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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
Commission file number 1-14115
RESORTQUEST INTERNATIONAL, INC.
DELAWARE 62-1750352
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
530 OAK COURT DRIVE
SUITE 360
MEMPHIS, TN 38117
(Address of principal executive offices) (Zip Code)
(901) 762-0600
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT.
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in the definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant computed by reference to the closing price at which the stock was
sold as of March 23, 1999 was approximately $170,630,460.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 23, 1999 was 17,188,804 shares of common stock, all of
one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1998 Annual Report Parts I, II and IV
to Shareholders
Portions of the Proxy Statement Parts I, III and IV
for the 1999 Annual Meeting of Shareholders
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TABLE OF CONTENTS
PART I .............................................................................. 1
ITEM 1. Business .................................................................... 1
General ..................................................................... 1
Industry Overview ........................................................... 2
Business Strategy ........................................................... 4
Growth Strategy ............................................................. 5
Markets ..................................................................... 7
Services Offered ............................................................ 8
Marketing ................................................................... 10
Technology .................................................................. 11
Year 2000 Compliance......................................................... 12
Competition ................................................................. 13
Employees ................................................................... 13
Factors That May Affect Future Results ...................................... 14
Government Regulation ....................................................... 21
ITEM 2. Properties .................................................................. 24
ITEM 3. Legal Proceedings ........................................................... 24
ITEM 4. Submission of Matters to a Vote ............................................. 24
Executive Officers of the Company ........................................... 24
PART II ............................................................................. 26
ITEM 5. Market for the Company's Common Equity and Related Stockholder
Matters ..................................................................... 26
ITEM 6. Selected Financial Data ..................................................... 27
ITEM 7. Management's Discussion and Analysis of Financial Condition and Result of
Operations .................................................................. 27
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk .................. 27
ITEM 8. Financial Statements and Supplementary Data ................................. 28
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ........................................................ 28
PART III ............................................................................. 28
ITEM 10. Directors and Executive Officers of the Company ............................. 28
ITEM 11. Executive Compensation ...................................................... 28
ITEM 12. Security Ownership of Certain Beneficial Owners and Management .............. 28
ITEM 13. Certain Relationships and Related Transactions .............................. 28
PART IV ............................................................................. 29
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Forms 8-K ............ 29
14(a)(1) Financial Statements ............................................... 29
14(a)(2) Financial Statement Schedules ...................................... 30
14(a)(3) Exhibits ........................................................... 30
14(b) Reports on Form 8-K ................................................... 37
PART I
ITEM 1. BUSINESS
GENERAL
ResortQuest International, Inc. is a leading 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 offers vacationers
through its operating subsidiaries (the "Operating Companies") a branded network
of high quality, fully furnished, privately-owned condominium and home rentals.
ResortQuest offers property owners superior management services designed to
enhance their rental income.
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 in
November 1998, established quality standards and segmented most of its
approximately 14,400 vacation homes and condominiums into five levels (Quest
Home, Platinum, Gold, Silver and Bronze). In January 1999, ResortQuest launched
resortquest.com, a comprehensive web site that enables consumers to search
through all of the ResortQuest vacation home and condominium rentals, including
photographs and detailed floor plans, and to make reservations directly on-line.
The Company commenced operations on May 26, 1998, concurrently with its
initial public offering and the acquisitions of 12 leading vacation rental and
property management companies and the industry's leading management software
company ("the Founding Companies"). Since that time, ResortQuest has acquired
ten additional vacation rental and property management companies, five in 1998
and five in 1999. The Company currently manages approximately 14,400
condominiums and homes at 29 premier destination resorts nationwide and in
Canada. These resort locations include Gulf Shores, AL; Scottsdale/Phoenix, AZ;
Palm Desert, CA; Aspen, Breckenridge, Dillon and Telluride, CO; Bethany Beach,
DE; Captiva Island, Destin, Ft. Walton Beach and Sanibel Island, FL; St. Simons
Island, GA; Hawaii, Maui, Oahu, and Kauai, HI; Nantucket, MA; Big Sky, MT; the
Outer Banks of North Carolina; Sunriver, OR; Hilton Head Island, SC; Park City,
UT; and Whistler, British Columbia. The Company also manages 11 hotels
aggregating approximately 1,700 hotel rooms located primarily in the Hawaiian
Islands.
ResortQuest 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. Vacation
condominium and home rentals generally offer greater space and convenience than
resort hotel rooms, including separate
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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 suchservices 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. For owners desiring to sell their vacation home or
condominium, ResortQuest offers traditional real estate brokerage services at
many of its resort locations. Owners of vacation homes and condominiums managed
by the Company also may participate in QuestClub, an exclusive travel benefits
program for homeowners initiated in December 1998.
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 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, 1998, the "1998 Operating Companies"
(consisting of the "Founding Companies" (Aston Hotels & Resorts; Maui
Condominium and Home; Brindley and Brindley; Coastal Resorts; The Maury People;
Trupp-Hodnett Enterprises; Collection of Fine Properties; Houston and O'Leary;
Resort Property Management; Telluride Resort Accommodations; Whistler Chalets
and First Resort Software) and the "1998 Acquired Companies" (Abbott Resorts;
Plantation Resort; Whistler Exclusive Properties; Goldpoint Lodging and
Columbine Management)), generated total revenues of approximately $69.4 million,
which includes $35.3 million of revenues from property rental fees and net
income of $6.4 million. 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 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
total market for vacation condominium, home and apartment rentals, which are
marketed predominantly by vacation rental and property management companies, was
over $10 billion in 1996, representing over 20 million vacation property
rentals. Rental 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 overall growth in the leisure travel and tourism industry, which
reflected a 16.1%
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increase in revenues from 1995 to 1997 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. 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 are by referral,
word of mouth, limited local advertising and direct mailings. Before
ResortQuest, there was no central reservations service for vacationers or travel
agents to obtain information regarding most condominium or home rental
opportunities at popular destination resorts across the country or for booking
such rentals once a destination was selected. 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
national network of high quality vacation condominiums and homes with superior
levels of customer service.
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BUSINESS STRATEGY
The Company's objective is to enhance its position as a leading 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. Prior to ResortQuest, there has been no national brand for vacation
condominium and home rentals, no industry standards for quality and a general
lack of access to reliable information regarding rental opportunities for
vacationers. By providing an extensive network of high quality condominiums and
homes in premier destination resorts throughout the United States, the Company
has increased the information available to vacationers and developed a brand
which provides greater confidence and ease to vacationers in making their rental
arrangements. In order to ensure high quality, the Company on November 1, 1998
implemented a comprehensive quality assurance program to assure vacationers that
rental accommodations will meet their expectations. As part of its quality
assurance initiative, ResortQuest has established a basic set of criteria based
on quality, appearance, and amenity standards and has categorized most of the
ResortQuest rental homes and condominiums on five levels.
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
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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's senior
management team has a proven track record of building and operating successful
brands, and breadth of experience to effectively execute ResortQuest's business
plan. David C. Sullivan, Chairman and Chief Executive Officer, is the former
Chief Operating Officer of Promus Hotel Corporation, where he was responsible
for developing, expanding and managing the Hampton Inn, Homewood Suites and
Embassy Suites hotel brands -- all leaders in their market segments. David L.
Levine, President and Chief Operating Officer, is the former President and Chief
Operating Officer of Equity Inns, Inc., a leading real estate investment trust
specializing in hotel acquisitions. Concurrently he served as President and
Chief Operating Officer of Trust Management, Inc. which operated Equity Inns
properties. Jeffery M. Jarvis, Senior Vice President, Chief Financial Officer,
has over 20 years of related finance and accounting experience. Mr. Jarvis is
the former Vice President, Controller of Promus Hotel Corporation and spent over
12 years with Arthur Andersen LLP. The Company's mergers and acquisitions effort
is lead by W. Michael Murphy, Senior Vice President and Chief Development
Officer. Mr. Murphy has been involved with real estate acquisition businesses
and the hospitality industry for more than 25 years. The Company's Senior Vice
President and General Counsel, John K. Lines is the former General Counsel and
Secretary of Insignia Financial Group, Inc., a fully integrated real estate
services company. The Company's marketing strategy is led by Jules S. Sowder,
Senior Vice President and Chief Marketing Officer. Ms. Sowder is the former Vice
President, Marketing for Promus Hotel Corporation, where she had overall
responsibility for marketing the Hampton Inn, Homewood Suites and Embassy Suites
hotel brands. The Company's Senior Vice President and Chief Information Officer,
Frederick L. Farmer, has more than 20 years of experience working for Fortune
500 companies. He most recently spent 12 years with Marriott International as
Senior Vice President, Internet and Desktop Services and was responsible for
positioning the company for Internet commerce.
Maintain Local Relationships and Expertise. The management teams of the
Operating 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.
GROWTH STRATEGY
The Company intends to enhance its position as a leading provider of
vacation condominium and home rentals in premier destination resorts by pursuing
the following growth strategies:
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Implement a National Marketing Strategy. The Company has implemented a
multi-faceted 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. This multi-faceted marketing program
targets consumers and the travel trade through high-profile advertising, direct
mail, e-mail marketing, public relations and promotional programs. In addition,
the Company markets to existing customers to capitalize on cross-selling
opportunities and increase customer loyalty offering customers similar
properties and services in its other resorts. The Company believes the
integrated marketing efforts of the Operating 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. In January 1999, the Company launched resortquest.com,
one of the most comprehensive web sites in the vacation industry.
resortquest.com enables consumers to search through all of the Company's
vacation home and condominium rentals, including photographs and detailed floor
plans, and to make reservations directly on-line. In addition to facilitating
the ability to provide one-stop shopping, the Company intends to utilize further
the expertise of First Resort Software, a Founding Company, to link the
Operating Companies' and future acquired companies' databases in order to
enhance its cross-selling and direct marketing efforts.
Increased Use of Additional Marketing Channels. Historically, most
vacationers have located 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
condominiums and homes in order to expand its market share and strengthen the
local brands of each of the Operating 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 QuestClub, the Company's new travel benefits program for owners
of properties managed by ResortQuest. In addition, in order to capture a higher
portion of the rental business from new condominiums and homes being built in
its markets, the
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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
Operating Companies. First, the Company will strive to improve 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 Operating 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 Operating 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. For
example, the Company has achieved savings through company-wide contracts for
long distance telephone service, credit card fees and insurance.
Build National Market Presence Through Strategic Acquisitions. The vacation
rental and property management industry continues to be 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 has implemented an aggressive acquisition program to
gain a presence in additional premier destination resort locations as well as to
expand its market share in existing resorts. Since the acquisition of the
thirteen Founding Companies in May 1998, ResortQuest has acquired ten additional
vacation rental and property management companies. The Company continues to 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 offers 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 29 premier island,
beach, mountain and desert resorts in the United States and Canada. The
following table sets forth the
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resort locations at which the Company manages vacation home and condominium
properties and the number of properties managed at each resort.
BEACH RESORTS
Gulf Shores, Alabama ......................................... 384
Bethany Beach, Delaware ...................................... 626
The Beaches of South Walton,
Captiva Island, Destin, Ft. Myers,
Okalossa Island and
Sanibel Island, Florida ..................................... 3,139
St. Simons Island, Georgia .................................. 404
Nantucket, Massachusetts .................................... 1,200
The Outer Banks, North Carolina ............................. 456
Hilton Head Island, South Carolina .......................... 343
DESERT RESORTS
Scottsdale and Phoenix, Arizona ............................. 150
Palm Desert and
Palm Springs, California ................................... 295
HAWAIIAN RESORTS
Hawaii, Kauai, Maui and Oahu, Hawaii ........................ 5,124
MOUNTAIN RESORTS
Whistler, British Columbia .................................. 465
Aspen, Breckenridge, Dillon and Telluride, Colorado ......... 1,097
Big Sky, Montana ............................................ 207
Sunriver, Oregon ............................................ 162
The Canyons, Deer Valley
and Park City, Utah ........................................ 348
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TOTAL(1)..................................................... 14,400
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(1) Includes nonexclusive management contracts in Colorado and Massachusetts of
130 and 1,200 units, respectively.
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, ResortQuest in January 1999 launched
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resortquest.com, an online, interactive web site that provides consumers with
instant access to ResortQuest's inventory of approximately 14,400 vacation
rental properties. Consumers can check availability and rental rates, view
extensive information about each property, including photographs and floor
plans, and make reservations directly online. ResortQuest also provides
vacationers with catalogs containing color photographs and descriptions of
available condominiums or homes. Reservations also are taken over ResortQuest's
24-hour toll-free reservations line by agents who are familiar with the specific
condominiums and homes.
To assure that vacationers' expectations are met by the condominium or home
selected, ResortQuest in November 1998 implemented quality standards and
accommodation categories for each of its vacation rental properties. The Company
has established a basic set of criteria based on quality, appearance and amenity
standards for each property. Each property also has been rated in one of five
levels, Quest Home, Platinum, Gold, Silver and Bronze, based on its furnishings,
soft goods, flooring, kitchen/appliances, televisions and stereos, bathrooms,
decor, and other features such as swimming pools and exercise facilities.
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 by combining local management expertise and
attention with the marketing resources of a national brand. In most markets, the
Company will assume complete responsibility for rental management of the
condominium or home, including marketing, renting and maintaining the specific
property as well as managing the common properties and homeowners' associations.
The Company currently engages in extensive marketing activities, including its
interactive web site, resortquest.com, print advertising in high-profile
nationwide publications, and e-mail marketing, as well as 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, the Company performs
9
periodic inspections and makes recommendations to property owners for
maintenance, refurbishment's 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
Operating Companies provide traditional real estate brokerage services,
including listing and showing the property. In 1998, net real estate sales
commissions represented approximately 12% of pro forma combined revenues. The
relative amount of such revenue varies by Operating 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.
Owners of condominiums and homes managed by ResortQuest also may
participate in QuestClub, a travel benefits program for the Company's homeowners
initiated in December 1998. QuestClub members receive a 70 percent savings on
vacation home and condominium rentals for stays of up to 28 days each year at
other QuestClub member properties. The availability of QuestClub privileges is
limited during extremely popular times to preserve the revenue potential for
each participating homeowner. The QuestClub annual membership fee is $129.
MARKETING
The marketing efforts of traditional vacation rental and property
management companies, including the Operating 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. Since its initial
public offering, ResortQuest also has developed a multi-faceted, national
marketing campaign targeting consumers and the travel trade through high-profile
print advertising, direct mail, e-mail marketing, public relations and
promotional programs. The Company also 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. 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.
10
ResortQuest believes that its most important marketing resource is its web
site, resortquest.com, which was launched in January 1999. For the first time,
consumers can visit resort destinations across North America, view photographs
and floor plans and make reservations directly on-line. The Company believes
that a national marketing campaign should increase the effectiveness of the
Operating 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 intends to capitalize on its extensive market presence and
further increase its use of the world wide web, travel agents and the print
media. The Company believes that its extensive 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 Software, one of the Founding Companies, is a leading provider
of integrated management, reservations and accounting software for the vacation
rental and property management industry. Fourteen of the Operating Companies and
over 700 other vacation rental and property management companies use First
Resort Software's software programs. First Resort Software'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 Software'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
condominiums 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 Software also offers
additional modules and interfaces, including a work order generator, activities
management system, credit card interface and on-line booking interface through
the world wide web.
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 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 Operating Companies' and future acquired
11
companies' databases. The Company intends to develop proprietary data mining
tools in order to enhance its cross-selling and direct marketing efforts.
YEAR 2000 COMPLIANCE
The vacation property management industry uses a complex suite of software.
The areas of greatest risk of software failure due to Year 2000 problems are:
o Property Management Systems (guest services and back-office accounting)
o Reservations/Inventory Management
o Hardware BIOS (the software that runs "beneath" the operating system)
o Analysis and/or management reporting tools
o Embedded control systems (HVAC, elevator controls, etc.)
ResortQuest is in the process of evaluating the various components of its
operating environment (personal computer workstations and related equipment,
network servers, telephone and data communication equipment, point of sale
devices, software applications (both third party and internally developed
software)), and embedded technology such as micro controllers. ResortQuest
expects to complete the analysis and implement any corrective measures in early
1999. The Year 2000 project is not expected to delay or supercede other planned
IT projects.
Based upon the information gathered to date, ResortQuest estimates the
upper range of the cost of the analysis and subsequent replacement or upgrade of
system components which are not Year 2000 compliant, is approximately $600,000.
A significant portion of the total potential expense estimate relates to the
cost of replacement of personal computer hardware, servers and
telecommunications equipment. Funding of Year 2000 costs is expected to be
provided by cash flows from operations.
The impact upon ResortQuest by Year 2000 issues is greatest in the areas of
property management systems, telecommunications, and financial
accounting/reporting. ResortQuest believes that the consequences of the Year
2000 issues with respect to adverse impact upon the Company's results of
operations will not be material.
ResortQuest will have contingency plans in place designed to mitigate the
impact of Year 2000 issues. The contingency Plan will include items such as:
offsite and/or manual reservations/inventory management, property management
(guest services, back-office functions, work order administration), financial
accounting and reporting, and management reporting. All contingency plans are
expected to be developed, tested and implemented by the end of the third quarter
1999.
12
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 Operating Companies and subsequently acquired companies.
EMPLOYEES
The Company had approximately 2,800 employees as of December 31, 1998. 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.
13
FACTORS THAT MAY AFFECT FUTURE RESULTS
Our disclosure and analysis in this report and in our 1998 Annual Report to
Shareholders contain some forward-looking statements. Forward-looking statements
give our current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to future actions,
future performance or results of current and anticipated services, sales
efforts, expenses, and financial results. From time to time, we also may provide
oral or written forward-looking statements in other materials we release to the
public.
Any or all of our forward-looking statements in this report, in the 1998
Annual Report and in any other public statements we make may turn out to be
wrong. They can be affected by inaccurate assumptions we might make or by known
or unknown risks and uncertainties. Many factors mentioned in the discussion
above will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our 10-Q, 8-K and 10-K reports to the SEC. Also note that we provide
the following cautionary discussion of risks, uncertainties and possibly
inaccurate assumptions relevant to our businesses. These are factors that we
think could cause our actual results to differ materially from expected and
historical results. Other factors besides those listed here could also adversely
affect the Company. This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION. ResortQuest
was founded in September 1997 but conducted no operations and generated no
revenues prior to its initial public offering in May 1998, when it
simultaneously acquired the Founding Companies. Subsequent to May 1998, we
acquired ten additional vacation rental and property management companies. Prior
to such acquisitions, the Operating Companies operated as separate independent
entities. Currently, the Company relies on the existing reporting systems of the
Operating Companies for financial reporting. The pro forma combined financial
statements of the Founding Companies and the 1998 Acquired Companies cover
periods when these companies and ResortQuest were not under common control or
management. Consequently, they may not be indicative of our future financial or
operating results.
The Company's senior management group was assembled in connection with the
initial public offering. We cannot assure you that the management group will be
able to continue to manage effectively the combined entity or effectively
implement our operating and growth
14
strategies. If we are unable to integrate successfully the Operating Companies
and future acquisitions, it would have a material adverse effect on our business
and financial results. It also would make it unlikely that our acquisition
program will continue to be successful.
The Operating 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 Operating 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 Operating Companies.
RISKS ASSOCIATED WITH THE VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY;
GENERAL ECONOMIC CONDITIONS. Our business and financial results are dependent
upon various factors affecting the vacation rental and property management
industry. Factors such as the following could have a material adverse effect on
our business and financial results:
o a reduction in the demand for vacation properties, particularly for
beach and island resort properties and mountain resort properties;
o adverse changes in travel and vacation patterns;
o adverse changes in the tax treatment of second homes;
o an oversupply of vacation properties;
o a downturn in the leisure and tourism industry;
o increases in gasoline or airfare prices; and
o adverse weather conditions or natural disasters, such as hurricanes,
tidal waves or tornadoes.
SEASONALITY AND QUARTERLY FLUCTUATIONS. Our business is highly seasonal.
The financial results of each of the Operating Companies have been subject to
quarterly fluctuations caused primarily by the seasonal variations in the
vacation rental and property management industry. Peak seasons for the Operating
Companies depend upon whether the resort is primarily a summer or winter
destination. During 1998, we derived approximately 30.0% of our pro forma
revenues and 71.8% of our operating income in the first quarter and 24.4% of our
pro forma revenues and 25.7% of our operating income in the third quarter.
Although the seasonality of our financial results may be partially mitigated by
the geographic diversity of the Operating Companies and any future acquisitions,
we expect a significant seasonal factor with respect to our financial results to
continue.
15
Our quarterly financial results 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 our quarterly financial results
could adversely affect the price of the Common Stock which in turn could
adversely affect our proposed acquisition strategy.
RISKS OF DEPENDENCE ON THIRD PARTIES. We manage properties that are
generally located in destination resorts which depend upon third parties for the
development of new homes and condominiums, as well as resort amenities such as
golf courses and chair lifts. If such third parties fail to continue to develop
or to invest in resort facilities and amenities, it could have a material
adverse effect on the rental value of the Company's properties and,
consequently, on our business and financial results.
We also depend on travel agents, package tour providers and wholesalers for
a significant portion of our revenues. During 1998, we derived approximately 24%
of our combined revenues from sales made through or to travel agents, package
tour providers and wholesalers. If travel agents, package tour providers and
wholesalers fail to continue to recommend or package ResortQuest's vacation
properties, it could have a material adverse effect on our business and
financial results.
FACTORS AFFECTING INTERNAL GROWTH. ResortQuest has experienced revenue and
earnings growth on a pro forma combined basis over the past few years, including
(i) increases in pro forma combined revenues and earnings of approximately 6.8%
and 40.7%, respectively, from 1996 to 1997, and (ii) increases in pro forma
combined revenue of approximately 22.2% and decreases in pro forma combined
earnings of 8.0%, from 1997 to 1998. The total market for vacation condominium,
home and apartment rentals, which are marketed predominantly by vacation rental
and property management companies, experienced an 8.7% increase in total
revenues from 1995 to 1996. We cannot assure you that we or the total market for
vacation property rentals will continue to experience growth. Factors affecting
our ability to continue to experience internal growth include, the ability to
maintain existing relationships with property owners, expand the number of
properties under management and cross-sell among the Operating Companies, as
well as continued demand for such rentals.
16
RISKS OF GEOGRAPHIC CONCENTRATION OF OPERATIONS. ResortQuest manages
properties that are significantly concentrated in beach and island resorts
located in Florida and the Hawaiian Islands and mountain resorts located in
Colorado and Utah. The following table sets forth the December 31, 1998 combined
pro forma revenue and percentage of total pro forma revenues derived from each
location.
COMBINED % OF TOTAL
REGION REVENUES REVENUES
- ----------------------------------- ---------- -----------
Florida .................... $12,821 18.4%
Hawaii ..................... 21,874 31.5%
Colorado and Utah* ......... 12,619 18.2%
Other ...................... 22,133 31.9%
-------
Total ...................... $69,447
=======
----------
* excludes revenues of First Resort Software
Adverse events or conditions which affect these 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
our operations, than if our operations were more geographically diverse.
RISKS ASSOCIATED WITH ACQUISITIONS. ResortQuest 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. We cannot assure you that we will be able to identify, acquire or
profitably manage additional businesses or successfully integrate acquired
businesses into our existing operations without substantial costs, delays or
other operational or financial problems. It is possible that competition may
increase for companies we might seek to acquire. In such event, there may be
fewer acquisition opportunities available to us, as well as higher acquisition
prices.
Acquisitions also involve a n umber of special risks which could have a
material adverse effect on our business and financial results. These risks
include the following:
o the failure of acquired companies to achieve expected financial results;
o diversion of management's attention;
o failure to retain key personnel;
o amortization of acquired intangible assets; and
17
o increased potential for customer dissatisfaction or performance problems
at a single acquired company to affect adversely our reputation and brand
name.
We may also seek international acquisitions that may be subject to
additional risks associated with doing business in such countries. We
continually review various strategic acquisition opportunities and have held
discussions with a number of such acquisition candidates. ResortQuest is a party
to two agreements to acquire vacation rental and property management companies
in Crested Batte, Colorado, and Whistler, British Columbia. These agreements,
which do not represent significant acquisitions, are subject to customary terms
and conditions to closing. ResortQuest expects the acquisitions to close prior
to the end of the first quarter of fiscal 1999 and anticipates that the
transactions will be accounted for as a pooling of interests.
ResortQuest intends to use shares of Common Stock to finance a portion of
the consideration for future acquisitions. If the Common Stock does not maintain
a sufficient market value, or the owners of businesses we may seek to acquire
are otherwise unwilling to accept shares of Common Stock as part of the
consideration for the sale of their businesses, we may be required to utilize
more of our cash resources, if available, in order to implement our acquisition
strategy. If we have insufficient cash resources, our growth could be limited
unless we are able to obtain additional funds through debt or equity financings.
We cannot assure you that our cash resources will be sufficient, or that other
financing will be available on terms we find acceptable. If we are unable to
obtain financing sufficient for all of our desired acquisitions, we may be
unable to implement fully our acquisition strategy.
MANAGEMENT OF GROWTH. We plan to continue to grow internally and through
acquisitions. We will expend significant time and effort in expanding the
Operating Companies and in identifying, completing and integrating acquisitions.
We cannot assure you that our systems, procedures and controls will be adequate
to support our 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. We
cannot assure you that we will be able to identify and retain such additional
management. If we are unable to manage our growth efficiently and effectively,
or we are unable to attract and retain additional qualified management, it could
have a material adverse effect on our business and financial results.
RELIANCE ON KEY PERSONNEL. Our business substantially depends on the
efforts and relationships of David C. Sullivan, Chairman and Chief Executive
Officer, the other executive officers of the Company and the senior management
of the Operating Companies. Furthermore, we 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, or if we are unable to
attract and retain other qualified employees, it could have a material adverse
effect on our business and financial results. Although ResortQuest has entered
into employment agreements with each of ResortQuest's executive officers and the
majority of the managers of the Operating Companies, we cannot assure you that
any of these individuals will continue in his or her present capacity for any
particular period of time.
18
SUBSTANTIAL AMOUNTS OF GOODWILL. Approximately $130.2 million, or 70.4%, of
the Company's total assets as of December 31, 1998, is net goodwill, which
represents the excess of consideration we paid over the estimated fair market
value of net assets we acquired in business combinations accounted for as
purchases. ResortQuest generally amortizes goodwill on a straight line method
over a period of 40 years, except for First Resort Software which is being
amortized over 15 years, with the amount amortized in a particular period
constituting a non-cash expense that reduces our net income. Amortization of
goodwill resulting from certain past acquisitions, and additional goodwill
recorded in certain future acquisitions may not be deductible for tax purposes.
In addition, we will periodically evaluate the recoverability of goodwill by
reviewing the anticipated undiscounted future cash flows from operations and
comparing such cash flows to the carrying value of the associated goodwill. If
goodwill becomes impaired, we would be required to write down the carrying value
of the goodwill and incur a related charge to our income. A reduction in net
income resulting from a write down of goodwill would currently affect our
financial results and could have a material and adverse impact upon the market
price of the Common Stock.
SHORT-TERM RENTAL AND PROPERTY MANAGEMENT CONTRACTS. We provide 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. If property owners do not renew a significant number of
management contracts or we are unable to attract additional property owners, it
would have a material adverse effect on our business and financial results. In
addition, although most of our contracts are exclusives, industry standards in
certain geographic markets dictate that rental services be provided on a
non-exclusive basis. Approximately 1.1% of our revenues for 1998 on a pro forma
combined basis were derived from rental services provided on a non-exclusive
basis. We are unable to determine the percentage of the national rental services
market that is provided on a non-exclusive basis.
RISKS ASSOCIATED WITH HOMEOWNERS' ASSOCIATION MANAGEMENT CONTRACTS. We
currently provide homeowners' association management services at numerous
condominium developments pursuant to contracts with the homeowners' association
present at such developments. We frequently provide rental management services
for a significant percentage of the condominiums within these developments.
Providing management services for homeowners' associations frequently leads the
associations to request that we manage and control the front desk operations,
laundry facilities and other related services of the condominium developments.
Controlling these services often gives us a competitive advantage over other
vacation rental and property management companies in retaining the condominiums
we currently manage and in attracting new property owners.
We cannot assure you that a homeowners' association will not terminate its
management agreement with us. If a homeowners' association terminates a
management agreement, we could
19
lose the control or management of the front desk and related services, thereby
eliminating our competitive advantage. If we lose our competitive advantage, it
could cause a reduction in the number of properties we manage and an increase in
the expenses required to retain and maintain the condominiums we manage at that
site. Any such termination could have a material adverse effect on our business
and financial results.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE. As described above, ResortQuest is
working to address "Year 2000" issues. If we should fail to identify or fix all
such issues in our own operations, or if we are affected by the inability of a
sole-source supplier or a major customer to continue operations due to such a
problem, our operations could be affected.
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. We
compete for vacationers and property owners primarily with local vacation rental
and property management companies located in our 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.
We also compete for vacationers with large hotel and resort companies. Many
of these competitors are large companies with greater financial resources than
ResortQuest, 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, they would
constitute formidable competition for our business. Such competition could cause
us to lose management contracts, increase expenses or reduce management fees
which could have a material adverse effect on our business and financial
results.
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. The executive officers and
directors of ResortQuest, and entities affiliated with them, as of December 31,
1998, own shares of Common Stock representing approximately 39% of the total
voting power of the Common Stock (approximately 41% if all shares of Restricted
Common Stock (which are entitled to one-half vote per share) were converted into
Common Stock). These persons, if acting together, will likely be able to
exercise control over the Company's affairs, to elect all of the directors and
to control the disposition of any matter submitted to a vote of stockholders.
20
PORTION OF REVENUES DERIVED FROM REAL ESTATE SALES. We derived
approximately 12% of our pro forma combined revenues for 1998 on a combined
basis 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 our business and financial results.
GOVERNMENT REGULATION OF VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY.
ResortQuest's operations are subject to various federal, state and local laws
and regulations, including licensing requirements applicable to real estate
operations, laws and regulations relating to consumer protection and local
ordinances. Many states have adopted specific laws and regulations which
regulate our activities, such as:
o real estate and travel services provider license requirements;
o anti-fraud laws;
o telemarketing laws;
o environmental laws;
o the Fair Housing Act;
o the Americans With Disabilities Act; and
o labor laws.
We believe that we are in material compliance with all federal, state,
local and foreign laws and regulations to which we are currently subject.
However, we cannot assure you that the cost of qualifying under applicable
regulations in all jurisdictions in which we desire to conduct business will not
be significant or that we are actually in compliance with all applicable
federal, state, local and foreign laws and regulations. Compliance with or
violation of any current or future laws or regulations could require us to make
material expenditures or otherwise have a material adverse effect on our
business and financial results.
RELATIONSHIPS WITH OPERATING COMPANY AFFILIATES; POTENTIAL CONFLICTS OF
INTERESTS. Several lease agreements, management contracts and other agreements
with stockholders of the Operating Companies and entities controlled by them
continued after the closing of the acquisitions of the Operating Companies. We
have also entered into certain similar agreements that became effective upon
such acquisitions. In addition, we may enter into similar agreements in the
future. Although we believe that the existing agreements we have entered into
with related persons, other than a loan agreement with the former principal
stockholder of Aston Hotels & Resorts, are and that all future agreements will
be on terms no less favorable to ResortQuest than
21
it could obtain unrelated third parties, conflicts of interests may arise
between the Company and these related persons.
At December 31, 1998 the former principal stockholder of Aston Hotels &
Resorts owed ResortQuest, either directly or through entities controlled by him
(including properties managed by Aston Hotels & Resorts), approximately $4.2
million. $4.0 million of this amount is fully collateralized by cash or cash
equivalents and real estate or by the former principal stockholder's personal
guarantee (not to exceed $1.0 million).
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON
STOCK. The market price of the Common Stock could drop as a result of the sale
of substantial amounts of Common Stock in the public market, or the perception
that such sales could occur.
ResortQuest has 16,891,927 shares of Common Stock outstanding as of
December 31, 1998. The 6,670,000 shares of Common Stock sold in the initial
public offering are freely tradable unless held by affiliates of the Company.
Simultaneous with the closing of the acquisition of the Founding Companies, the
stockholders of the Founding Companies received, in the aggregate, 6,119,656
shares. Management and founders of ResortQuest own 3,134,630 shares. These
9,254,286 shares have not been registered under the Securities Act of 1933, 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 holders of these shares have agreed with ResortQuest
not to sell, transfer or otherwise dispose of any of these shares for one year
following the closing of the initial public offering (until May 26, 1999).
However, the holders of these shares also have certain demand registration
rights beginning two years after the initial public offering and certain
piggyback registration rights with respect to these shares.
ResortQuest has registered 3,000,000 shares of Common Stock for use as
consideration for recent and future acquisitions. 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. ResortQuest has issued
967,641 shares of Common Stock in connection with the five acquisitions which
closed in 1998 after the initial public offering. All of these shares were
registered under the Securities Act and 205,868 of these shares are subject to
certain contractual transfer restrictions expiring between May 30, 1999 and
February 1, 2000.
POSSIBLE VOLATILITY OF STOCK PRICE. There was no public market for the
Common Stock prior to the initial public offering. Although a public market for
the common stock has developed, we cannot assure you that the public market for
the Common Stock will be active or continue. The following factors, among
others, may cause the market price of the Common Stock to significantly increase
or decrease:
o variations in our annual or quarterly financial results or the financial
results of our competitors;
22
o changes by financial research analysts in their estimates of our
earnings;
o our failure to meet financial research analysts' estimates of our
earnings;
o conditions in the general economy, or the vacation and property rental
management or leisure and travel industries in particular;
o unfavorable publicity about ResortQuest or our industry; and
o significant price and volume volatility in the stock market in general
for reasons unrelated to ResortQuest.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS. Certain
provisions of our Certificate of Incorporation could make it more difficult for
a third party to acquire control of ResortQuest, even if such change in control
would be beneficial to stockholders. The directors are allowed to issue
preferred stock without stockholder approval. Such issuances could make it more
difficult for a third party to acquire ResortQuest. The Company's By-Laws
contain other provisions that may have an anti-takeover effect.
On February 25, 1999, the Board of Directors adopted a shareholder rights
plan that is designed to protect company stockholders in the event of takeover
action that would deny them the full value of their investment. Under this plan,
a dividend distribution of one right for each share of Common Stock was declared
to holders of record at the close of business on March 15, 1999. The rights will
become exercisable only in the event, with certain exceptions, an acquiring
party accumulates 15 percent or more of ResortQuest's voting stock, or if a
party announces an offer to acquire 15 percent or more of ResortQuest's voting
stock. The rights will expire on March 15, 2009. Each right will entitle the
holder to buy one one-hundredth of a share of a new series of preferred stock at
a price of $87.00. In addition, upon the occurrence of certain events, holders
of the rights will be entitled to purchase either ResortQuest stock or shares in
an "acquiring entity" at half of market value. ResortQuest generally will be
entitled to redeem the rights at $0.01 per right at any time until the date on
which a 15 percent position in its voting stock is acquired by any person or
group. The rights plan is designed to prevent the use of coercive and/or abusive
takeover techniques and to encourage any potential acquiror to negotiate
directly with the Board for the benefit of all stockholders. In addition, the
rights plan is intended to provide increased assurance that a potential acquiror
would pay an appropriate control premium in connection with any acquisition of
ResortQuest. Nevertheless, the rights plan could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change of
control of ResortQuest.
23
ITEM 2. PROPERTIES
The Company has 95 properties located in 11 states and 27 cities in the
United States and Canada. These properties consist principally of offices and
maintenance, laundry and storage facilities. The Company owns 20 of these
facilities and leases the remaining 75 properties. The Company considers all of
its owned and leased properties to be suitable and adequate for the conduct of
its business.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the ordinary
course of its business. ResortQuest does not believe that any of these actions
will have a material adverse effect on its business, financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
As of March 23, 1999, the following executive officers of the Company hold
the offices indicated until their successors are chosen and qualified after the
next annual meeting of shareholders:
David C. Sullivan ........... 59 Chairman and Chief Executive Officer
David L. Levine ............. 51 President and Chief Operating Officer
Jeffery M. Jarvis ........... 43 Senior Vice President and Chief Financial Officer
W. Michael Murphy ........... 52 Senior Vice President, Development
Jules S. Sowder ............. 42 Senior Vice President, Marketing
John K. Lines ............... 39 Senior Vice President, General Counsel and Secretary
Frederick L. Farmer ......... 49 Senior Vice President and Chief Information Officer
DAVID C. SULLIVAN became the Chairman and Chief Executive Officer and a
director of the Company in May 1998. 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 franchiser,
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.
DAVID L. LEVINE became the President and Chief Operating Officer and a
director of the Company in May 1998. Mr. Levine was President and Chief
Operating Officer of Equity Inns, Inc., a real estate investment trust that
specializes in hotel acquisitions, from June 1994 to April 1998. Mr. Levine was
also President and Chief Operations Officer of Trust Management Inc.,
24
which operated Equity Inns properties, from June 1994 until November 1996. Prior
to that, he was President of North American Hospitality, Inc., a hotel
management and consulting company, which he formed in 1985.
JEFFERY M. JARVIS became Senior Vice President and Chief Financial Officer
of the Company in May 1998. 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 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 became the Senior Vice President of Development of the
Company in May 1998. 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 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 became the Senior Vice President of Marketing of the
Company in May 1998. 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.
JOHN K. LINES became Senior Vice President, General Counsel and Secretary
of the Company in May 1998. Mr. Lines was General Counsel and Secretary of
Insignia Financial Group, Inc., a fully integrated real estate services company
from 1994 until March 1998. He also served as Vice President and Secretary of
Insignia Properties Trust from 1996 until March 1998. From May 1993 until June
1994, Mr. Lines was employed as Assistant General Counsel and Vice President of
Ocwen Financial Corporation, a unitary thrift holding company. From October 1991
until April 1993, Mr. Lines was employed as Senior Attorney of Banc One
Corporation in Columbus, Ohio.
FREDERICK L. FARMER became Senior Vice President and Chief Information
Officer of the Company in May 1998. Mr. Farmer was Senior Vice President for
Internet and Desktop Services of Marriott International from November 1996 to
April 1998. He also served as Vice President of Data Resources & Services for
Marriott International from March 1992 to November 1996.
25
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for our Common Stock is the New York Stock Exchange.
Information required by this item concerning quarterly sales price data is
incorporated by reference from the table Quarterly Results of Operations on page
40 of the 1998 Annual Report to Shareholders.
The following is certain information concerning all sales of securities by
the Company during the year ended December 31, 1998 that were not registered
under the Securities Act of 1933:
(a) ResortQuest was formed in September 1998 and issued 293.9481 shares of
Common Stock to Alpine Consolidated II, LLC and Capstone Partners, LLC
at a per share price of $.01. The offer and sale of these shares was
exempt from registration under the Securities Act in reliance on
Section 4(2) thereof because, among other things, the offers and sales
were made to a small number of sophisticated investors who had access
to information about the Company and were able to bear the economic
risk of loss of their investment. On March 9, 1998, the number of
these shares was increased by a 8,834.76-for-one stock split.
(b) In January and February of 1998, the Company issued a total of 518,369
shares of Common Stock at a price of $.01 per share to persons who
were to become members of the management of ResortQuest. The offer and
sale of these shares was exempt from registration under the Securities
Act in reliance on Section 4(2) thereof because, among other things,
the offers and sales were made to a small number of sophisticated
investors who had access to information about the company and were
able to bear the economic risk of loss of their investment.
26
(c) In May 1998, the Company issued the following shares in connection
with the acquisition of the Founding Companies:
SHARES OF
COMPANY COMMON STOCK
---------------------------------------------------------------- -------------
Aston Hotels & Resorts ................................... 1,708,333
Brindley & Brindley Realty and Development, Inc. ......... 195,000
Coastal Resorts Realty L.L.C. ............................ 816,667
Collection of Fine Properties, Inc. ...................... 404,167
First Resort Software, Inc. .............................. 290,767
Houston and O'Leary Company .............................. 248,167
Maui Condominium and Home Realty, Inc. ................... 166,667
The Maury People, Inc. ................................... 150,000
Priscilla Murphy Realty, Inc. ............................ 1,144,036
Resort Property Management, Inc. ......................... 108,333
Telluride Resort Accommodations, Inc. .................... 125,103
Trupp-Hodnett Enterprises, Inc. .......................... 627,833
Whistler Chalets Limited ................................. 134,583
The offer and sale of these shares was exempt from registration under
the Securities Act in reliance on Section 4(2) thereof because, among
other things, the offers and sales were made to a small number of
sophisticated investors who had access to information about the
Company and were able to bear the economic risk of loss of their
investment.
ITEM 6. SELECTED FINANCIAL DATA
Financial information required by this item is incorporated by reference
from the Selected Financial Data on page 40 of the 1998 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is incorporated by reference from the
Management's Discussion and Analysis on pages 11 through 20 of the 1998 Annual
Report to Shareholders.
ITEMS 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference from the
discussion under the heading Management's Discussion and Analysis on page 20 of
the 1998 Annual Report to Shareholders.
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated by reference from the
Report of Independent Public Accountants found on page 39, from the consolidated
financial statements and supplementary data on pages 21 through 38 of the 1998
Annual Report to Shareholders, and from the audited financial statements of
Priscilla Murphy Realty, Inc., Collection of Fine Properties, Inc., Coastal
Resorts Management, Inc. and Coastal Resorts Realty L.L.C., First Resort
Software, Inc., Houston and O'Leary Company, Brindley & Brindley (including
Brindley & Brindley Realty and Development, Inc. and B&B On The Beach, Inc.),
The Maury People, Inc., Resort Property Management, Inc., Telluride Resort
Accommodations, Inc. and Trupp-Hodnett Enterprises, Inc. filed as Exhibits 99.2
through 99.11 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information about Directors of the Company is incorporated by reference
from the discussion under Item 1 of our Proxy Statement for the 1999 Annual
Meeting of Shareholders. The balance of the response to this item is contained
in the discussion entitled Executive Officers of the Company in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information about executive compensation is incorporated by reference from
the discussion under the heading Compensation of Executive Officers in our Proxy
Statement for the 1999 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information about security ownership of certain beneficial owners and
management is incorporated by reference from the discussion under the heading
Security Ownership of Management and Principal Stockholders in our Proxy
Statement for the 1999 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information about certain relationships and transactions with related
parties is incorporated herein by reference from the discussion under the
heading Certain Relationships and Related Transactions under Item 1 of our Proxy
Statement for the 1998 Annual Meeting of Shareholders.
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
14(a)(1) FINANCIAL STATEMENTS
ResortQuest International, Inc. The following consolidated financial
statements, related notes and report of independent public accountants, from the
1998 Annual Report to Shareholders, are incorporated by reference into Item 8 of
Part II of this report.
PAGES(S) IN THE 1998 ANNUAL
REPORT TO SHAREHOLDERS
----------------------------
Consolidated Balance Sheets ............................. 21
Consolidated Statements of Income ....................... 22
Consolidated Statements of Stockholders' Equity ......... 24
Consolidated Statements of Cash Flows ................... 25
Notes to Consolidated Financial Statements .............. 26
Report of Independent Public Accountants ................ 39
Quarterly Results of Operations ......................... 40
Selected Financial Data ................................. 40
Priscilla Murphy Realty, Inc. The audited financial statements, related
notes and report of independent public accountants filed as Exhibit 99.2 of this
report are incorporated by reference into Item 8 of Part II of this report.
Collection of Fine Properties, Inc. The audited financial statements,
related notes and reports of independent public accountants filed as Exhibit
99.3 of this report are incorporated by reference into Item 8 of Part II of this
report.
Coastal Resorts Management, Inc. and Coastal Resorts Realty L.L.C. The
audited financial statements, related notes and report of independent public
accountants filed as Exhibit 99.4 of this report are incorporated by reference
into Item 8 of Part II of this report.
First Resort Software, Inc. The audited financial statements, related notes
and report of independent public accountants filed as Exhibit 99.5 of this
report are incorporated by reference into Item 8 of Part II of this report.
Houston and O'Leary Company. The audited financial statements, related
notes and report of independent public accountants filed as Exhibit 99.6 of this
report are incorporated by reference into Item 8 of Part II of this report.
29
Brindley & Brindley (including Brindley & Brindley Realty and Development,
Inc. and B&B On the Beach, Inc.). The audited financial statements, related
notes and report of independent public accountants filed as Exhibit 99.7 of this
report are incorporated by reference into Item 8 of Part II of this report.
The Maury People, Inc. The audited financial statements, related notes and
report of independent public accountants filed as Exhibit 99.8 of this report
are incorporated by reference into Item 8 of Part II of this report.
Resort Property Management, Inc. The audited financial statements, related
notes and report of independent public accountants filed as Exhibit 99.9 of this
report are incorporated by reference into Item 8 of Part II of this report.
Telluride Resort Accommodations, Inc. The audited financial statements,
related notes and report of independent public accountants filed as Exhibit
99.10 of this report are incorporated by reference into Item 8 of Part II of
this report.
Trupp-Hodnett Enterprises (including Trupp-Hodnett Enterprises, Inc. and
THE Management Company). The audited financial statements, related notes and
report of independent public accountants filed as Exhibit 99.11 of this report
are incorporated by reference into Item 8 of Part II of this report.
14(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because they are not required or the information is
given elsewhere in the financial statements. The financial statements of
unconsolidated subsidiaries are omitted because they are not applicable.
14(a)(3) EXHIBITS
These exhibits are available upon request at a charge of ten cents per
page. Requests should be directed to John K. Lines, Secretary, ResortQuest
International, Inc., 530 Oak Court Drive, Suite 360, Memphis, TN 38117
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 (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
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 (previously filed on March 12, 1998 as an
exhibit to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
30
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.
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
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 (previously
filed on March 12, 1998 as an exhibit to the Company's Registration
Statement on Form S-1 (File No. 333-47867) and incorporated herein by
reference).
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 (previously filed on March
12, 1998 as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-47867) and incorporated herein by reference).
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 (previously filed on March 12, 1998 as an exhibit
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
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 (previously filed on March 12, 1998 as an exhibit to
the Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
2.8 Areement 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
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
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 (previously filed on March 12, 1998 as an exhibit to
the Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
31
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 (previously filed on March 12,
1998 as an exhibit to the Company's Registration Statement on Form
S-1 (File No. 333-47867) and incorporated herein by reference).
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 Martori and Alan Mishkin
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
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 (previously filed on March 12, 1998
as an exhibit to the Company's Registration Statement on Form S-1
(File No. 333-47867) and incorporated herein by reference).
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 (previously
filed on March 12, 1998 as an exhibit to the Company's Registration
Statement on Form S-1 (File No. 333-47867) and incorporated herein by
reference).
2.14 Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., FRS Acquisition
Corp., First Resort Software, Inc., Thomas A. Leddy, Evan H. Gull and
Daniel Patrick Curry (previously filed on March 12, 1998 as an
exhibit to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
2.15 Stock Purchase Agreement dated September 11, 1998 by and among
ResortQuest International, Inc., Abbott Realty Services, Inc.,
Tops'L Sales Group, Inc., William W. Abbott, Jr., Stephen J. Abbott,
James R. Steiner, Charles H. Van Driver, Sue C. Van Driver and Angus
G. Andrews, (previously filed on October 16, 1998 as an exhibit to
the Company's Registration Statement on Form S-1 (File No.
333-56703) and incorporated herein by reference).
32
3.1 Certificate of Incorporation, as amended (previously filed on March
12, 1998 as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-47867) and incorporated herein by reference).
3.2 Bylaws of the Company, Amended as of February 10, 1999.
3.3 Certificate of Amendment of Certificate of Incorporation of Company,
dated April 23, 1998 (changing the name of the Company from Vacation
Properties International, Inc. to ResortQuest International, Inc.)
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company, dated May 11, 1998 (previously filed on May 12, 1998 as an
exhibit to Amendment No. 3 to the Company's Registration Statement
on Form S-1 (File No. 333-47867) and incorporated herein by
reference).
4.1 Specimen Common Stock Certificate (previously filed on April 27,
1998 as an exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-1 (File No. 333-47867) and incorporated herein
by reference).
4.2 Form of Registration Rights Agreements between the Company and each
of Alpine Consolidated II, LLC, Capstone Partners, LLC, John
Przywara, David Marshall, Douglas W. Comfort, Robert G. Falcone,
Wayne Heller, Dwain Wall, Stephen J. Garchik, John Shaw, David
Sullivan, Jeffery M. Jarvis, Frederick L. Farmer, W. Michael Murphy,
Jules S. Sowder, John K. Lines, Brian S. Sullivan, John D. Sullivan,
the Sullivan Grandchildren's Trust, the David L. Levine Irrevocable
Children's Trust Under Agreement dated April 27, 1998 f/b/o Whitney
Monica Levine, the David L. Levine Irrevocable Children's Trust
Under Agreement dated April 27, 1998 f/b/o Ross Michael Levine, the
David L. Levine Irrevocable Children's Trust Under Agreement dated
April 27, 1998 f/b/o Keith Phillip Levine and the David L. Levine
Revocable Trust Under Agreement dated April 27, 1998 (previously
filed on May 26, 1998 an exhibit to the Company's Current Report on
Form 8-K (File No. 001-14115) and incorporated herein by reference).
4.3 Rights Agreement, dated as of February 25, 1999 between ResortQuest
International, Inc. and American Stock Transfer & Trust Company, as
Rights Agent.
10.1 Form of 1998 Long-Term Incentive Plan of the Company (previously
filed on March 12, 1998 as an exhibit to the Company's Registration
Statement on Form S-1 (File No. 333-47867) and incorporated herein
by reference).
33
10.2 Form of Employment Agreement between the Company and David C.
Sullivan (previously filed on April 27, 1998 as an exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-47867) and incorporated herein by reference).
10.3 Form of Employment Agreement between the Company and Jeffery M.
Jarvis (previously filed on April 27, 1998 as an exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-47867) and incorporated herein by reference).
10.4 Form of Employment Agreement between the Company and W. Michael
Murphy (previously filed on April 27, 1998 as an exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-47867) and incorporated herein by reference).
10.5 Form of Employment Agreement between the Company and Jules S. Sowder
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.6 Form of Employment Agreement between the Company and David L. Levine
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.7 Form of Employment Agreement between the Company and John K. Lines
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.8 Form of Employment Agreement between the Company and Frederick L.
Farmer (previously filed on April 27, 1998 as an exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-47867) and incorporated herein by reference).
10.9 Form of Employment Agreement between the Company and Luis Alonso
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.10 Form of Employment Agreement between the Company and Douglas R.
Brindley (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
34
10.11 Form of Employment Agreement between the Company and Paul T. Dobson
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
10.12 Form of Employment Agreement between the Company and Sharon Benson
Doucette (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
10.13 Form of Employment Agreement between the Company and Evan H. Gull
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
10.14 Form of Employment Agreement between the Company and Heidi O'Leary
Houston (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
10.15 Form of Employment Agreement between the Company and Daniel L.
Meehan (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
10.16 Form of Management Services Agreement between the Company and J.
Patrick McCurdy (previously filed on March 12, 1998 as an exhibit to
the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.17 Form of Employment Agreement between the Company and Andre S.
Tatibouet (previously filed on March 12, 1998 as an exhibit to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
10.18 Form of Employment Agreement between the Company and Hans F. Trupp
(previously filed on March 12, 1998 as an exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-47867) and
incorporated herein by reference).
10.19 Form of Officer and Director Indemnification Agreement (previously
filed on April 27, 1998 as an exhibit to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
35
10.20 Form of Consulting Agreement between the Company and Park Brady
(previously filed on April 27, 1998 as an exhibit to Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-47867) and incorporated herein by reference).
10.21 Promissory Note (previously filed on March 12, 1998 as an exhibit to
the Company's Registration Statement on Form S-1 (File No. 333-47867)
and incorporated herein by reference).
10.22 Credit Agreement dated as of May 26, 1998, in the amount of $30
million, among ResortQuest International, Inc. as Borrower and the
Financial Institutions named thereon and NationsBank, N.A. as agent
for the Financial Institutions (previously filed on June 12, 1998 as
an exhibit to the Company's Registration Statement on Form S-1 (File
No. 333-56703) and incorporated herein by reference).
10.23 First Amendment to Credit Agreement, dated September 30, 1998
(previously filed on November 16, 1998 as exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 001-14115) and incorporated herein by
reference).
10.24 Promissory Note, dated September 30, 1998, in the amount of $5.0
million, between ResortQuest International, Inc. and NationsBank,
N.A. (previously filed on November 16, 1998 as exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 001-14115) and incorporated herein by
reference).
10.25 Consulting Agreement dated September 10, 1998 by and among Abbott
Realty Services, Inc. and William W. Abbott, Jr.
10.26 Form of Officer and Director Indemnification Agreement, as amended.
10.27 Second Amendment to Credit Agreement, dated December 7, 1998.
10.28 Form of Section 401(k) Profit Sharing Plan Adoption Agreement.
13 The 1998 Annual Report to Shareholders, which, except for those
portions expressly incorporated herein by reference, is furnished
solely for the information of the Commission and is not to be deemed
"filed."
21 Subsidiaries of the Company.
27 Financial Data Schedule for the Period Ended December 31, 1998.
99.2 Financial Statements of Howey Acquisition, Inc. (dba Priscilla Murphy
Realty, Inc.) as of December 31, 1997 and May 26, 1998 together with
Report of Independent Public Accountants.
36
99.3 Financial Statements of Collection of Fine Properties, Inc. as of
December 31, 1997 and May 26, 1998 together with Reports of
Independent Public Accountants.
99.4 Financial Statements of Coastal Resorts Management, Inc. and Coastal
Resorts Realty L.L.C. as of December 31, 1997 and May 26, 1998
together with Report of Independent Public Accountants.
99.5 Financial Statements of First Resort Software, Inc. as of December
31, 1997 and May 26, 1998 together with Report of Independent Public
Accountants.
99.6 Financial Statements of Houston & O'Leary Company as of December 31,
1997 and May 26, 1998 together with Report of Independent Public
Accountants.
99.7 Financial Statements of Brindley & Brindley (including Brindley &
Brindley Realty and Development, Inc. and B&B On The Beach, Inc.) as
of December 31, 1997 and May 26, 1998 together with Report of
Independent Public Accountants.
99.8 Financial Statements of The Maury People, Inc. as of December 31,
1997 and May 26, 1998 together with Report of Independent Public
Accountants.
99.9 Financial Statements of Resort Property Management, Inc. as of
September 30, 1997 and May 26, 1998 together with Report of
Independent Public Accountants.
99.10 Financial Statements of Telluride Resort Accommodations, Inc. as of
December 31, 1997 and May 26, 1998 together with Report of
Independent Public Accountants.
99.11 Financial Statements of Trupp-Hodnett Enterprises (including
Trupp-Hodnett Enterprises, Inc. and THE Management Company) as of
December 31, 1997 and May 26, 1998 together with Report of
Independent Public Accountants.
14(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K during the last quarter of 1998
dated October 16, 1998 relating to the acquisition of Abbott Resorts, Inc.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RESORTQUEST INTERNATIONAL, INC.
By: /s/ John K. Lines
-----------------------------
John K. Lines, Senior
Vice President, Secretary and
General Counsel
Date: March 29, 1999
SIGNATURE TITLE DATE
- ------------------------------ ------------------------------------- --------------
/s/ DAVID C. SULLIVAN Chairman of the Board and March 29, 1999
- --------------------------- Chief Executive Officer,
(David C. Sullivan) (Principal Executive Officer)
/s/ DAVID L. LEVINE President, Chief Operating Officer, March 29, 1999
- --------------------------- Director
(David L. Levine)
/s/ JEFFERY M. JARVIS Senior Vice President and Chief March 29, 1999
- --------------------------- Financial Officer (Principal
(Jeffery M. Jarvis) Financial and Accounting
Officer)
/s/ WILLIAM W. ABBOTT, JR. Director March 29, 1999
- ---------------------------
(William W. Abbott, Jr.)
Director March , 1999
- ---------------------------
(Luis Alonso)
/s/ ELAN J. BLUTINGER Director March 29, 1999
- ---------------------------
(Elan J. Blutinger)
/s/ PARK BRADY Director March 29, 1999
- ---------------------------
(Park Brady)
38
SIGNATURE TITLE DATE
- ------------------------------ ------------------------------------- --------------
/s/ DOUGLAS R. BRINDLEY Director March 29, 1999
- ---------------------------
(Douglas R. Brindley)
/s/ D. FRASER BULLOCK Director March 29, 1999
- ---------------------------
(D. Fraser Bullock)
/s/ PAUL T. DOBSON Director March 29, 1999
- ---------------------------
(Paul T. Dobson)
Director March , 1999
- ---------------------------
(Joshua M. Freeman)
Director March , 1999
- ---------------------------
(Evan H. Gull)
/s/ HEIDI O'LEARY HOUSTON Director March 29, 1999
- ------------------------------
(Heidi O'Leary Houston)
Director March , 1999
- ---------------------------
(Charles O. Howey)
/s/ DANIEL L. MEEHAN Director March 29, 1999
- ---------------------------
(Daniel L. Meehan)
/s/ J. PATRICK MCCURDY Director March 29, 1999
- ---------------------------
(J. Patrick McCurdy)
Director March , 1999
- ---------------------------
(Michael D. Rose)
/s/ ANDRE S. TATIBOUET Director March 29, 1999
- ---------------------------
(Andre S. Tatibouet)
/s/ HANS F. TRUPP Director March 29, 1999
- ---------------------------
(Hans F. Trupp)
/s/ JOSEPH V. VITTORIA Director March 29, 1999
- ---------------------------
(Joseph V. Vittoria)
Director March , 1999
- ---------------------------
(Theodore L. Weise)
39