Return		Section 11.2(a)(xx)		51
Taxes		Section 11.2(a)(xviii)		50
Taxing Authority		Section 11.2(a)(xix)		51
Termination Date		Section 9.1(b)		43
Third Party Acquirer		Section 6.14		31
Third-Party Claim		Section 10.4(a)		45
Transition Services Agreement		Section 7.2(f)		36
Working Capital		Section 11.2(a)(xxi)		51

 

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Index of the Disclosure Schedule

 

Section

4.3 – No Conflict

4.4(c) – Listing of Subsidiaries

4.5(a)(i) – Financial Statements

4.5(a)(ii) – Accounting Policies

4.5(b) – Non-Compliance with GAAP

4.6 – Title to Assets and Properties

4.7(a) – Material Contracts

4.7(b) – Breach or Termination of Material Contracts

4.8(a) – Real Property; Leases

4.8(d) – Right of Use/Occupancy Contracts

4.8(f)(i) – Specified Managed Properties

4.8(f)(ii) – Specified Managed Properties

4.9 – Intellectual Property

4.10 – Litigation, Claims and Proceedings

4.11 – Environmental and Safety and Health Matters

4.12 – Compliance with Law; Licenses and Permits

4.13(a) – Employee Matters and Benefit Plans

4.13(b) – Plan Creation/Modification

4.13(c) – ERISA Compliance

4.13(d) – Post-Termination Benefits

4.13(e) – Multiemployer Plans

4.13(f) – Acceleration of Benefits

4.14 – Taxes

4.15 – Absence of Undisclosed Liabilities

4.16 – Absence of Certain Changes

4.17 – Labor Matters

4.19 – Insurance

4.21 – Related Party Transactions

4.23 – Hawaiian Operations

6.1 – Interim Operations of the Companies

6.10 – Debt and Guaranties

6.14(c) – Mainland Properties

7.2(d) – Required Consents

 

Index of Exhibits

 

Exhibit A	–	Form of Transition Services Agreement
Exhibit B	–	Form of Opinion of Counsel
Exhibit C	–	Form of Trademark and Domain Name License Agreement
Exhibit D	–	Third Amendment to Waimea Plantation Cottages Management Agreement

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (“ Agreement ”) is made this 18 ^th day of April, 2007, by and among Interval Acquisition Corp., a Delaware corporation (“ Interval ”), Vacation Holdings Hawaii, Inc., a Delaware corporation and indirect wholly owned subsidiary of Interval (“ Purchaser ”), Gaylord Entertainment Company, a Delaware corporation (“ GEC ”), and ResortQuest International, Inc., a Delaware corporation and indirect wholly owned subsidiary of GEC (“ Seller ”).

 

WHEREAS, Seller owns all of the issued and outstanding shares of the capital stock of RQI Holdings, Ltd., a Hawaii corporation (“ RQIH ”), and ResortQuest Real Estate of Hawaii, Inc., a Hawaii corporation (“ RQRE ”; each of RQIH and RQRE is a “ Company ” and, collectively, the “ Companies ”); and

 

WHEREAS, Purchaser desires to acquire from Seller, and Seller desires to sell to Purchaser, all of the issued and outstanding shares of the capital stock of the Companies upon and subject to the terms and conditions contained in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, the parties agree as follows:

 

ARTICLE 1
PURCHASE AND SALE OF SHARES

 

1.1                                Transfer of Shares.  1.2               On the terms and subject to conditions of this Agreement, at the Closing (as defined in Section 3.1 ), Seller shall sell, transfer and convey to Purchaser, and Purchaser shall purchase and acquire from Seller, 1,000 shares of common stock of RQIH (the “ RQIH Shares ”), which constitute all of the issued and outstanding shares of capital stock of RQIH, and 10 shares of common stock of RQRE (the “ RQRE Shares ,” and, collectively with the RQIH Shares, the “ Shares ”), which constitute all the issued and outstanding capital stock of RQRE.

 

ARTICLE 2
CONSIDERATION

 

2.1                                Purchase Price .  The aggregate purchase price (the “ Purchase Price ”) for the Shares shall be $109,125,000, prior to adjustment pursuant to Section 2.2(a)  and 2.2(b)  below.  The Purchase Price, as adjusted pursuant to Section 2.2(a)  but prior to adjustment pursuant to Section 2.2(b) , shall be paid at the Closing to Seller, by wire transfer of immediately available funds pursuant to the wire transfer instructions provided in advance by Seller.

 

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2.2                                Purchase Price Adjustment.

 

(a)                                   Closing Date Purchase Price Adjustment .  At least five (5) business days prior to the Closing Date, Seller shall prepare and deliver to Purchaser an estimated combined balance sheet of the Companies and their Subsidiaries as of the month end immediately preceding the Closing Date (the “ Estimated Closing Date Balance Sheet ”), which shall include the Working Capital as of such month-end date (“ Estimated RQ Working Capital ”).  The Estimated Closing Date Balance Sheet and the Estimated RQ Working Capital shall be prepared in good faith and in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a basis consistent with the Financial Statements.  Within 24 hours of notice, Seller shall provide Purchaser access to all relevant documents and information reasonably requested by Purchaser in connection with its review of the Estimated Closing Date Balance Sheet.  No later than two (2) business days prior to the Closing Date, Purchaser shall notify Seller of any objections to the Estimated Closing Date Balance Sheet, which notice shall state in reasonable detail the basis for Purchaser’s objections.  If Purchaser has any objections, Purchaser and Seller shall attempt in good faith to resolve any such objections; provided, however , that in the event that any such objections are not resolved prior to Closing, the Estimated Closing Date Balance Sheet shall remain as initially delivered to Purchaser for all purposes hereunder.  The Purchase Price to be paid at Closing by Purchaser shall, (i) if the Estimated RQ Working Capital is a positive amount, be increased by such amount, or, (ii) if the Estimated RQ Working Capital is a negative amount, be decreased by such amount.

 

(b)                                  Post-Closing Date Purchase Price Adjustment .

 

(i)                                      Within 90 days following the Closing Date, Purchaser shall prepare and deliver to GEC a combined balance sheet of the Companies and their Subsidiaries as of the Closing Date (the “ Closing Date Balance Sheet ”), which shall include the Working Capital as of the Closing Date (the “ Closing Date RQ Working Capital ”).  The Closing Date Balance Sheet and the Closing Date RQ Working Capital shall be prepared in accordance with GAAP applied on a basis consistent with the Financial Statements.

 

(ii)                                   If, within 30 days following delivery of the Closing Date Balance Sheet, GEC has not given Purchaser written notice of its objection as to the Closing Date Balance Sheet or calculation of the Closing Date RQ Working Capital (which notice shall state in reasonable detail the basis of GEC’s objection), then the Closing Date Balance Sheet and Purchaser’s calculation of the Closing Date RQ Working Capital as of the Closing Date shall be binding and conclusive on the parties for all purposes hereunder.  Upon prior reasonable notice, Purchaser shall provide GEC access to all relevant documents and information reasonably requested by GEC in connection with its review of the Closing Date Balance Sheet.

 

(iii)                                If GEC duly gives Purchaser such notice of objection within the 30-day period, and if GEC and Purchaser fail to resolve the issues outstanding

 

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with respect to the Closing Date Balance Sheet and Purchaser’s calculation of the Closing Date RQ Working Capital within 30 days of Purchaser’s receipt of GEC’s objection notice, GEC and Purchaser shall submit the issues remaining in dispute to a nationally recognized certified public accounting firm mutually determined by GEC and Purchaser that has not performed accounting, tax or audit services for Purchaser, GEC, Seller or any of their respective Affiliates during the past three years (the “ Accountants ”), for resolution in accordance with the terms of the Agreement and GAAP applied on a basis consistent with the Financial Statements.  If issues are submitted to the Accountants for resolution, (A) GEC and Purchaser shall furnish or cause to be furnished to the Accountants such work papers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party or its agents and shall be afforded the opportunity to present to the Accountants any material relating to the disputed issues and to discuss issues with the Accountants; (B) the determination by the Accountants, as set forth in a notice to be delivered to both GEC and Purchaser within 60 days of the submission to the Accountants of the issues remaining in dispute, shall be final, binding and conclusive on the parties and shall be used in calculation of the Closing Date RQ Working Capital; and (C) GEC and Purchaser will each bear fifty percent (50%) of the fees and costs of the Accountants for such determination.

 

(iv)                             Within three business days after the Closing Date Balance Sheet becomes binding and conclusive pursuant to this Section 2.2(b) , the following adjustments to the Purchase Price shall be made:

 

(A)                               In the event that the Closing Date RQ Working Capital is less than the Estimated Closing Date RQ Working Capital, then GEC shall pay an amount equal to the difference between the Estimated Closing Date RQ Working Capital and the Closing Date RQ Working Capital to Purchaser by wire transfer of immediately available funds pursuant to the wire transfer instructions provided by Purchaser; or

 

(B)                                In the event that the Closing Date RQ Working Capital is greater than the Estimated Closing Date RQ Working Capital, then Purchaser shall pay an amount equal to the difference between the Closing Date RQ Working Capital and the Estimated Closing Date RQ Working Capital to GEC by wire transfer of immediately available funds pursuant to the wire transfer instructions provided by GEC.

 

(c)                                   Any payments made under this Section 2.2 shall be treated by GEC, Seller and Purchaser as an adjustment to the Purchase Price for tax purposes, unless a final determination (which shall include the execution of a Form 870-AD or successor form) with respect to the recipient of such payment causes any such payment not to be treated as an adjustment to the Purchase Price for tax purposes.

 

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ARTICLE 3
CLOSING; OBLIGATIONS OF THE PARTIES

 

3.1                                Closing Date.   The closing (the “ Closing ”) shall take place at 10:00 a.m., local time, at the offices of Bass, Berry & Sims PLC, Nashville, Tennessee, on the immediately succeeding last business day of the month following satisfaction or, to the extent permitted by applicable Law, waiver of all conditions to Closing set forth in Article 7 , or at such other place or at such other time or on such other date as Purchaser and Seller mutually may agree in writing.  The date on which the Closing takes place shall be referred to as the “ Closing Date .”  The effective time of the Closing will be 11:59 p.m. (Central time) on (a) the Closing Date, if the Closing Date is the last day of the month, or (b) the last day of the month immediately following the Closing Date, if the business day on which the Closing occurs is not the last day of the month.

 

3.2                                Obligations of the Parties at the Closing.

 

(a)                                   At the Closing, Purchaser shall deliver to Seller:

 

(i)                                      payment of the Purchase Price, prior to adjustment pursuant to Section 2.2(b) , as set forth in Section 2.1 ;

 

(ii)                                   a copy of resolutions of the Board of Directors of Purchaser, certified by Purchaser’s secretary, authorizing the execution, delivery and performance of this Agreement and the other documents referred to herein to be executed by Purchaser, and the consummation of the transactions contemplated hereby; and

 

(iii)                                executed Ancillary Agreements to which Purchaser is a party.

 

(b)                                  At the Closing, Seller shall deliver to Purchaser:

 

(i)                                      stock certificates representing the Shares, which certificates shall be duly endorsed to Purchaser or accompanied by a duly executed stock power;

 

(ii)                                   a copy of resolutions of the Board of Directors of Seller, certified by Seller’s secretary, authorizing the execution, delivery and performance of this Agreement and the other documents referred to herein to be executed by Seller, and the consummation of the transactions contemplated hereby;

 

(iii)                                the certificate of incorporation, certificate of formation or other organizing document and a certificate of good standing for each of the Companies and their Subsidiaries, each dated within ten (10) days of the Closing Date and certified by the Secretary of State or other appropriate official of the jurisdiction of organization or formation of such Company or such Subsidiary; and

 

(iv)                               executed Ancillary Agreements to which Seller, any Company or any Subsidiary of a Company is a party.

 

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limited liability company agreement (or similar organizing documents) of GEC, Seller, the Companies or any Subsidiary of the Companies, each as in effect on the date hereof and as may be further amended prior to the Closing, (ii) assuming the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “ HSR Act ”), has expired or been terminated, conflict with or violate any Law applicable to GEC, Seller, the Companies or any Subsidiary of the Companies or any of their respective assets, properties or businesses or (iii) conflict with or violate, result in the breach of any term or provision of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration, consent, suspension, revocation or cancellation of, or result in the creation of any mortgage, pledge, hypothecation, claim, security interest, encumbrance, interest, option, lien or other restriction (collectively, “ Encumbrances ”) on any of the Shares or on any of the assets or properties of the Companies or any Subsidiary of any of the Companies or pursuant to any Material Contract (as defined in Section 4.7 ); except, in the case of clauses (ii) and (iii) only, for such violations, conflicts, breaches, defaults, rights of termination, amendment, acceleration, consent, suspension, revocation or cancellation or creation of any Encumbrance that (A) would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect or (B) would become applicable solely as a result of the business or activities in which Purchaser engages in or the status of any facts pertaining to Purchaser.

 

(b)                                  Except as set forth in Section 4.3 of the Disclosure Schedule, neither GEC nor Seller is required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by GEC and Seller of this Agreement and the Ancillary Agreements to which they are a party or the consummation of the transactions contemplated hereby or thereby, except for (i) any filings required to be made under the HSR Act, (ii) such filings as may be required by any applicable federal or state securities or “ blue sky ” laws, (iii) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect or (iv) as may be necessary as a result of any facts or circumstances relating to Purchaser or any of its Affiliates.

 

4.4                                Capitalization .

 

(a)                                   The authorized capital stock of RQIH consists of 1,000 shares of common stock, which have no stated par value.  The authorized capital stock of RQRE consists of 1,000 shares of common stock, $1.00 par value per share.  All of the Shares are validly issued, fully paid and nonassessable and are not subject to any preemptive rights, rights of first offer or rights of first refusal.  The Shares constitute all of the issued and outstanding capital stock of the Companies.  Seller is the record and beneficial owner of the Shares, free and clear of any Encumbrance.  Upon delivery to Purchaser of certificates evidencing the Shares duly endorsed for transfer at the Closing in exchange for Purchaser’s payment of the Purchase Price, Purchaser shall acquire good, valid and

 

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marketable title to the Shares, free and clear of any Encumbrance other than Encumbrances created by Purchaser.

 

(b)                                  There are (i) no outstanding obligations, options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any kind relating to the capital stock of a Company or securities convertible or exchangeable into capital stock of a Company or obligating a Company to issue or sell any shares of capital stock of, or any other interest in, a Company, (ii) no outstanding contractual obligations of a Company to repurchase, redeem or otherwise acquire any shares of its capital stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person, other than as set forth in Section 4.4(c)  of the Disclosure Schedule or (iii) no voting trusts, stockholder agreements, registration rights agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the capital stock of a Company.

 

(c)                                   Section 4.4(c)  of the Disclosure Schedule sets forth a true and complete list of (i) all Subsidiaries of the Companies, listing for each Subsidiary its name, its jurisdiction of organization or formation, each jurisdiction (other than its jurisdiction of organization or formation) in which it is qualified to do business, the percentage of stock or other equity interest of each Subsidiary owned by the Companies or a Subsidiary of a Company and, for each Subsidiary that is a corporation, the authorized and outstanding capital stock of each such Subsidiary and (ii) all other Persons in which the Companies or any of their Subsidiaries own, of record or beneficially, any direct or indirect equity or other similar interest or any right (contingent or otherwise) to acquire the same, listing for each Person its name, its jurisdiction of organization, each jurisdiction (other than its jurisdiction of organization) in which it is qualified to do business, the percentage of stock or other equity interest of each Person owned by the Companies (as well as identification of which Company owns such interest) or a Subsidiary of the Companies and, for each Person that is a corporation, the authorized and outstanding capital stock of each such Person.  Other than the Subsidiaries and other entities set forth in Section 4.4(c)  of the Disclosure Schedule, there are no other corporations, limited liability companies, partnerships, joint ventures, associations or other similar entities in which a Company owns or any of their Subsidiaries own, of record or beneficially, any direct or indirect equity or other similar interest or any right (contingent or otherwise) to acquire the same.  All of the issued and outstanding shares (or voting securities) of each of the Subsidiaries of the Companies that are corporations are validly issued, fully paid and nonassessable and are not subject to any preemptive rights, rights of first offer or rights of first refusal.  Except as set forth in Section 4.4(c)  of the Disclosure Schedule, (w) the Companies, or one of their Subsidiaries, own beneficially and of record all of the outstanding shares of capital stock (or voting securities), or securities convertible or exchangeable into capital stock (or voting securities), of each of the Companies’ Subsidiaries free and clear of any Encumbrances, (x) there are no outstanding obligations, options, warrants, convertible securities or other rights, agreements or commitments of any kind relating to the capital stock, or securities convertible or exchangeable into capital stock, of any Subsidiary of the Companies or obligating the Companies or any Subsidiary of the Companies to issue or sell any shares of capital stock of, or any other interest in, any such Subsidiary of the Companies, (y) there are no outstanding

 

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contractual obligations of any Subsidiary of the Companies to repurchase, redeem or otherwise acquire any shares of its capital stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person, and (z) except as set forth in Section 4.4(c)  of the Disclosure Schedule, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the equity interests of any Companies or any Subsidiary thereof.

 

4.5                                Financial Statements .

 

(a)                                   Attached hereto as Section 4.5(a)(i)  of the Disclosure Schedule are true and complete copies of the unaudited combined balance sheets as of December 31, 2004, 2005 and 2006 and related unaudited combined statements of operations for the Companies and their Subsidiaries for the fiscal years then ended (collectively, the “ Financial Statements ”).  The December 31, 2006 balance sheet is referred to herein as the “ Reference Balance Sheet .”  Section 4.5(a)(ii)  of the Disclosure Schedule contains a complete and accurate description of the significant accounting policies used in the preparation of the Financial Statements.

 

(b)                                  The Financial Statements (i) have been prepared based on the books and records of the Companies and their Subsidiaries, (ii) have been prepared in accordance with GAAP as applied consistent with the past practice of Seller and GEC and the Companies’ normal accounting practices (except as set forth on Section 4.5(b)  of the Disclosure Schedule or as may be indicated in the Financial Statements and except for the absence of notes) and (iii) present fairly and accurately, in all material respects, the combined financial position and results of operations of the Companies and their Subsidiaries as of the dates indicated or for the periods indicated therein.

 

4.6                                Title to Assets and Properties .  Except as set forth in Section 4.6 of the Disclosure Schedule, the Companies and their Subsidiaries have good and marketable title to, or valid leasehold interests in, their assets and properties sufficient to operate such properties and to conduct their businesses as currently conducted, except for (a) the Permitted Encumbrances (as defined below) and (b) other defects in such titles, or any easements, restrictive covenants or similar encumbrances that have not had and would not reasonably be expected to be materially adverse to the Companies and their Subsidiaries and their respective assets.  For purposes of this Agreement, “ Permitted Encumbrances ” mean:  (i) encumbrances for assessments, taxes, water, sewer and other similar charges not yet delinquent or that either Company or any of their Subsidiaries is contesting in good faith through appropriate proceedings; provided that adequate reserves have been established with respect thereto; (ii) easements or reservations thereof, rights of way, highway and railroad crossings, sewers, electric and other utility lines, telegraph and telephone lines, zoning, building code and other covenants, conditions and restrictions as to the use of the Real Property that do not affect or interfere in an material way with the use of such Real Property by the Companies and their Subsidiaries; (iii) encumbrances listed on Section 4.6 of the Disclosure Schedule; (iv) liens securing the claims of materialmen, landlords and others provided payment is not yet delinquent; (v) any leases, subleases or licenses listed on Section 4.6 of the Disclosure

 

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Schedule; (vi) all encumbrances relating to liens securing borrowed money to be released at or prior to the Closing, all of which are listed on Section 4.6 of the Disclosure Schedule; (vii) any and all matters and encumbrances (including, without limitation, fee mortgages or ground leases) affecting the leased real property of the Companies or their Subsidiaries, not created or granted by the Companies or their Subsidiaries, but only to the extent that such matters and encumbrances (1) do not materially interfere with the right of the Companies or their Subsidiaries to use any of the leased real property, or (2) are not Known to Seller (it being understood that reasonable investigation for purposes of this clause (vii) will not require GEC or Seller to conduct title searches with respect to such real property); and (viii) any subordination or attornment agreement between either of the Companies or any of their Subsidiaries and the lender for any of the landlords of either of the Companies or any of their Subsidiaries, all of which are listed on Section 4.6 of the Disclosure Schedule.

 

4.7                                Material Contracts.

 

(a)                                   Section 4.7(a)  of the Disclosure Schedule sets forth a true and complete list of all the Material Contracts of the Companies and the Subsidiaries of the Companies.  As used herein, “ Material Contract ” means any of the following:

 

(i)                              each material agreement or arrangement of either Company or any Subsidiary of either Company that was not entered into in the ordinary course of business;

 

(ii)                           each agreement related to indebtedness for borrowed money, or guaranteeing, or providing security for, any indebtedness of any Person;

 

(iii)                        each partnership, joint venture or other similar agreement to which a Company or any Subsidiary of either Company is a party or by which any of them is otherwise bound;

 

(iv)                       each agreement, arrangement, contract or commitment of either Company or any Subsidiary of either Company restricting or otherwise affecting the ability of either Company or any Subsidiary of either Company to compete in any jurisdiction;

 

(v)                          each employment agreement to which either Company or a Subsidiary of either Company is a party;

 

(vi)                       each agreement for the sale of a material asset that has not yet been consummated and was not entered into in the ordinary course of business as presently conducted;

 

(vii)                    all agreements between any of the Companies and their Subsidiaries, on the one hand, and any of GEC, Seller or their respective Affiliates (other than the Companies and their Subsidiaries), on the other hand;

 

(viii)                 all hotel management agreements to which either Company or a Subsidiary of either Company is a party;

 

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(ix)                         all condominium association management agreements to which either Company or a Subsidiary of either Company is a party;

 

(x)                            all front-desk leases to which either Company or a Subsidiary of either Company is a party; and

 

(xi)                         each other existing agreement, not otherwise covered by clauses (i) through (x), that (A) requires payments by or to a Company or any Subsidiary of either Company in excess of One Hundred Fifty Thousand Dollars ($150,000.00) during any twelve (12)-month period or (B) is material to the Companies and their Subsidiaries, taken as a whole.

 

(b)                                  Except as disclosed in Section 4.7(b)  of the Disclosure Schedule:

 

(i)                              none of the Companies or any Subsidiary of either Company party to any Material Contract, nor, to the Knowledge of Seller, any other party thereto, is in breach thereof or default thereunder, or has given notice of breach or default to any other party thereunder, and, to the Knowledge of Seller, no event has occurred and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a default;

 

(ii)                           no party to a Material Contract has given notice to the Companies or any Subsidiaries of the Companies of its intent, nor, to the Knowledge of Seller, intends, to terminate any Material Contract or not to renew any Material Contract upon expiration of its term; and

 

(iii)                        each Material Contract is valid and binding on and in full force and effect with respect to either Company or a Subsidiary of either Company party thereto and, to the Knowledge of Seller, each respective counterparty thereto, subject to general principles of equity and except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws of general application relating to creditors’ rights.

 

(c)                                   Seller has made available to Purchaser (i) complete and accurate copies of all Material Contracts and (ii) representative samples of individual agency rental agreements, rental agreements and wholesale agreements of the Companies.

 

4.8                                Real Property; Leases; Managed Property.

 

(a)                                   Section 4.8(a)  of the Disclosure Schedule sets forth a complete and accurate list of the locations of all real property owned and leased by the Companies or any of their Subsidiaries (collectively with all improvements located thereon and appurtenances thereto, the “ Real Property ”), including whether such Real Property is owned or leased and the location of, and a brief description of the nature of the activities conducted on, such Real Property.  Except as set forth on Section 4.8(a) of the Disclosure Schedule, one of the Companies or one of their Subsidiaries has good and marketable fee

 

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simple title to or a valid leasehold interest in the Real Property, free and clear of all Encumbrances except Permitted Encumbrances.

 

(b)                                  The Real Property is not subject to any order to be sold nor is it being condemned, expropriated or otherwise taken by any Governmental Authority with or without payment or compensation therefor, nor, to the Knowledge of Seller, has any such condemnation, expropriation or taking been threatened or proposed.

 

(c)                                   There are no pending or, to the Knowledge of Seller, threatened condemnation proceedings, lawsuits, or administrative actions relating to any of the Real Property which would reasonably be expected to be material to the Companies and their Subsidiaries.

 

(d)                                  Except as described in Section 4.8(d)  of the Disclosure Schedule, none of the Companies nor any of their Subsidiaries has entered into any material contract, agreement or arrangement granting to any person the right of or use or occupancy of any portion of the Real Property.

 

(e)                                   There are no material latent defects or material adverse physical conditions affecting the Real Property.  All structures and buildings on the Real Property are adequately maintained and are in good operating condition and repair in all material respects for the requirements of the business of the Companies and their Subsidiaries as currently conducted.

 

(f)                                     Except as set forth on Section 4.8(f)(i)  of the Disclosure Schedule, to the Knowledge of Seller, none of the owners of any of the properties listed on Section 4.8(f)(ii)  of the Disclosure Schedule (the “ Specified Properties “) that are managed or maintained by either Company or any of their Subsidiaries plans or intends to cease or interrupt the operations of any of such properties in any material respect or otherwise close or make unavailable a material portion of any such property for purposes of renovations or otherwise.

 

4.9                                Intellectual Property; Information Systems .

 

(a)                                   Section 4.9 of the Disclosure Schedule sets forth a true and complete list of all patents and patent applications, registered trademarks, registered trade names and service marks, domain names, and registered copyrights, together with applications to register the same, owned by one or both of the Companies or a Subsidiary of a Company (“ Registered Intellectual Property ”), and all other material Intellectual Property (as defined below) owned by one or both of the Companies or a Subsidiary of a Company and used in or necessary for the conduct of their businesses (excluding “clickwrap” or “shrinkwrap” agreements or agreements contained in or pertaining to “off-the-shelf” software, trade secrets or the terms of use or service for any website).  A Company or a Subsidiary of a Company is the exclusive owner of all Registered Intellectual Property and other material Intellectual Property listed on Section 4.9 of the Disclosure Schedule with respect to which the Companies or such Subsidiary is indicated as the owner on Section 4.9 of the Disclosure Schedule.  To Seller’s Knowledge, the Registered

 

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Intellectual Property is valid and enforceable and is not now involved in any opposition or cancellation proceeding and, to the Knowledge of Seller, no such proceeding is or has been threatened in writing with respect thereto.  There are no pending actions against a Company or any Subsidiary of a Company of which a Company or any Subsidiary of a Company has been given written notice that assert that a Company or any Subsidiary of a Company has or may have violated, infringed, misappropriated or diluted the Intellectual Property rights or rights or privacy, rights of publicity, or other rights of others, or challenging or questioning the validity or enforceability of any Registered Intellectual Property or any other material Intellectual Property right of a Company or any Subsidiary.  To the Knowledge of Seller, none of the Companies nor any Subsidiary of a Company has infringed upon, misappropriated, diluted, or unlawfully used any Intellectual Property owned by another Person or violated rights of privacy, rights of publicity, or other rights of others.  Except as set forth in Section 4.9 of the Disclosure Schedule, to the Knowledge of Seller, none of the Companies nor any Subsidiary of a Company has received any written notice alleging any infringement upon or unlawful use of any intellectual property owned or claimed by another Person that remains unresolved on the date hereof.  Except as set forth in Section 4.9 of the Disclosure Schedule, to the Knowledge of Seller, no third party is misappropriating, infringing, or diluting any Intellectual Property rights of a Company or any Subsidiary in a material manner.  No loss or expiration of any of the material Intellectual Property rights is pending or, to the Knowledge of Seller, threatened.  The Companies and their Subsidiaries have taken reasonable steps to protect their rights in the Intellectual Property and to maintain the confidentiality of any trade secret of the Companies or their Subsidiaries.  Except as set forth in Section 4.9 of the Disclosure Schedule, the Intellectual Property owned by or licensed to either Company or their Subsidiaries constitutes all the material Intellectual Property rights necessary for the conduct and support of the business as it is currently conducted.  As used herein, “ Intellectual Property ” shall mean all Registered Intellectual Property, together with (a) trade names and unregistered trademarks and service marks, (b) unregistered copyrights, (c) inventions, discoveries, technical data, processes, methods, formulae, and other trade secrets, (d) database rights, publicity rights and all other intellectual and industrial property rights, whether protected, created or arising under the laws of the United States or any other jurisdiction, and (e) information technology systems and software excluding “off-the-shelf” software, used in the Companies’ and their Subsidiaries’ operations and that has not been customized or otherwise modified by or for the Companies or such Subsidiaries.

 

(b)                                  Section 4.9 of the Disclosure Schedule contains a true and complete list of all material agreements and contracts to which any Company or any Subsidiary of any Company is a party under which any Company or any Subsidiary of any Company licenses the Intellectual Property (as a licensor or licensee) (“ Intellectual Property Contracts ”).  All of the Intellectual Property Contracts are in full force and effect.  Neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in the breach, termination, or suspension of any of the Intellectual Property Contracts. Except as set forth in Section 4.9 of the Disclosure Schedule, following the Closing Date, Purchaser will be permitted to exercise all of the rights of the Companies and their Subsidiaries under the Intellectual Property Contracts.

 

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Knowledge of Seller, may subject the Companies or a Subsidiary of a Company to material liability under any Environmental Law.

 

(f)                                     Neither the Companies nor any Subsidiary of a Company has received any written notice, demand, letter, claim or request for information relating to the Real Property alleging a violation of or liability under any Environmental Law and neither the Companies nor any Subsidiary of a Company is party to any written proceedings, actions, orders, decrees or injunctions alleging material liability under any Environmental Law.

 

4.12                         Compliance with Law; Licenses and Permits.  Except as disclosed in Section 4.12 of the Disclosure Schedule, since November 20, 2003, the businesses of the Companies and their Subsidiaries have been conducted in compliance in all material respects with all Laws and Governmental Orders applicable to the Companies and their Subsidiaries.  Except as disclosed in Section 4.12 of the Disclosure Schedule, since November 20, 2003, none of the Companies nor any Subsidiary of a Company has received any outstanding or uncured written notice alleging any default or violation of any Law or Governmental Order, nor are there any circumstances Known to Seller that would reasonably be expected to result in any such defaults or violations, except any such defaults or violations which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.  Except as disclosed in Section 4.12 of the Disclosure Schedule, as of the date hereof, there is no pending change of Law that, to the Knowledge of the Seller, would reasonably be expected to have a Seller Material Adverse Effect.  The Companies and the Subsidiaries of the Companies have all material Permits, whether federal, state or local, relating to the ownership and operation of the Companies and their Subsidiaries as are necessary or required for the conduct of the businesses of the Companies and their Subsidiaries, except where the failure to have such Permits would not reasonably be expected to be material to the Companies and their Subsidiaries, taken as a whole.  As of the date hereof, there has not been any actual, nor to Seller’s Knowledge is there any pending, threat of loss of any Permit held or enjoyed by the Companies or a Subsidiary of the Companies which loss was or would reasonably be expected to be material to the Companies and their Subsidiaries, taken as a whole.

 

4.13                         Employee Matters and Benefit Plans .

 

(a)                                   Section 4.13(a)  of the Disclosure Schedule identifies (i) each employment, bonus, deferred compensation, pension, stock option, stock appreciation right, stock purchase, profit-sharing, retirement, supplemental retirement, or other similar employee benefit plan, program, arrangement or practice, (ii) each health, life or disability insurance, vacation, retiree medical or life insurance, severance, termination pay or similar plan, program, arrangement or practice, and (iii) each other agreement or fringe benefit plan, in each case, whether written or unwritten, that is maintained, sponsored, contributed to or required to be contributed to by a Company, Seller, GEC or a Subsidiary of a Company and which covers any current or former employee, officer, director or consultant of a Company or a Subsidiary of a Company, or with respect to which a Company or a Subsidiary of a Company could reasonably be expected to have any liability (contingent or otherwise), including all “employee benefit plans” as defined by Section 3(3) of ERISA (collectively, the “ Plans ”); provided , however , that there shall be no obligation to identify on Section 4.13(a)  of the Disclosure Schedule any Plan that is

 

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not material.  For each Plan, correct and complete copies of the plan documents and summary plan descriptions, the two most recent Form 5500 annual reports, the two most recent actuarial reports, if applicable, all related trust agreements, insurance contracts and funding agreements that implement each such Plan, and the most recent determination letter or opinion letter issued by the Internal Revenue Service (“ IRS ”), if any, have been made available to Purchaser.

 

(b)                                  Neither of the Companies nor any Subsidiary of a Company has any commitment, whether formal or informal, (i) to create any new Plan; (ii) to modify or change any Plan; or (iii) to maintain for any period of time any Plan, except as described in Section 4.13(b) of the Disclosure Schedule.

 

(c)                                   Except as disclosed in Section 4.13(c) of the Disclosure Schedule, (i) neither Company nor any Subsidiary of a Company, or, to the Knowledge of Seller, any Plan or any trustee, third party administrator, fiduciary or sponsor of any Plan, has engaged in any prohibited transactions as defined in Section 406 of ERISA or Section 4975 of the Code for which there is no statutory exemption under Section 408 of ERISA or Section 4975 of the Code for which a Company or a Subsidiary of a Company has incurred or could incur any material liability; (ii) all material filings, reports and descriptions as to such Plans (including Form 5500 annual reports, summary plan descriptions, and summary annual reports) required, since January 1, 2005, to have been made or distributed to participants, the IRS, the United States Department of Labor and other governmental agencies have been made in a timely manner; (iii) there is no material litigation, disputed claim, governmental proceeding or investigation pending or, to the Knowledge of Seller, threatened with respect to any Plan, any related trust, or any fiduciary, trustee, administrator or sponsor of any Plan; and (iv) the Plans have been established, maintained and administered in all material respects in accordance with their governing documents and all applicable laws, including ERISA and the Code.  Each Plan that is intended to qualify under Section 401 of the Code has received a favorable determination or opinion letter from the IRS and, to the Knowledge of Seller, nothing has occurred with respect to the operation of any such Plan that would reasonably be expected to cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code.  All contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Plans to any funds or trusts established thereunder or in connection therewith have been timely made, other than a failure to make contributions that is not material.

 

(d)                                  Except as disclosed in Section 4.13(d) of the Disclosure Schedule, none of the Plans that are “welfare benefit plans,” within the meaning of Section 3(1) of ERISA, provide for continuing benefits or coverage after termination or retirement from employment, except for COBRA rights under a “group health plan” as defined in Section 4980B(g) of the Code and Section 607 of ERISA.  The Companies and any Subsidiaries of the Companies have complied in all material respects with the provisions of Part 6 of Title I of ERISA, Sections 4980B, 9801, 9802, 9811 and 9812 of the Code, and the Health Insurance Portability and Accountability Act (including regulations thereunder).

 

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(e)                                   Except as disclosed in Section 4.13(e) of the Disclosure Schedule, none of the Companies, any Subsidiary of a Company nor any entity required to be aggregated with the Companies or any Subsidiary of a Company under Section 414(b), (c), (m) or (o) of the Code (“ ERISA Affiliate ”) has in the last six (6) years sponsored, participated in, contributed to or incurred any material liability (contingent or otherwise) with respect to either a plan subject to Title IV of ERISA, or a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA (“ Multiemployer Plan ”), and none of the Companies, any Subsidiary of a Company nor any ERISA Affiliate has in the last six (6) years withdrawn in a partial or complete withdrawal from a Multiemployer Plan and incurred any material liability as a result of any such partial or complete withdrawal by the Companies, any Subsidiary of a Company or any ERISA Affiliate from a Multiemployer Plan as described under Sections 4201, 4203, or 4205 of ERISA.  None of the Companies nor any Subsidiary of a Company has incurred any outstanding material liability under Section 4062 of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA.  None of the Companies, any Subsidiary of a Company nor any ERISA Affiliate has engaged in any transaction described in Section 4069 of ERISA.  All contributions required to have been made under any Multiemployer Plan to any funds or trusts established thereunder or in connection therewith have been timely made.

 

(f)                                     Except as set forth in Section 4.13(f) of the Disclosure Schedule, there will be no payment, accrual of additional benefits, acceleration of payments or vesting of any benefit under any Plan or any other agreement or arrangement to which a Company is a party, and no employee, officer, director or consultant of a Company or any Subsidiary of the Companies will become entitled to severance, termination allowance or similar payments, solely by reason of entering into or in connection with the transactions contemplated by this Agreement (whether alone or in combination with any other event).  No payment or benefit that will or may be made in connection with the transactions contemplated by this Agreement (either alone or in combination with any other events) by a Company, a Subsidiary of the Companies, Seller or any of its Affiliates with respect to any employee, officer, director or consultant of a Company or any Subsidiary of the Companies will be characterized as a “parachute payment,” within the meaning of Section 280G(b)(2) of the Code.

 

(g)                                  Each Plan that is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) has been operated in good faith compliance with Sections 409A(a)(2), (3), and (4) of the Code.

 

4.14                         Taxes .

 

(a)                                   Each Company and each Subsidiary has timely filed all Tax Returns that it was required to file and such Tax Returns are true, correct, and complete in all material respects.  All Taxes due or payable by or with respect to the Companies and their Subsidiaries have been or will be timely paid.  There is an adequate accrual on the Financial Statements in accordance with GAAP for all Taxes (other than income Taxes and payroll Taxes) of the Companies and their Subsidiaries that were not yet due or payable as of the date of the Financial Statements.  Seller has made available to Purchaser

 

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true and correct copies of all (i) federal and state income Tax Returns of the Companies and their Subsidiaries that are prepared on a consolidated basis or combined basis on a pro forma basis and only covering the operations of the Companies and their Subsidiaries and relating to all periods since November 20, 2003, (ii) federal, state and local income Tax Returns filed by or with respect to the Companies and their Subsidiaries on a stand-alone basis for all periods since November 20, 2003, and (iii) all other material Tax Returns filed by either or both of the Companies and/or any of their Subsidiaries.  There are no pending audits or administrative or judicial proceedings relating to Taxes of a Company or any Subsidiary of a Company.  There are no existing penalty, interest or deficiency assessments relating to U.S. federal Taxes of a Company or any Subsidiary of a Company, and the Seller has not received any notice of such assessments relating to foreign, state, or local Taxes of any Company or any Subsidiary and to the Knowledge of Seller, there are no such assessments.  None of Seller, the Companies or any of their Subsidiaries has received written notice from any Taxing Authority that it intends to commence such an audit or proceeding.

 

(b)                                  None of the Companies or any of their Subsidiaries is a party to any Tax allocation, sharing, indemnity or similar agreement or arrangement pursuant to which any of them will have any obligation to make any payments after the Closing.

 

(c)                                   None of the Companies or any of their Subsidiaries is a “foreign person” for purposes of Section 1445 of the Code, except as set forth in Section 4.14 of the Disclosure Schedule.

 

(d)                                  None of the Companies or any of their Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

(e)                                   Except with respect to any Affiliated Group of which Seller, its parent or a Company is the common parent, neither Company nor their Subsidiaries (i) has been a member of an Affiliated Group or (ii) has liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.

 

(f)                                     Each Affiliated Group has timely filed all material Tax Returns that it was required to file for each taxable period during which a Company was a member of that Affiliated Group, all such Tax Returns are true, complete and accurate in all material respects, and each Affiliated Group has paid all material Taxes due and payable with respect to each member of the Affiliated Group.  With respect to Taxes and Tax Returns of the Company and its Subsidiaries, the foregoing representation is true, accurate, and complete without regard to any materiality qualifiers.

 

(g)                                  Each of the Companies and their Subsidiaries has withheld and paid to each appropriate Taxing Authority all Taxes required to have been withheld and paid to such authorities in connection with amounts paid or owed to any employee, independent contractor, creditor, stockholder, member or other third party, except as set forth on Section 4.14 of the Disclosure Schedule.

 

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(h)                                  None of the Companies nor any of their Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

 

(i)                                      None of the Companies nor any of their Subsidiaries has participated in any “reportable transaction” as defined in Treas. Reg. § 1.6011-4(b).

 

(j)                                      None of the Companies nor any of their Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any installment sale or open transaction disposition made on or prior to the Closing Date or prepaid amount received on or prior to the Closing Date.  None of the Companies nor any of their Subsidiaries nor any other Person on any of their behalf has (i) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law or (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to the Companies or their Subsidiaries.

 

(k)                                   Each Company and each of its Subsidiaries is member of the “Selling Consolidated Group” (within the meaning of Section 338(h)(10)(B) and Treas. Reg. § 1.338(h)(10)-1(b)(2)) that includes the Seller.

 

(l)                                      ResortQuest Hawaii, LLC is, and has at all times since its conversion from a C corporation in 2002 been, properly treated for federal, state, and local income tax purposes as an entity that is disregarded as separate from its owner pursuant to Treas. Reg. § 301.7701-3.

 

(m)                                The transactions contemplated by this Agreement are not subject to the tax withholding provisions of the Code or the tax withholding provisions of Hawaii state law.  To the Knowledge of Seller, the transactions contemplated by this Agreement are not subject to the withholding provisions of any other state, local or foreign law.

 

4.15                         Absence of Undisclosed Liabilities; Capital Commitments.  Except as disclosed in Section 4.15 of the Disclosure Schedule, and except for liabilities or obligations (i) that are reflected in, accrued, reserved against or otherwise described in the Reference Balance Sheet, (ii) that were incurred after the date of the Reference Balance Sheet in the ordinary course of business and consistent with past practices, (iii) arising pursuant to the terms of contracts or agreements of any Company or a Subsidiary of any Company entered into in the ordinary course of business consistent with past practices that are not required to be reflected as liabilities on a balance sheet, or disclosed in the notes thereto, prepared in accordance with GAAP, or (iv) that are being paid or satisfied by Seller or its Affiliates at Closing in accordance with the terms hereof, none of the Companies or any of their Subsidiaries has any material liabilities or

 

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obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable.

 

4.16                         Absence of Certain Changes.  Except as disclosed in Section 4.16 of the Disclosure Schedule, since the date of the Reference Balance Sheet, (a) neither Company nor any Subsidiary of a Company has (i) split, combined or reclassified its capital stock, (ii) materially changed its accounting principles, practices or methods, except as required by GAAP or applicable Law, (iii) declared or paid any dividend or other distribution of cash or other assets or made any payments to Seller or its Affiliates (in each case, on a net basis), except for participation in Seller’s and/or its Affiliates’ cash management program pursuant to which cash collected by a Company is swept by Seller and/or its Affiliates, which shall continue until Closing, or (iv) suffered any change constituting a Seller Material Adverse Effect and (b) the business of the Companies and their Subsidiaries has been conducted, in all material respects, in the ordinary course of business consistent with past practice.

 

4.17                         Labor Matters.  Except as disclosed in Section 4.17 of the Disclosure Schedule, neither of the Companies nor any Subsidiary of a Company is a party to any collective bargaining agreement or other labor union contract.  There is no labor strike, slowdown or stoppage in progress or, to the Knowledge of Seller, threatened, against or involving either Company or any Subsidiary of a Company.  Since November 20, 2003, neither Company nor any Subsidiary of a Company has experienced any labor strike, slowdown or stoppage.  Seller has no Knowledge of any material activities or proceedings of any labor union to organize any employees of a Company or any Subsidiary of a Company.  Except as set forth in Section 4.17 of the Disclosure Schedule, since January 1, 2006, there has been no request for collective bargaining or for a representation election from any employee, union or the National Labor Relations Board.  All individuals who are performing consulting or other services for a Company or any Subsidiary of a Company are or were correctly classified as either “independent contractors” or “employees,” as the case may be, and, immediately prior to the Closing, will qualify for such classification with immaterial exceptions.  Seller is not aware that any officer or key employee, or that any group of key employees, currently intends to terminate his or her employment with a Company or any Subsidiary of a Company, nor does a Company or any Subsidiary of a Company have a present intention to terminate the employment of any of the foregoing.  Section 4.17 of the Disclosure Schedule sets forth all employment, consulting or other material agreements, written or oral, between a Company or any Subsidiary of a Company and any employee, officer, director or consultant and identifies each such employee or consultant whose employment or services may not be terminated on less than three months’ notice without compensation.  Each Company and each Subsidiary of a Company is in compliance in all material respects with all applicable Laws respecting employment, termination of employment, employment practices, terms and conditions of employment and wages and hours.  There are no pending, or to the Knowledge of Seller, threatened, material claims or actions against a Company or any Subsidiary of a Company under any workers’ compensation policy or long-term disability policy.

 

4.18                         Finder’s Fee .  Except for fees payable to Citigroup Global Markets Inc., which fees are payable by GEC or Seller, neither GEC, Seller, the Companies nor any Subsidiary of the Companies has incurred any liability to any party for any brokerage or finder’s fee or agent’s

 

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commission, or the like, in connection with the transaction contemplated by this Agreement based upon arrangements made by or on behalf of Seller or either Company.

 

4.19                         Insurance .  Section 4.19 of the Disclosure Schedule contains a true and complete list of all policies of property, fire and casualty, product liability, workers’ compensation, and other forms of insurance held by the Companies or their Subsidiaries as of the date hereof.  Seller has heretofore provided Purchaser with a summary of the coverage and terms of each such policy.  All such policies are in full force and effect, no notice of default or termination has been received in respect thereof, and all premiums due thereupon have been paid.  Seller has made available to Purchaser (a) true and complete copies or binders of all such insurance policies and (b) a list of all claims paid under the insurance policies of the Companies and their Subsidiaries since January 1, 2005 and all claims pending as of the date hereof.

 

4.20                         Accounts Receivable .  The accounts receivable reflected on the Reference Balance Sheet or the accounting records of the Companies and their Subsidiaries as of the Closing represent or will represent valid obligations for monies due for goods sold and delivered or services actually performed by the Companies or their Subsidiaries in the ordinary course of business.  There is no material contest, claim, defense or right of set off relating to the amount or validity of any such accounts receivable.

 

4.21                         Related Party Transactions .  Except as set forth in Section 4.21 of the Disclosure Schedule, (a) neither GEC, Seller nor any of their Affiliates, nor any officer or director of GEC, Seller or their Affiliates, nor any officer or director of a Company or the Subsidiaries of a Company (any such person, a “ Related Person ”), is involved, either directly or indirectly, in any material business arrangement or relationship with (i) the Companies or their Subsidiaries (except in connection with their service as an officer or director, as applicable), (ii) any Person that purchases from or sells, licenses or furnishes to the Companies or any of their Subsidiaries any material amount of goods, property, technology, intellectual or other property rights or (iii) any contract or agreement to which either Company or any of their Subsidiaries is a party or by which it may be bound or affected, and (b) no Related Person owns any material property or right, tangible or intangible, used by the Companies or their Subsidiaries in the conduct of their business.

 

4.22                         Books and Records .  The Companies and their Subsidiaries have made and kept (and given Purchaser access to) their true, correct and complete books and records and accounts, which accurately and fairly reflect, in reasonable detail, the activities of the Companies and their Subsidiaries in all material respects.

 

4.23                         Hawaiian Operations .  Except as set forth in Section 4.23 of the Disclosure Schedule, the Companies and their Subsidiaries own or lease all assets used in the conduct of the Hawaiian operations of Seller, GEC and their respective Subsidiaries.

 

4.24                         Payment Card Industry Data Security Standard.   Neither Company nor any of their Subsidiaries has received notice from any credit car