Exhibit 10.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
DATED AS OF MAY 1, 2009
AMONG
AMBASSADORS INTERNATIONAL, INC.,
a Delaware corporation,
AMBASSADORS MARINE GROUP, LLC,
a Delaware limited liability company,
AND
BELLWETHER FINANCIAL GROUP, INC.
a California corporation

 

 

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Table of Contents

              Page  
 
       
ARTICLE I DEFINITIONS
    1  
 
       
ARTICLE II SALE AND PURCHASE OF THE INTEREST
    10  
 
       
Section 2.1 Basic Transaction
    10  
Section 2.2 Closing Payment
    10  
Section 2.3 Purchase Price Adjustment
    10  
Section 2.4 Cancellation of Intercompany Indebtedness
    11  
Section 2.5 Withholding
    11  
Section 2.6 Purchase Price Allocation
    11  
 
       
ARTICLE III CLOSING
    11  
 
       
Section 3.1 The Closing
    11  
Section 3.2 Deliveries at the Closing
    11  
 
       
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND AMG
    12  
 
       
Section 4.1 Representations and Warranties Concerning Seller
    12  
Section 4.2 Organization and Good Standing
    14  
Section 4.3 Authority; No Conflict
    14  
Section 4.4 Notices and Consents
    15  
Section 4.5 Capitalization
    15  
Section 4.6 Financial Statements; Preliminary Intercompany Balance
    16  
Section 4.7 Books and Records
    16  
Section 4.8 Assets
    17  
Section 4.9 Real Property
    17  
Section 4.10 Notes and Accounts Receivable
    18  
Section 4.11 Inventory
    18  

 

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Table of Contents

              Page  
 
       
Section 4.12 Taxes
    18  
Section 4.13 Employee Benefits
    22  
Section 4.14 Compliance With Legal Requirements
    25  
Section 4.15 Licenses and Permits
    25  
Section 4.16 Legal Proceedings
    26  
Section 4.17 Absence of Certain Changes and Events
    26  
Section 4.18 Contracts; No Defaults
    28  
Section 4.19 Insurance
    30  
Section 4.20 Environmental, Health and Safety Matters
    30  
Section 4.21 Employees and Labor Matters
    32  
Section 4.22 Intellectual Property
    34  
Section 4.23 Certain Payments
    36  
Section 4.24 Affiliated Transactions and Certain Other Agreements
    36  
Section 4.25 Customer and Supplier Relationships
    37  
Section 4.26 Foreign Corrupt Practices Act
    37  
Section 4.27 Anti-Takeover Statute
    37  
Section 4.28 Brokers or Finders
    37  
 
       
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
    38  
 
       
Section 5.1 Organization of Buyer
    38  
Section 5.2 Authorization of Transaction
    38  
Section 5.3 Noncontravention
    38  
Section 5.4 Brokers’ Fees
    38  

 

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Table of Contents

              Page  
 
       
ARTICLE VI CLOSING CONDITIONS; TERMINATION
    39  
 
       
Section 6.1 Closing Conditions of Buyer
    39  
Section 6.2 Closing Conditions of Seller
    40  
Section 6.3 Termination
    41  
 
       
ARTICLE VII COVENANTS
    43  
 
       
Section 7.1 No Inconsistent Action; Reasonable Effort
    43  
Section 7.2 Access to Books and Records and Personnel
    43  
Section 7.3 Conduct of Business by Acquired Companies
    44  
Section 7.4 Competing Proposals
    46  
Section 7.5 Buyer’s Right of First Refusal
    46  
Section 7.6 Intercompany Balance; Financial Statement
    47  
Section 7.7 Other Pre-Closing Actions
    48  
Section 7.8 General
    48  
Section 7.9 Litigation Support
    48  
Section 7.10 Transition
    48  
Section 7.11 Solicitation of Seller and Target Employees
    49  
Section 7.12 Tax Matters
    49  
Section 7.13 Access to Records
    51  
Section 7.14 Use of Proceeds
    51  
Section 7.15 Further Assurances
    51  
Section 7.16 D&O Insurance
    51  
Section 7.17 Benefit Plans
    52  
Section 7.18 Insurance Refund
    52  
 
       
ARTICLE VIII INDEMNIFICATION
    52  
 
       
Section 8.1 Survival of Representations and Warranties
    52  
Section 8.2 Indemnification of Buyer
    53  
Section 8.3 Indemnification for Taxes
    54  

 

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Table of Contents

              Page  
 
       
Section 8.4 Indemnification of Seller
    54  
Section 8.5 Procedures for Indemnification
    55  
Section 8.6 Resolution of Conflicts and Claims
    56  
Section 8.7 Payment of Damages
    57  
Section 8.8 Limitations on Indemnity
    57  
Section 8.9 Sole and Exclusive Remedy
    58  
Section 8.10 Release by Seller
    58  
 
       
ARTICLE IX MISCELLANEOUS
    59  
 
       
Section 9.1 Press Releases and Public Announcements
    59  
Section 9.2 No Third-Party Beneficiaries
    59  
Section 9.3 Entire Agreement
    59  
Section 9.4 Succession and Assignment
    59  
Section 9.5 Counterparts
    59  
Section 9.6 Headings
    60  
Section 9.7 Notices
    60  
Section 9.8 Governing Law
    61  
Section 9.9 Amendments, Modifications and Waivers
    61  
Section 9.10 Severability
    61  
Section 9.11 Expenses
    61  
Section 9.12 Construction
    62  
Section 9.13 Incorporation of Exhibits and Schedules
    62  
Section 9.14 Specific Performance
    62  
Section 9.15 Arbitration
    62  
Section 9.16 Submission to Jurisdiction
    63  
Section 9.17 Waiver of Trial by Jury
    63  
Section 9.18 Attorney’s Fees
    64  

 

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      Exhibits    
 
   
Exhibit A
  Non-Competition and Non-Disclosure Agreement
Exhibit B
  Legal Opinion of Seller's Counsel
Exhibit C
  Legal Opinion of Buyer's Counsel

      Schedules    
 
   
Disclosure Letter
   
 
   
Schedule 2.6
  Purchase Price Allocation
 
   
Schedule 7.7
  Acquired Companies Adjustments

 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (“Agreement”) is entered into as of
May 1, 2009, by and among AMBASSADORS INTERNATIONAL, INC., a Delaware
corporation (“Seller”), AMBASSADORS MARINE GROUP, LLC, a Delaware limited
liability company and wholly-owned subsidiary of Seller (“AMG”), and BELLWETHER
FINANCIAL GROUP, INC. a California corporation (“Buyer”). Seller, AMG and Buyer
are referred to herein individually as a “Party” and collectively as the
“Parties.”
WHEREAS, Seller owns one hundred percent (100%) of the issued and outstanding
limited liability company interest (the “Interest”) of AMG; and
WHEREAS, this Agreement contemplates a transaction in which Buyer will purchase
from Seller, and Seller will sell to Buyer, the Interest in return for the
consideration described in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
ARTICLE I
DEFINITIONS
The following terms, when used in this Agreement, shall have the following
meanings. Any of these terms may, unless the context otherwise requires, be used
in the singular or plural depending on the reference.
“AAA” has the meaning set forth in Section 9.15 below.
“Accounts Receivable” has the meaning set forth in Section 4.10 below.
“Acquired Company” means any of AMG or its Subsidiaries, and “Acquired
Companies” means AMG and its Subsidiaries, collectively.
“Acquired Company Affiliates” has the meaning set forth in Section 4.24(a)
below.
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
“Agreement” has the meaning set forth in the preface above.
“Alternate Discussions” has the meaning set forth in Section 7.4.
“Alternate Solicitation Activities” has the meaning set forth in Section 7.4.
“Alternate Transaction” has the meaning set forth in Section 7.4.

 

 

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“AMG” has the meaning set forth in the preface above.
“Bank Indebtedness” means all indebtedness (including without limitation,
principal, interest, fees, expenses, and other charges and amounts) owed by the
Acquired Companies to any bank or other financial institution for borrowed
money, letters of credit, overdrafts or pursuant to any credit facilities
(including without limitation, lines of credit, revolving facilities or term
loan facilities.)
“Bankruptcy or Insolvency Proceeding” means any bankruptcy, civil
rehabilitation, corporate reorganization or special liquidation proceeding.
“Basis” means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
“Business Day” means any day that is not a Saturday or Sunday or a legal holiday
on which banks are authorized or required by law to be closed in Los Angeles,
California.
“Buyer” has the meaning set forth in the preface above.
“Buyer Acceptance Notice” has the meaning set forth in Section 7.5(b) below.
“Buyer Indemnitees” has the meaning set forth in Section 8.2 below.
“Cash Balance” means the cash in bank accounts maintained by the Acquired
Companies less the sum of all outstanding checks, debits and bank fees.
“Cap” has the meaning set forth in Section 8.8 below.
“Closing Payment” has the meaning set forth in Section 2.2 below.
“Closing” has the meaning set forth in Section 3.1 below.
“Closing Date” has the meaning set forth in Section 3.1 below.
“Closing Intercompany Balances Certificate” means a written certificate executed
by an executive officer of Seller certifying as to the respective Intercompany
Balances on the Closing Date but immediately prior to the Closing, which
respective Intercompany Balances set forth thereon shall equal the Preliminary
Intercompany Balances.
“Code” means the Internal Revenue Code of 1986, as amended.
“Competing Offer” has the meaning set forth in Section 7.4 below.
“Competing Offer Notice” has the meaning set forth in Section 7.5(a) below.
“Competing Offeror” has the meaning set forth in Section 7.4 below.
“Contracts” has the meaning set forth in Section 4.18 below.

 

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“Damages” has the meaning set forth in Section 8.2 below.
“Disclosure Letter” has the meaning set forth in Article IV below.
“Dispute” has the meaning set forth in Section 9.15 below.
“Employees” has the meaning set forth in Section 4.21(b) below.
“Employee Plan” means each “employee benefit plan” as defined in Section 3(3) of
ERISA, and any other plan, policy, program, practice, agreement, understanding
or arrangement (whether written or oral) providing compensation or other
benefits to any current or former director, officer, employee, contractor or
consultant (or to any dependent or beneficiary thereof) of Seller or any
Acquired Company, which are now, or were within the past three (3) years,
maintained, sponsored or contributed to by any Acquired Company, or with respect
to which any Acquired Company has incurred or may incur any obligation or
Liability, including, without limitation, all incentive, bonus, retirement,
deferred compensation, vacation, holiday, cafeteria, medical, disability, stock
purchase, stock option, stock appreciation, phantom stock, restricted stock or
other stock-based compensation plans, policies, programs, practices or
arrangements.
“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, mortgage, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins and
wetlands), groundwaters, drinking water supply, stream sediment, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
“Environmental Action” means any notice, claim, act, cause of action, order,
decree or investigation by any third party (including, without limitation, any
Governmental Authority) alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damage, damage to flora or fauna caused by Environmental
Conditions, real property damage, personal injuries or penalties) arising out
of, based on or resulting from the Release of or exposure of any individual to
any Hazardous Materials.
“Environmental Conditions” means the presence in the environment, including the
soil, groundwater, surface water or ambient air, of any Hazardous Materials at
any level which exceeds any applicable standard or threshold under any
Environmental, Health and Safety Law or otherwise requires investigation or
remediation (including, without limitation, investigation, study, health or risk
assessment, monitoring, removal, treatment or transport) under any applicable
Environmental, Health and Safety Law.

 

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“Environmental, Health, and Safety Laws” means any and all applicable
international, federal, state, or local laws, statutes, ordinances, regulations,
policies, guidance, rules, judgments, orders, court decisions or rule of common
law, permits, restrictions and licenses, which (i) regulate or relate to the
protection or clean up of the environment; the use, treatment, storage,
transportation, handling, disposal or release of Hazardous Materials, the
preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants or other natural resources; or the health and safety of persons
or property, including without limitation protection of the health and safety of
employees; or (ii) impose liability or responsibility with respect to any of the
foregoing, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each
as amended.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”, with respect to any entity, shall mean any entity which is
(or at any relevant time was) a member of a “controlled group of corporations”
with, under “common control” with, or a member of an “affiliated service group”
with, the identified entity, as defined in Section 414(b), (c), (m) or (o) of
the Code, or under “common control” with the identified entity, within the
meaning of Section 4001(b)(1) of ERISA.
“Extremely Hazardous Substance” has the meaning set forth in Section 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended.
“Facility” means real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures or equipment (including motor vehicles, tank cars, and rolling stock)
currently or formerly owned or operated by any Acquired Company.
“Financial Statements” has the meaning set forth in Section 4.6(a) below.
“GAAP” means United States generally accepted accounting principles as in effect
from time to time.
“Governmental Authority” means any United States or any non-United States,
foreign, international, federal, state, local or municipal government, court,
legislature, governmental agency or governmental commission, judicial or
quasi-judicial authority, regulatory authority, agency, department, body or
instrumentality of any government.
“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use or groundwater) of Hazardous Materials in, on, under, about or from the
Facilities or any part thereof into the Environment, that poses an unreasonable
risk of harm to persons or property on or off the Facilities, or that may affect
the value of the Facilities or the Acquired Companies.

 

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“Hazardous Materials” means any pollutant, chemical, or substance and any toxic,
infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical,
or chemical compound, or hazardous substance, material or waste, whether solid,
liquid or gas, that is subject to regulation, control or remediation under any
Environmental, Health and Safety Laws, including without limitation, any
quantity of asbestos in any form, urea, formaldehyde, PCBs, radon gas, crude oil
or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives.
“Indemnified Party” has the meaning set forth in Section 8.5(a) below.
“Indemnifying Party” has the meaning set forth in Section 8.5(a) below.
“Indemnity Claim” has the meaning set forth in Section 8.5(a) below.
“Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all internet domain names, (h) all other proprietary
rights, and (i) all copies and tangible embodiments thereof (in whatever form or
medium).
“Intercompany Balance” means (i) with respect to the Acquired Companies, the
aggregate amount of indebtedness or other amounts owed by any of the Acquired
Companies to Seller or any of its Affiliates (other than the Acquired Companies)
and (ii) with respect to Seller and its Affiliates (other than the Acquired
Companies), the sum of the aggregate amount of indebtedness or other amounts
owed by Seller or any of its Affiliates (other than the Acquired Companies) to
any of the Acquired Companies.
“Interest” has the meaning set forth in the preface above.
“Interim Financial Statements” has the meaning set forth in Section 4.6(a)
below.
“Interim Financial Statements Date” has the meaning set forth in Section 4.6(a)
below.

 

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“Knowledge” or “Known” means (i) with respect to the Acquired Companies, actual
knowledge after reasonable investigation of the following officers: Paul Chapman
— Bellingham Marine Industries, Inc. Vice President Finance, Tina M. DeVries —
Bellingham Marine Industries, Inc. Vice President of Administration, J. Everett
Babbitt — Bellingham Marine Industries, Inc. President, Phillip Greenman —
Bellingham Marine Industries, Inc. Executive Vice President, and Errol Redman —
Bellingham Marine Industries, Inc. Chief Financial Officer (New Zealand,
Australia, Malaysia) and Jesse Salem — Vice President of Shipyard Operations —
Bellport Group, or (ii) with respect to Seller, actual knowledge after
reasonable investigation of Joseph McCarthy. With respect to Section 4.20
(Environmental, Health and Safety Matters), “Knowledge” means (i) with respect
to the Acquired Companies, actual knowledge without further investigation of the
following officers: Paul Chapman — Bellingham Marine Industries, Inc. Vice
President Finance, Tina M. DeVries — Bellingham Marine Industries, Inc. Vice
President of Administration, J. Everett Babbitt — Bellingham Marine Industries,
Inc. President, Phillip Greenman — Bellingham Marine Industries, Inc. Executive
Vice President, and Errol Redman — Bellingham Marine Industries, Inc. Chief
Financial Officer (New Zealand, Australia, Malaysia) and Jesse Salem — Vice
President of Shipyard Operations — Bellport Group, or (ii) with respect to
Seller, actual knowledge without further investigation of Joseph McCarthy.
“Laws” means (a) all applicable domestic, international, foreign, admiralty and
maritime laws, including all statutes, codes, plans, constitutions, treaties,
principles of common law, ordinances, regulations, decrees, rules, municipal
by-laws and orders of every Governmental Authority and (b) any applicable
judicial, arbitral, administrative, ministerial, departmental or regulatory
judgment, decision, injunction, decree, charge, ruling, order or other
restriction of any court or Governmental Authority.
“Leased Real Property” has the meaning set forth in Section 4.9(b) below.
“Liability” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
“Licenses and Permits” means any approval, consent, license, permit, franchise,
approval registration, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Authority
or pursuant to any Law, including without limitation any Environmental, Health
and Safety Law, that is held by or otherwise relates to the business of, or to
any of the assets owned or used by, any Acquired Company.
“Material Adverse Change” means any change relating to the business, properties,
assets, condition (financial or otherwise) or results of operation of the
Acquired Companies taken as a whole that has had or would reasonably be expected
to have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on the business,
properties, assets, condition (financial or otherwise) or results of operation
of the Acquired Companies taken as a whole.
“NASDAQ” has the meaning set forth in Section 9.1 below.

 

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“Non-Competition and Non-Disclosure Agreement” has the meaning set forth in
Section 6.1(f)(ix) below.
“Non-Solicitation Area” has the meaning set forth in Section 7.11 below.
“Non-Solicitation Period” has the meaning set forth in Section 7.11 below.
“Notice” has the meaning set forth in Section 8.5(a) below.
“Objection Notice” has the meaning set forth in Section 8.6(a) below.
“Option Period” has the meaning set forth in Section 7.5(b) below.
“Order” means any award, decision, injunction, judgment, decree, ruling,
subpoena, verdict or order entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority or by any arbitrator.
“Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency); provided, however, that as to any contract, it shall be deemed to be
in the “Ordinary Course of Business” if the liability of any Acquired Company,
in the aggregate, is less than $25,000.
“Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles or certificate of organization and the operating
agreement of a limited liability company; (e) any charter or similar document
adopted or filed in connection with the creation, formation or organization of a
Person; and (f) any amendment to any of the foregoing.
“Owned Real Property” has the meaning set forth in Section 4.9(a) below.
“Party” has the meaning set forth in the preface above.
“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
“Post-Closing Tax Period” means any Tax period beginning on the day after the
Closing Date and that portion of any Straddle Period beginning on the day after
the Closing Date.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing
Date and the portion of any Straddle Period ending on the Closing Date.

 

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“Preliminary Intercompany Balances” has the meaning set forth in Section 4.6(b)
below.
“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
information) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
“Properties” means any real property currently owned or under lease by the
Acquired Companies on the Closing Date.
“Purchase Price” has the meaning set forth in Section 2.2 below.
“Release” means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, groundwater, wetlands, land
or subsurface strata.
“Securities Act” means the Securities Act of 1933, as amended.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Seller” has the meaning set forth in the preface above.
“Seller Indemnitees” has the meaning set forth in Section 8.4 below.
“Seller Loan Agreement” means that certain Loan Agreement dated as of
September 1, 2006, as amended, among Bank of America, N.A, Seller, AMG and
certain Affiliates of Seller.
“Seller Representatives” has the meaning set forth in Section 7.4 below.
“Solicitation Period” has the meaning set forth in Section 7.4 below.
“Straddle Period” means any Tax period beginning before and ending after the
Closing Date.
“Subsidiary” means, with respect to any party, any corporation, limited
liability company or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which held
by such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or manager of a limited liability company,
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation, limited
liability company or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries, or (iii) such party or any direct or
indirect Subsidiary of such party owns at least fifty percent (50%) of the
equity interests or voting interests of such corporation, limited liability
company or other organization.

 

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“Superior Competing Offer” has the meaning set forth in Section 7.5(a).
“Survival Period” has the meaning set forth in Section 8.1 below.
“Tax” means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
intangible property, sales, use, transfer, registration, recording, occupancy,
value added, alternative or add-on minimum, estimated, or other tax, charge,
fee, levy, deficiency or other assessment of any kind whatsoever imposed by a
Governmental Authority, including any Liability therefor as a transferee,
successor, member of a consolidated, combined or unitary group, pursuant to an
agreement or otherwise, including any interest, addition to tax, penalty, or
addition thereto, in each case whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to the determination, assessment,
collection, payment, reporting or administration of any Tax, including any
schedule or attachment thereto, and including any amendment thereof, whether on
a separate, consolidated, combined, unitary or other basis.
“Third-Party Claim” has the meaning set forth in Section 8.5(b) below.
“Threatened” means, with respect to a claim, Proceeding, dispute, action or
other matter, that any demand or statement has been made (orally or in writing)
or any notice has been given (orally or in writing), or any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken or otherwise pursued in the future.
“Threshold” has the meaning set forth in Section 8.8 below.
“Transfer Taxes” has the meaning set forth in Section 7.11(d) below.
“WARN Act” has the meaning set forth in Section 4.21(e) below.
“Year End Financial Statements” has the meaning set forth in Section 4.6(a)
below.

 

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ARTICLE II
SALE AND PURCHASE OF THE INTEREST
Section 2.1 Basic Transaction.
On and subject to the terms and conditions of this Agreement, Buyer agrees to
purchase from Seller, and Seller agrees to sell to Buyer, all of Seller’s right,
title and interest in the Interest, free and clear of all liens, pledges,
Encumbrances, charges and claims thereon, for the consideration specified below.
Upon consummation of the transaction, Buyer will hold all of the issued and
outstanding Interest, free and clear of any and all liens, pledges,
Encumbrances, charges and claims.
Section 2.2 Closing Payment.
On and subject to the terms and conditions of this Agreement, Buyer agrees to
pay Seller the sum of Five Million Two Hundred Fifty Thousand Dollars
($5,250,000) in cash as such amount may be adjusted pursuant to Section 2.3
below (the “Cash Consideration”), payable as follows:
(a) Subject to Section 2.3 below, Five Million Dollars ($5,000,000) at Closing
(the “Closing Payment”) by delivery of cash payable by wire transfer or delivery
of other immediately available funds to an account designated by Seller;
(b) One Hundred Thousand Dollars ($100,000) payable on the date one month after
the Closing Date;
(c) One Hundred Thousand Dollars ($100,000) payable on the date two months after
the Closing Date; and
(d) Fifty Thousand Dollars ($50,000) payable on the date three months after the
Closing Date.
Section 2.3 Purchase Price Adjustment.
If the total amount of the Bank Indebtedness owed immediately prior to the
Closing exceeds the aggregate Cash Balance of the Acquired Companies immediately
prior to the Closing but following the cancellation and settlement of the
Intercompany Balances, the Purchase Price and the Closing Payment shall be
reduced by such amount and the Closing Date shall be extended by one Business
Day. If such Cash Balance exceeds the total amount of such Bank Indebtedness
immediately prior to the Closing, AMG shall distribute such amount to Seller;
provided, however, that to the extent that Seller is entitled to such
distribution but AMG is unable to make such distribution in full for any reason,
the Purchase Price and the Closing Payment shall be increased by such amount.

 

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Section 2.4 Cancellation of Intercompany Indebtedness.
Immediately prior to the Closing, Seller, AMG, the Acquired Companies and any of
their respective Affiliates shall execute appropriate documentation to reflect
the cancellation and settlement of the Intercompany Balances.
Section 2.5 Withholding.
Buyer shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to Seller such amounts as it is required to
deduct and withhold with respect to such payment under the Code, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Buyer, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to Seller.
Section 2.6 Purchase Price Allocation.
After a thorough analysis and arm’s length negotiations between the parties,
Buyer and Seller agree that the Purchase Price shall be allocated among the
assets deemed for income tax purposes to be purchased hereunder in the manner
set forth on Schedule 2.6. The parties shall be bound by such allocation for all
purposes, shall prepare Tax Returns in accordance with such allocations and
shall not take a position inconsistent with such allocations.
ARTICLE III
CLOSING
Section 3.1 The Closing.
The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Rutan & Tucker, LLP in Costa Mesa,
California, 92626, on the earlier of (i) two (2) Business Days after the date
Seller provides notice to Buyer that it is ready to close, and (ii) June 1,
2009, as such date set forth in clause (i) or (ii) may be extended in accordance
with Section 2.3 above, provided that all conditions to Closing set forth herein
have been satisfied by such date (the “Closing Date”). The Closing shall be
effective as of 11:59 p.m. Pacific Time on the Closing Date.
Section 3.2 Deliveries at the Closing.
At the Closing, the Parties shall make the deliveries as set forth in
Sections 6.1(f) and 6.2(e) below.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLER AND AMG
Seller with respect to Section 4.1 below, and each of Seller and AMG with
respect to all sections of this Article IV except Section 4.1, represents and
warrants to Buyer that the statements contained in this Article IV are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then as and as though the Closing Date
were substituted for the date of this Agreement throughout this Article IV) with
respect to themselves and their respective Subsidiaries, except where such
representations and warranties expressly relate to an earlier date (in which
case they were correct and complete as of such earlier date) and except as set
forth on the Disclosure Letter delivered by Seller and the Acquired Companies to
Buyer on the date hereof (the “Disclosure Letter”). Nothing in the Disclosure
Letter shall be deemed adequate to disclose an exception to any representation
or warranty made herein, however, unless the Disclosure Letter identifies the
exception with particularity and describes the relevant facts in detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty addresses the existence of the document or other item itself). The
Disclosure Letter is arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Agreement.
Section 4.1 Representations and Warranties Concerning Seller.
(a) Organization and Good Standing. Seller is a corporation duly authorized,
validly existing, and in good standing under the Laws of Delaware. Seller is
duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the
failure to so qualify and be in good standing would not have a Material Adverse
Effect.
(b) Authority; No Conflict. Seller has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and legally binding obligation of
Seller, enforceable in accordance with its terms and conditions, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
or by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Any and all corporate acts and
other proceedings necessary for the due and valid authorization, execution,
delivery and performance by Seller of this Agreement and the exhibits and
schedules hereto and the consummation by Seller of the transactions contemplated
hereby have been validly and appropriately taken. Neither the execution and
delivery of this Agreement and the exhibits and schedules hereto, nor the
consummation of the transactions contemplated hereby, will violate any Law to
which Seller is subject, or any Licenses and Permits to which Seller is a party.

 

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(c) Interest Ownership. Seller holds of record and owns beneficially all of the
Interest free and clear of any restrictions on transfer (other than any
restrictions under any applicable securities Laws), Taxes, Encumbrances,
options, warrants, purchase rights, contracts, commitments, equities, claims and
demands. Seller is not a party to any option, warrant, purchase right or other
contract or commitment that would require Seller to sell, transfer, or otherwise
dispose of any of the Interest (other than this Agreement). Seller is not a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any of the Interest. Seller has delivered or made
available to Buyer copies of all agreements relating to any of the Interest.
(d) Seller’s Sales Process. On January 9, 2009, Seller’s Board of Directors
formed a special committee to oversee the sale of non-Windstar assets (which
includes AMG and the other Acquired Companies). Joseph J. Ueberroth was not a
member of that special committee. On January 30, 2009, Seller engaged Stephens,
Inc. as its investment banker to, among other things, sell the Interest. On
February 11, 2009, Seller issued a press release to publicly announce its plans
to sell its non-Windstar assets, including but not limited to the Interest.
Since the engagement of Stephens, Inc., agents and representatives of Seller
have contacted 146 strategic and financial buyers regarding the purchase of the
Interest and have received multiple indications of interest from qualified
buyers. After receiving formal bid letters from interested parties, the board of
directors concluded that, subject to the negotiation of definitive agreements
and the receipt of a fairness opinion, accepting the offer from Buyer was in the
best interest of Seller’s stockholders. On April 19, 2009, Seller entered into a
non-binding term sheet with Buyer relating to purchase of the Interest.
(e) Use of Proceeds. Seller has no plan or intention to conceal, gift or
otherwise dispose of any cash consideration Seller receives pursuant to this
Agreement in a manner that may prejudice any rights of any creditor of Seller.
(f) Broker’s Fees. Except as set forth in Section 4.1(f) of the Disclosure
Letter, Seller and its agents have incurred no obligation or Liability,
contingent or otherwise, for brokerage or finders’ fees, or agents’ commissions,
or other similar payment in connection with this Agreement or any of the
transactions contemplated herein.
(g) Notices and Consents. Except as set forth on Section 4.1(g) of the
Disclosure Letter, Seller is not, and will not be, required to give any notice
to, make any filing with, or obtain any consent, authorization or approval of,
any Person, including any Governmental Authority, in connection with the
execution and delivery of this Agreement and the exhibits and schedules hereto
or the consummation or performance of the transactions contemplated herein.

 

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Section 4.2 Organization and Good Standing.
Section 4.2 of the Disclosure Letter contains a complete and accurate list of
each Acquired Company’s name, jurisdiction of incorporation, other jurisdictions
in which it is authorized to do business, capitalization (including the identity
of each shareholder or member and the number of shares or percentage of
membership interest held by each) and managers, directors, and officers. Each
Acquired Company is an entity duly organized, validly existing, and in good
standing under the Laws of its jurisdiction of incorporation or organization,
with full power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own and
use, and to perform all its obligations under the Contracts. Except as set forth
on Section 4.2 of the Disclosure Letter, each Acquired Company has all material
licenses, permits, and authorizations necessary to carry on the business in
which it is engaged and in which it presently proposes to engage and to own and
use the properties owned and used by it. Each Acquired Company is duly qualified
to do business as a foreign entity and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to so qualify and be in
good standing would not have a Material Adverse Effect. The Acquired Companies
have delivered or made available to Buyer correct and complete copies of the
Organizational Documents of each Acquired Company, as amended to date and
currently in effect. No Acquired Company is in default under or in violation of
any provision of its Organizational Documents.
Section 4.3 Authority; No Conflict.
The Acquired Companies have delivered or made available to Buyer an execution
copy of all actions by the Acquired Companies’ boards of directors or other
corporate authority performing similar functions necessary to approve this
Agreement and the transactions contemplated herein. This Agreement and the
exhibits and schedules hereto has been duly executed and delivered by AMG and
constitutes the legal, valid and binding obligations of AMG, enforceable against
AMG in accordance with its terms, except where such enforceability may be
limited to bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally and by general equity principles.
Subject to the requisite consents referenced in Section 4.4 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated herein will,
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with, or result in a violation of (i) any provision of
the Organizational Documents of the Acquired Companies, or (ii) any resolution
adopted by the board of directors (other corporate authority performing similar
functions) or stockholders (or other equity owners) of any Acquired Company;
(b) contravene, conflict with, or result in a violation of, or give any
Governmental Authority or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Law or any Order to which any Acquired Company or any of
the assets owned or used by any Acquired Company may be subject;

 

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(c) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Authority or Other Person the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any License or Permit
that is held by any Acquired Company or that otherwise relates to the business
of, or any of the assets owned or used by, any Acquired Company;
(d) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract; or
(e) result in the imposition or creation of any Encumbrance upon or with respect
to any of the assets owned or used by any Acquired Company.
Section 4.4 Notices and Consents.
Except as set forth on Section 4.4 of the Disclosure Letter, no Acquired Company
is or will be required to give any notice to, make any filing with, or obtain
any consent, authorization or approval of, any Person, including any
Governmental Authority, in connection with the execution and delivery of this
Agreement and the exhibits and schedules hereto or the consummation or
performance of the transactions contemplated herein.
Section 4.5 Capitalization.
Seller is the sole member of AMG and Seller owns the Interest and the Interest
comprises all of the issued and outstanding limited liability company interests
in AMG. Seller is and will be on the Closing Date the record and beneficial
owner and holder of the Interest, free and clear of all Encumbrances. With the
exception of the Interest (which are owned by Seller), all of the outstanding
equity securities and other securities of each Acquired Company are owned of
record and beneficially by one or more of the Acquired Companies, free and clear
of all Encumbrances. Other than standard Securities Act restrictions, no legend
or other reference to any purported Encumbrance appears upon any certificate
representing equity securities of any Acquired Company. All of the outstanding
equity securities of each Acquired Company have been duly authorized and validly
issued and are fully paid and nonassessable. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require any
of the Acquired Companies to issue, sell, transfer or otherwise cause to become
outstanding any equity securities or other securities of any Acquired Company.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to any of the Acquired Companies.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of securities of the Acquired Companies. None of the
outstanding equity securities or other securities of any Acquired Company was
issued in violation of any Law. No Acquired Company owns, or has any agreement
to acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.

 

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Section 4.6 Financial Statements; Preliminary Intercompany Balance.
(a) Financial Statements. The Acquired Companies have delivered or made
available to Buyer a true and complete copy of the audited balance sheet and
statements of operations, change in stockholders’ equity (including the related
notes) and cash flow for each Acquired Company as of and for the twelve months
ended December 31, 2008 (the “Year End Financial Statements”), and a true and
complete copy of the unaudited balance sheet, statement of operations, and
change in stockholders’ equity (including the related notes) for each Acquired
Company as of and for the three months ended March 31, 2009 (the “Interim
Financial Statements Date”) (collectively, the “Interim Financial Statements,”
and, along with the Year End Financial Statements, the “Financial Statements”).
The Financial Statements (i) are in accordance with the books and records of the
Acquired Companies, (ii) have been prepared in accordance with GAAP consistently
applied through the periods covered thereby and (iii) fairly and accurately
present the assets, Liabilities (including all reserves) and financial position
of the Acquired Companies as of the respective dates thereof and the results of
operations for the period then ended (subject, in the case of the Interim
Financial Statements, to immaterial year-end adjustments and the fact that there
are no notes thereto). Except as set forth in the Financial Statements, no
Acquired Company has any Liabilities of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth or reserved for in the
Financial Statements or the notes thereto, which are not set forth or reserved
for in the Financial Statements or the notes thereto. Nothing has come to the
attention of Seller since such respective dates that would indicate that such
Financial Statements are not true and correct in all material respects as of the
date hereof. Except as set forth on Section 4.6(a) of the Disclosure Letter, no
Acquired Company is a guarantor or otherwise liable for any Liability or
obligation (including indebtedness) of any other Person.
(b) Preliminary Intercompany Balances. Section 4.6(b) of the Disclosure Letter
sets forth the Intercompany Balances as of the date hereof (the “Preliminary
Intercompany Balances”).
Section 4.7 Books and Records.
Except as set forth on Section 4.7 of the Disclosure Letter, the books of
account, Organizational Documents, stock record books, minutes, and other
records of the Acquired Companies, all of which the Acquired Companies have been
made available to Buyer, are, to the Acquired Companies’ Knowledge, complete and
correct and have been maintained in accordance with sound business practices and
the requirements of all applicable Laws. To the Acquired Companies’ Knowledge,
the minute books of the Acquired Companies contain accurate and complete records
of all meetings held of, and corporation action taken by, the stockholders or
other equity owners, the boards of directors or other corporate authority
performing similar functions, and committees of the boards of directors of the
Acquired Companies, and no meeting of any such stockholders or other equity
owners, boards of directors or other corporate authority performing similar
functions, or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Acquired Companies.

 

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Section 4.8 Assets.
Except as set forth on Section 4.8 of the Disclosure Letter, the Acquired
Companies have good and marketable title to, or a valid leasehold interest in,
the properties and assets used by them or located on their premises, free and
clear of any Encumbrances. Such assets include all assets necessary for the
conduct of the Acquired Companies’ businesses as presently conducted. To the
Knowledge of Seller and the Acquired Companies, all tangible assets and
properties of the Acquired Companies are in good operating condition and repair
(subject to normal and customary maintenance requirements), are usable in the
Ordinary Course of Business and conform in all material respects to all
applicable Laws relating to their construction, use and operation, except as set
forth on Section 4.8 of the Disclosure Letter. The assets and properties of the
Acquired Companies are sufficient for the continued conduct of the Acquired
Companies’ businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
Section 4.9 Real Property.
(a) Section 4.9(a) of the Disclosure Letter sets forth a complete list of all
real property owned by the Acquired Companies (the “Owned Real Property”). The
Acquired Companies have good and marketable title to the Owned Real Property,
free and clear of all Encumbrances.
(b) Section 4.9(b) of the Disclosure Letter sets forth a complete list of all
real property leased by the Acquired Companies (the “Leased Real Property”).
Except as set forth on Section 4.9(b) of the Disclosure Letter, the Acquired
Companies are not in material default (with or without notice or lapse of time,
or both) under any such leases, and the execution of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
default under such leases or require the consent of any other party thereto. The
Acquired Companies have not, and to the Knowledge of Seller and the Acquired
Companies, the other party to any such lease has not, commenced any action in
respect of, or arising out of such lease or given any notice to the Acquired
Companies for the purpose of terminating or threatening to terminate such lease.
(c) Except as set forth on Section 4.9(c) of the Disclosure Letter, to the
Knowledge of Seller and the Acquired Companies, the improvements located on the
Owned Real Property and the Leased Real Property used for the Acquired
Companies’ material operations are structurally sound, with no material defects,
and all building systems contained therein are in good operating condition and
repair, subject to ordinary wear and tear.

 

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Section 4.10 Notes and Accounts Receivable.
All notes and accounts receivable of the Acquired Companies that are reflected
on the Financial Statements or on the accounting records of the Acquired
Companies as of the Closing Date (collectively, the “Accounts Receivable”)
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Except as set
forth on Section 4.10 of the Disclosure Letter, the Accounts Receivable are
current and collectible net of the respective reserves shown on the Financial
Statements. Subject to such reserves as reflected on the Financial Statements,
as adjusted in the Acquired Companies’ books in the Ordinary Course of Business
for the passage of time between the date of the Financial Statements through the
Closing Date, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, in the Ordinary Course of Business.
There is no contest, claim, or right of set-off under any agreement with any
obligor of any Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Seller has provided to Buyer a complete and accurate list
of all Accounts Receivable as of the Interim Financial Statements Date, which
list sets forth the aging of such Accounts Receivable.
Section 4.11 Inventory.
All inventory of the Acquired Companies, whether or not reflected on the
Financial Statements, consists of a quality and quantity usable and saleable in
the Ordinary Course of Business, except for obsolete items and items of
below-standard quality, which in all material respects have been written off or
written down to net realizable value in the Financial Statements. All
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
Section 4.12 Taxes.
(a) Filing of Tax Returns. Each of the Acquired Companies has duly and timely
filed with the appropriate taxing authorities all material Tax Returns required
to be filed. All such Tax Returns are complete and accurate in all material
respects. Except as set forth on Section 4.12(a) of the Disclosure Letter, all
material Taxes due and owing by any of the Acquired Companies (whether or not
shown on any Tax Return) have been paid. None of the Acquired Companies
currently is the beneficiary of any extension of time within which to file any
Tax Return. No written claim has ever been made by a Governmental Authority in a
jurisdiction where any of the Acquired Companies does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction.

 

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(b) Payment of Taxes. The unpaid Taxes of the Acquired Companies did not, as of
the dates of the Financial Statements, exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the balance
sheets (rather than in any notes thereto) contained in the Financial Statements.
Since the date of the most recent Financial Statement, none of the Acquired
Companies has incurred any liability for Taxes outside the Ordinary Course of
Business or otherwise inconsistent with past custom and practice.
(c) Audits, Investigations or Claims. No deficiencies for Taxes against any of
the Acquired Companies have been claimed, proposed or assessed by any
Governmental Authority in writing. There are no pending or, to the Knowledge of
any of the Acquired Companies, Threatened audits, assessments or other
Proceedings for or relating to any liability in respect of Taxes of any of the
Acquired Companies, and there are no matters under discussion with any
Governmental Authority, or Known to the Seller or the Acquired Companies, with
respect to Taxes that are likely to result in an additional material liability
for Taxes with respect to any of the Acquired Companies. The Acquired Companies
have delivered or made available to Buyer complete and accurate copies of
federal, state, local and foreign Tax Returns of each of the Acquired Companies
and their predecessors for all Tax years beginning after December 31, 2005, and
complete and accurate copies of all examination reports and statements of
deficiencies assessed against or agreed to by any of the Acquired Companies or
any predecessors, and any correspondence with any Governmental Authorities
regarding liability for Taxes, since December 31, 2005. No statute of
limitations in respect of any Tax (including for assessment of collection of any
Tax) of any of the Acquired Companies has been waived or extended.
(d) Liens. There are no liens for Taxes, other than Taxes not yet due and
payable, on any assets of any of the Acquired Companies.
(e) Tax Elections. None of the Acquired Companies (i) has consented at any time
under Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2)
of the Code (as such provisions were in effect prior to repeal) apply to any
disposition of the assets of any of the Acquired Companies; (ii) has agreed, or
is required, to make any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise; (iii) has made an election, or is
required, to treat any of its assets as owned by another Person pursuant to the
provisions of Section 168(f) of the Internal Revenue Code of 1954 or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; (iv) has acquired or owns any assets that directly
or indirectly secure any debt the interest on which is tax exempt under Section
103(a) of the Code; (v) has made or will make a consent dividend election under
Section 565 of the Code; (vi) has elected at any time to be treated as an S
corporation within the meaning of Sections 1361 or 1362 of the Code; or
(vii) made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state, local or foreign Tax provision.
(f) Tax Sharing Agreements. There are no Tax-sharing agreements or similar
arrangements (including indemnity arrangements) with respect to or involving any
of the Acquired Companies, and, after the Closing Date, none of the Acquired
Companies shall be bound by any such Tax-sharing agreements or similar
arrangements or have any liability thereunder for amounts due in respect of
periods on or prior to the Closing Date.

 

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(g) Other Entity Liability. None of the Acquired Companies has been a member of
an affiliated group filing a consolidated federal income Tax Return (other than
a group the common parent of which is Seller). None of the Acquired Companies
has any Liability for the Taxes of any Person (other than Taxes of the Acquired
Companies) (i) under Treasury regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(h) No Withholding. Each of the Acquired Companies has withheld or collected,
and paid and reported all material Taxes required to have been withheld,
collected or paid in connection with amounts paid or owing to, or received from,
any employee, independent contractor, creditor, stockholder or other third
party. The transaction contemplated herein is not subject to the tax withholding
provisions of the Code or under any other provision of applicable Law.
(i) Permanent Establishment. Except as set forth on Section 4.12(i) of the
Disclosure Letter, none of the Acquired Companies has or has had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country.
(j) Disallowance of Interest Deductions. None of the outstanding indebtedness of
any of the Acquired Companies constitutes indebtedness with respect to which any
interest deductions may be disallowed under Sections 163(i), 163(l), 265 or 279
of the Code or under any other provision of applicable Law.
(k) Tax Shelters. None of the Acquired Companies has entered into any
transaction identified as a “reportable transaction” for purposes of Code
Section 6707A or Treasury Regulations Sections 1.6011-4(b)(2) or
301.6111-2(b)(2) (or any predecessor provision). If any Acquired Company has
entered into any transaction such that, if the treatment claimed by it were to
be disallowed, the transaction would constitute a substantial understatement of
federal income tax within the meaning of Section 6662 of the Code, then the
Acquired Company has either (i) “substantial authority” (within the meaning of
Code Section 6662(d)) for the tax treatment of such transaction or (ii) in the
case of a transaction other than a “tax shelter” (within the meaning of Code
Section 6662(d)(2)(C)(ii)), has “adequately disclosed” (within the meaning of
Code Section 6662(d)) on its Tax Return the relevant facts affecting the tax
treatment of such transaction.
(l) Disregarded Entity. AMG is and has always been disregarded as an entity
separate from Seller for all income tax purposes.

 

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(m) No Power of Attorney. There is no outstanding power of attorney authorizing
anyone to act on behalf of any of the Acquired Companies in connection with any
Tax, Tax Return or Proceeding relating to any Tax.
(n) No Outstanding Rulings. There is no outstanding closing agreement, ruling
request, request for consent to change a method of accounting, subpoena or
request for information with or by any Governmental Authority relating to any of
the Acquired Companies, its income, assets or business, or any Tax, Tax Return
or Proceeding relating to any Tax.
(o) Post-Closing Tax Periods. None of the Acquire Companies will be required to
include any item of income or exclude any item of deduction for any Post-Closing
Tax Period as a result of (a) intercompany transactions or excess loss accounts,
(b) installment sale, open transaction or use of a completed contract method of
accounting with respect to any transaction that occurred on or prior to the
Closing Date or (c) prepaid amounts received on or prior to the Closing Date.
(p) Deemed Ownership. None of the assets of any of the Acquired Companies is
required to be treated as being owned by another Person for income tax purposes.
(q) No Exchanges. During the last two years, none of the Acquired Companies has
engaged in any exchange under which gain realized on the exchange was not
recognized under Code Section 1031 (or any similar provision of applicable
state, local or foreign Law).
(r) No Spin Off. None of the Acquired Companies has constituted a “distributing
corporation” or a “controlled corporation” under Code Section 355 (or any
similar provision of applicable state, local or foreign Law) in any distribution
in the last two years or pursuant to a plan or series of related transactions
(within the meaning of Code Section 355(e) or similar Law) with any transaction
contemplated by this Agreement.
(s) No Special Status. None of the Acquired Companies is or has ever been a
“personal holding company” (within the meaning of Code Section 542), or a
shareholder in a “controlled foreign corporation” (within the meaning of Code
Section 957), a “foreign personal holding company” (within the meaning of Coe
Section 552), or a “passive foreign investment company” (within the meaning of
Code Section 1297).
(t) Section 482. All transactions between an Acquired Company and any other
person that is owned or controlled by the same interests (within the meaning of
Code Section 482 and the regulations thereunder) have been at arm’s length
(within the meaning of such provisions).
(u) No Deferred Gain. None of the Acquired Companies will be required to include
any item of income, or exclude any item of deduction, for any taxable period (or
portion thereof) ending after the Closing Date as a result of any:
(i) intercompany transaction or excess loss account described in Treasury
regulations under Section 1502 of the Code (or any similar provision of state,
local, or foreign Law), (ii) installment sale, open transaction or use of a
completed contract method of accounting with respect to any transaction that
occurred on or prior to the Closing Date, or (iii) prepaid amount received on or
prior to the Closing Date.

 

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Section 4.13 Employee Benefits.
(a) List of Plans; Absence of Certain Arrangements. Section 4.13(a) of the
Disclosure Letter lists each Employee Plan and the Seller or Acquired Company
that maintains or sponsors such Employee Plan. No Employee Plan (i) is or was a
“multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of ERISA,
(ii) is or was subject to Title IV or Part 3 of Title I of ERISA or Section 412
of the Code, and (iii) provides retiree or post-employment benefits (including,
without limitation, medical, disability or life insurance, or other welfare
benefits) to any person, except as required by Applicable Law. Except as set
forth in Section 4.13(a) of the Disclosure Letter, no Employee Plan is or was a
“welfare benefit fund,” as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code, and no
Acquired Company nor any ERISA Affiliate of any Acquired Company is required to,
or has ever been required to, contribute to or provide benefits under any such
Employee Plan, fund or organization or has any Liability or obligation under any
such Employee Plan, fund or organization. With respect to each Employee Plan, at
the Closing there will be no unrecorded material liabilities with respect to the
establishment, implementation, operation, administration or termination of such
Employee Plan, or the termination of the participation in any such Employee Plan
by any Acquired Company or any ERISA Affiliate of any Acquired Company.
(b) No Commitments; Ability to Amend. Neither any Acquired Company nor any ERISA
Affiliate of any Acquired Company has any announced plan or legally binding
commitment to create any additional Employee Plans which are intended to cover
employees or former employees of any Acquired Company (with respect to their
relationship with such entities) or to amend or modify any existing Employee
Plan which covers or has covered employees or former employees of any Acquired
Company (with respect to their relationship with such entities). Each Employee
Plan can be amended, terminated or otherwise discontinued immediately after the
Closing in accordance with its terms, without liability (other than liability
for ordinary administrative expenses typically incurred in a termination event).
(c) No Other Material Liability. Neither Seller nor any Acquired Company is
subject to any material Liability, tax or penalty with respect to any Employee
Plan under ERISA, the Code or any other Applicable Law, and neither Seller nor
any Acquired Company has any Knowledge of any circumstances which reasonably
might result in any such material Liability, tax or penalty. No event has (as to
Seller’s representation and warranty only, to Seller’s Knowledge) occurred and
no condition exists that could subject any Acquired Company, by reason of its
affiliation with any ERISA Affiliate of such Acquired Company, to any material
Liability, Tax or penalty with respect to any Employee Plan under ERISA, the
Code or other Applicable Law, and neither Seller nor any Acquired Company has
any Knowledge of any circumstances which reasonably might result in any such
material Liability, Tax or penalty.

 

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(d) Tax Qualification; General Compliance. Each Employee Plan which is intended
to be a qualified plan under Section 401(a) of the Code has received a favorable
determination letter, opinion, notification or advisory letter from the IRS, and
each trust established in connection with any Employee Plan which is intended to
be exempt from federal income taxation under Section 501(a) of the Code is so
exempt. Each Employee Plan has been administered and maintained in compliance in
all material respects in accordance with its terms and with ERISA, the Code and
all other Applicable Laws. All contributions required to be made under the terms
of any Employee Plan as of the date of this Agreement have been timely made in
accordance with the terms of such Employee Plan, ERISA, the Code and all other
Applicable Laws, or if not yet due, have been properly reflected on the
Financial Statements.
(e) Fiduciary Duties and Prohibited Transactions. Neither any Acquired Company
nor any plan fiduciary of any Employee Plan which covers or has (as to Seller’s
representation and warranty only, to Seller’s Knowledge) covered employees or
former employees of any Acquired Company or any ERISA Affiliate of any Acquired
Company, has engaged in any transaction in violation of Sections 404 or 406 of
ERISA or any “prohibited transaction,” as defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code, or has otherwise violated the provisions
of Part 4 of Title I, Subtitle B of ERISA. None of the Acquired Companies have
knowingly participated in a violation of Part 4 of Title I, Subtitle B of ERISA
by any plan fiduciary of any Employee Plan (or other employee benefit plan
subject to ERISA). None of the Acquired Companies has (as to Seller’s
representation and warranty only, to Seller’s Knowledge) any Liability under
Section 502 of ERISA. Neither any Acquired Company nor any ERISA Affiliate of
any Acquired Company has incurred any excise tax under Chapter 43 of the Code.
(f) No Acceleration; Code Section 280G. No Employee Plan or other contract,
agreement or benefit arrangement covering any current or former employee or
independent contractor of any Acquired Company, individually or collectively,
would give rise to the payment of, or permit any such individual to retain, any
amount or benefit which would constitute a “parachute payment” (as defined in
Section 280G of the Code). Except as set forth on Section 4.13(f) of the
Disclosure Letter, neither the execution of this Agreement nor the consummation
of any of the transactions contemplated hereby (whether alone or upon the
occurrence of any additional or further acts or events) will (i) result in any
obligation or Liability (with respect to accrued benefits or otherwise) on the
part of any Acquired Company to any Employee Plan, or to any present or former
employee, officer, director, shareholder, contractor or consultant of any
Acquired Company or any of their dependents, or any other person, (ii) be an
event under any Employee Plan that will result in any payment (whether of
severance pay or otherwise) becoming due to any such present or former employee,
officer, director, shareholder, contractor, or consultant of any Acquired
Company or any of their dependents, or any other person, or (iii) accelerate the
time of payment or vesting, or increase the amount, of any compensation or
benefits theretofore or thereafter due or granted to any employee, officer,
director, shareholder, contractor, or consultant of any Acquired Company or any
of their dependents, or any other person.

 

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(g) COBRA; HIPAA. Each Acquired Company and each ERISA Affiliate is in
compliance in all material respects with (i) the requirements of the applicable
health care continuation and notice provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, and the regulations (including
proposed regulations) thereunder and any similar state law, and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended, and the regulations (including the proposed
regulations) thereunder. No Acquired Company or any ERISA Affiliate has incurred
any material Liability under Section 4980B of the Code.
(h) Litigation. Other than routine claims for benefits under the Employee Plans,
there are no pending or, to the Knowledge of Seller or any Acquired Company,
Threatened actions or proceedings against any Employee Plan, the fiduciaries or
administrators of any of the Employee Plans, or Seller or any Acquired Company
with respect to any Employee Plan, with any of the IRS, the Department of Labor,
the Pension Benefit Guaranty Corporation, any participant in or beneficiary of
any Employee Plan or any other person whomsoever. Neither Seller nor any
Acquired Company has any Knowledge of any reasonable basis for any such claim,
lawsuit, dispute, action or controversy.
(i) Code Section 409A. Except as set forth in Section 4.13(i) of the Disclosure
Letter, no payment or benefit provided or to be provided under to an Employee
Plan to or for the benefit of a “service provider” (within the meaning of
Section 409A of the Code) will or may provide for the deferral of compensation
subject to Section 409A of the Code, whether pursuant to the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby (either alone or upon the occurrence of any additional or subsequent
events) or otherwise. Each Employee Plan that is a nonqualified deferred
compensation plan subject to Section 409A of the Code has been operated and
administered in good faith compliance with Section 409A of the Code from the
period beginning January 1, 2007 through the date hereof.
(j) Deductibility of Payments. There is no contract, agreement, plan or
arrangement covering any employee or former employee of any Acquired Company
(with respect to its relationship with such entities) that, individually or
collectively, provides for the payment by any Acquired Company of any amount
that is not deductible by such Acquired Company under Section 162(a)(1), 404 or
419 of the Code, whichever is applicable.
(k) Foreign Plans. With respect to each employee benefit plan, program, or other
arrangement providing compensation or benefits to any employee or former
employee (or any dependent thereof) of the Seller, any Acquired Company, or any
of their respective Subsidiaries, which is subject to the laws of any
jurisdiction outside of the United States (the “Foreign Plans”): (i) such
Foreign Plan has been maintained in all material respects in accordance with all
applicable requirements and all applicable laws, (ii) if intended to qualify for
special tax treatment, such Foreign Plan meets all requirements for such
treatment, (iii) if intended or required to be funded and/or book-reserved, such
Foreign Plan is fully funded and/or book-reserved, as appropriate, based upon
reasonable actuarial assumptions, and (iv) no material Liability exists or
reasonably could be imposed upon the assets of any Acquired Company by reason of
such Foreign Plan.

 

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Section 4.14 Compliance With Legal Requirements.
Each Acquired Company is (as to Seller’s representation and warranty only, to
Seller’s Knowledge) in compliance with all Laws that are applicable to it or to
the conduct or operation of its business or the ownership or use of any of its
assets, except for such non-compliance which is not reasonably likely to result
in a Material Adverse Effect. No event has occurred or circumstance exists that
(with or without notice or lapse of time) (as to Seller’s representation and
warranty only, to Seller’s Knowledge) may constitute or result in a violation by
any Acquired Company of, or a failure on the part of any Acquired Company to
comply with, any Law, except where such violation or failure would not result in
a Material Adverse Effect. No Acquired Company has received (as to Seller’s
representation and warranty only, to Seller’s Knowledge) any notice, charge,
complaint, claim, demand or other communication (whether oral or written) from
any Governmental Authority with respect to any action, suit, Proceeding, hearing
or investigation by such Governmental Authority regarding any actual, alleged,
possible or potential material violation of, or material failure to comply with,
any Law, except (a) as has already been resolved with no fine or penalties,
(b) with respect to which all fines and penalties have been paid or otherwise
satisfied in full or are reserved for on the Financial Statements or (c) as is
being disputed in good faith and listed on Section 4.14 of the Disclosure
Letter.
Section 4.15 Licenses and Permits.
Section 4.15 of the Disclosure Letter contains a complete and accurate list of
all material Licenses and Permits. Each Acquired Company (as to Seller’s
representation and warranty only, to Seller’s Knowledge) owns or possesses such
respective Licenses and Permits free and clear of any Encumbrances, claims or
Liabilities. Such Licenses and Permits (as to Seller’s representation and
warranty only, to Seller’s Knowledge) are in full force and effect and there are
no proceedings pending or Threatened that seek the revocation, cancellation,
suspension or adverse modification thereof. No Acquired Company (as to Seller’s
representation and warranty only, to Seller’s Knowledge) has violated any such
Licenses and Permits, and each Acquired Company is in compliance in all material
respects with all such Licenses and Permits. No Acquired Company (as to Seller’s
representation and warranty only, to Seller’s Knowledge) has received any notice
to the effect that (i) such Acquired Company is not in compliance with, or is in
a violation of, any such Licenses and Permits or (ii) any currently existing
circumstances are likely to result in a failure of such Acquired Company to
comply with, or in a violation by such Acquired Company of, any such Licenses
and Permits. Such Licenses and Permits included on Section 4.15 of the
Disclosure Letter constitute (as to Seller’s representation and warranty only,
to Seller’s Knowledge) all of the material licenses, approvals, consents,
franchises and permits necessary to permit the Acquired Companies to own,
operate, use and maintain their assets in the manner in which they are now
operated and maintained and to conduct the business of the Acquired Companies as
currently conducted. All such Licenses and Permits are (as to Seller’s
representation and warranty only, to Seller’s Knowledge) renewable by their
terms in the Ordinary Course of Business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees, and such Licenses and Permits will not be subject to suspension,
modification or revocation or require any consent to transfer the same in
connection with the completion of the transactions contemplated by this
Agreement.

 

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Section 4.16 Legal Proceedings.
Section 4.16 of the Disclosure Letter sets forth a true and complete list of all
Proceedings as of the date hereof, including reasonable detail regarding the
current status of such Proceedings, to which any of the Acquired Companies is,
or to the Knowledge of Seller, is Threatened to be, a party or as to which their
property or assets may be bound. Except as set forth on Section 4.16 of the
Disclosure Letter, there is no Proceeding pending or, to the Knowledge of
Seller, Threatened, against or affecting any of the Acquired Companies, nor is
there any Order outstanding against any of the Acquired Companies. To the
Knowledge of Seller, no facts or circumstances exist that could reasonably be
expected to result in any Proceedings being brought against any of the Acquired
Companies.
Section 4.17 Absence of Certain Changes and Events.
(a) Except for incurring the expenses, making the payments, or the other
transactions contemplated in or by this Agreement, since the Interim Financial
Statements Date, and except as set forth on Section 4.17(a) of the Disclosure
Letter, (as to Seller’s representation and warranty only, to Seller’s Knowledge)
(i) each of the Acquired Companies has conducted its business in the Ordinary
Course of Business and has not incurred any material Liability, except in the
Ordinary Course of Business; (ii) there has not been any change in the business,
financial condition, Liabilities, assets, technology, Intellectual Property
rights, employee relations, customer relations, supplier relations, manufacturer
relations or distributor relations, or results of operations of the Acquired
Companies that has had, or would reasonably be expected to have, a Material
Adverse Effect on any such party, (iii) there has not been any declaration,
setting aside or payment of any dividend, other distribution (whether in cash,
stock or property), redemption or repurchase with respect to any shares or
membership interests of any of the Acquired Companies; (iv) there has not been
any split, combination or reclassification of any common stock of any of the
Acquired Companies or any issuance or commitment to issue or the authorization
of any issuance of any capital stock or other equity interests of any of the
Acquired Companies or other securities convertible into, in exchange or in
substitution for any shares of capital stock or other equity interests of any of
the Acquired Companies; (v) there has not been (A) any granting by any of the
Acquired Companies to any employee of any of the Acquired Companies of any
increase in compensation, other than in the Ordinary Course of Business, (B) any
granting by any of the Acquired Companies to any such employee of any increase
in severance or termination pay, (C) any entry by any of the Acquired Companies
into any employment, severance or termination agreement, policy or arrangement
with any employee other than in the Ordinary Course of Business, or (D) any
transaction with Seller, or a director or employee of any of the Acquired
Companies, other than in the Ordinary Course of Business; (vi) there has not
been any change in accounting methods, principles or practices by any of the
Acquired Companies affecting its assets, Liabilities or business, except insofar
as may have been required by a change in GAAP, and (vii) the Acquired Companies
have paid all of their liabilities and other obligations on a timely basis.

 

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(b) Except for the transactions contemplated in this Agreement and except as set
forth on Section 4.17(b) of the Disclosure Letter, since the Interim Financial
Statements Date, (as to Seller’s representation and warranty only, to Seller’s
Knowledge) none of the Acquired Companies has (i) sold, transferred, leased,
licensed, pledged or mortgaged or agreed to sell, transfer, lease, license,
pledge, or mortgage any assets, property or rights (including without limitation
Intellectual Property) in excess of $25,000 individually or $150,000 in the
aggregate, other than sales or disposition of inventories in the Ordinary Course
of Business, or cancelled, waived or compromised or agreed to cancel, waive or
compromise, any debts, claims or rights in excess of $25,000 in the aggregate;
(ii) made any material change in any method of management or operation; (iii)
(A) made any new, or made a change in any, material Tax election, settlement or
compromise of any claim, notice, audit report or assessment in respect of Taxes,
(B) made a material change in any annual Tax accounting period, (C) adopted or
changed any material method of Tax accounting, (D) filed of any amended material
Tax Return, (E) entered into any tax allocation agreement, tax sharing
agreement, tax indemnity agreement or closing agreement relating to any material
Tax, (F) surrendered any right to claim a material Tax refund or credit, or
(G) consented to any extension or waiver of the statute of limitations period
applicable to any material Tax claim or assessment; (iv) transferred, exchanged
or exclusively licensed any of its Intellectual Property, or had any other
material developments related to its Intellectual Property; (v) issued or
committed to issue any capital stock or any securities convertible into capital
stock; (vi) made any capital expenditure(s) in excess of, or purchased or
acquired capital assets costing in excess of, approximately $25,000, in the
aggregate; (vii) incurred or assumed any indebtedness for borrowed money or
guaranteed any obligation or the net worth of any other Person; (viii) suffered
any damage or destruction to, loss of, or condemnation or eminent domain
proceeding relating to any of its tangible properties or assets (whether or not
covered by insurance) which has had or would reasonably be likely to have a
Material Adverse Effect; (ix) lost the employment services of any employee whose
annual salary exceeded $75,000; (x) made any loan or advance to any Person,
other than travel and other similar routine advances to employees in the
Ordinary Course of Business consistent with past practice; (xi) entered into any
agreements, commitments or contracts, except those made in the Ordinary Course
of Business; or (xii) entered into any agreement or commitment to do any of the
foregoing.

 

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Section 4.18 Contracts; No Defaults.
(a) Section 4.18(a) of the Disclosure Letter contains a complete and accurate
list of the following written contracts and agreements, and any amendments,
modifications or supplements thereto as of the date hereof (“Contracts”), to
which any Acquired Company is a party:
(i) any contract or agreement that involves performance of services or delivery
of goods, commodities, supplies, products, materials or other personal property
by one or more of the Acquired Companies of an amount or value in excess of
$25,000;
(ii) any contract or agreement that involves performance of services or delivery
of goods, commodities, supplies, products, materials or other personal property
to one or more of the Acquired Companies of an amount or value in excess of
$25,000;
(iii) any contract or agreement that was not entered into in the Ordinary Course
of Business;
(iv) any lease, rental or occupancy agreement, license, installment and
conditional sale agreement, or other contract or agreement affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property;
(v) any licensing agreement or other contract with respect to the Intellectual
Property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property;
(vi) any collective bargaining agreement or other contract to or with any labor
union or other employee representative of a group of employees;
(vii) any contract or agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual compensation in
excess of $25,000 or providing severance benefits in excess of one month’s base
salary;
(viii) any contract or agreement between any Acquired Company and Seller or any
of its Affiliates (other than such Acquired Company);
(ix) any joint venture agreement, partnership agreement or similar contract or
agreement;
(x) any contract or agreement containing covenants that in any way purport to
restrict the business activity of any Acquired Company or any Affiliate of an
Acquired Company or limit the freedom of any Acquired Company or any Affiliate
of an Acquired Company to engage in any line of business or to compete with any
Person;

 

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(xi) any contract or agreement providing for commissions or payments to or by
any Person based on sales, purchases or profits;
(xii) any power of attorney that is currently effective and outstanding;
(xiii) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, termination, severance, change of control or other
agreement, plan or arrangement for the benefit of any Acquired Company’s current
or former managers, directors, officers and employees;
(xiv) any contract or agreement under which any Acquired Company has advanced or
loaned any amount to any of its managers, directors, officers or employees;
(xv) any contract or agreement (or group of related contracts or agreements)
under which any Acquired Company has created, incurred, assumed or guaranteed
any indebtedness for borrowed money or other Liability or obligation, or any
capitalized lease obligation;
(xvi) any written warranty, guaranty, and/or other similar undertaking with
respect to contractual performance extended by any Acquired Company;
(xvii) any other contract or agreement under which the consummation of the
transactions consummated by this Agreement would constitute a default thereunder
(with or without notice or lapse of time, or both) without the prior consent of
another party thereunder; and
(xviii) any other contract or agreement (or group of related contracts or
agreements) the performance of which involves consideration in excess of
$25,000.
(b) Except as set forth on Section 4.18(b) of the Disclosure Letter, none of the
Acquired Companies is a party to, or is otherwise bound by, any oral contract or
agreement that (i) has any continuing obligation of such Acquired Company or
(ii) is not terminable by such Acquired Company without notice and without
penalty. Any oral contract or agreement to which any Acquired Company is a party
or is otherwise bound by (whether or not such contract is listed on
Section 4.18(b) of the Disclosure Letter) shall be deemed a “Contract” for
purposes of Section 4.18, but shall not be required to be listed on
Section 4.18(a) of the Disclosure Letter.

 

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Seller has delivered or made available to Buyer a correct and complete copy of
each written Contract listed in Section 4.18(a) of the Disclosure Letter and a
written summary setting forth the terms and conditions of each oral Contract
referred to in Section 4.18(b) of the Disclosure Letter. With respect to each
such Contract (as to Seller’s representation and warranty only, to Seller’s
Knowledge): (i) the Contract is legal, valid, binding, enforceable, and in full
force and effect, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar Laws relating to or affecting
creditors generally and by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law); (ii) the
Contract will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated by this Agreement; (iii) no party is in material
breach or default, and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification, or acceleration under the Contract; and (iv) no party has
repudiated any provision of the Contract. None of the Acquired Companies has
received any notice of termination with respect to any Contract.
Section 4.19 Insurance.
Section 4.19 of the Disclosure Letter contains a complete and accurate list of
all policies or binders of fire, liability, title, property, director and
officer, worker’s compensation, product liability and other forms of insurance
(showing as to each policy or binder the carrier, policy number, coverage
limits, deductibles, expiration dates, annual premiums, a general description of
the type of coverage provided, and loss experience history by line of coverage)
maintained by any of the Acquired Companies on their businesses or employees
since January 1, 2007. All insurance coverage applicable to the Acquired
Companies (as to Seller’s representation and warranty only, to Seller’s
Knowledge) is in full force and effect, insures the Acquired Companies in
reasonably sufficient amounts, as determined by the Acquired Companies in
consultation with their insurance agents, against the Acquired Companies’
respective risks, provides coverage as may be required by any and all contracts
or agreements that the Acquired Companies are party to and has been issued by
insurers of recognized responsibility. There is no default (as to Seller’s
representation and warranty only, to Seller’s Knowledge) under any such coverage
nor has there been any failure to give notice or present any claim under any
such coverage in a due and timely fashion. As to Seller’s representation and
warranty only, to Seller’s Knowledge, there are no outstanding unpaid premiums
except in the Ordinary Course of Business and no notice of cancellation or
nonrenewal of any such coverage has been received. There are no provisions in
such insurance policies (as to Seller’s representation and warranty only, to
Seller’s Knowledge) for retroactive or retrospective premium adjustments.
Section 4.20 Environmental, Health and Safety Matters.
(a) Except as set forth on Section 4.20(a) of the Disclosure Letter and except
as has been fully remediated such that no Acquired Company has any remaining
remediation obligations, each Acquired Company is, and at all times has been,
(as to Seller’s representation and warranty only, to Seller’s Knowledge) in
material compliance with, and has not been and is not in material violation of
or liable under, all applicable Environmental, Health and Safety Laws and all
applicable Licenses and Permits related to environmental, health and safety
matters.

 

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(b) Except as set forth on Section 4.20(b) of the Disclosure Letter and except
where the failure to do so would not have a Material Adverse Effect, (as to
Seller’s representation and warranty only, to Seller’s Knowledge) neither Seller
nor any Acquired Company has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened Order, notice, or other communication from
(i) any Governmental Authority or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any actual
or potential violation or failure to comply with any Environmental, Health or
Safety Law, or of any actual or Threatened obligation to undertake or bear the
cost of any Environmental, Health, and Safety Law Liabilities with respect to
any of the Facilities or any other properties or assets (whether real, personal,
or mixed) in which Seller or any Acquired Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Seller, any Acquired Company, or any other Person for whose conduct they are or
may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(c) Except as set forth on Section 4.20(c) of the Disclosure Letter, to the
Knowledge of Seller and the Acquired Companies, there are no pending or
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Liabilities or arising under or pursuant to any Environmental, Health
and Safety Law, with respect to or affecting any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in which Seller or any
Acquired Company has or had an ownership interest.
(d) Except to the extent that it would not result in a Material Adverse Effect,
(as to Seller’s representation and warranty only, to Seller’s Knowledge) neither
Seller nor any Acquired Company has any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held responsible,
received, any written citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental, Health and Safety Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Law Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Seller or any
Acquired Company has or had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Seller, any Acquired Company, or
any other Person for whose conduct they are or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(e) Except as set forth on Section 4.20(e) of the Disclosure Letter and except
to the extent that it would not result in a Material Adverse Effect, neither
Seller nor any Acquired Company, nor any other Person for whose conduct they are
or may be held responsible, has (as to Seller’s representation and warranty
only, to Seller’s Knowledge) any Environmental, Health, and Safety Law
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which Seller or any
Acquired Company (or any predecessor), has or had an interest, or at any
property adjoining the Facilities or any such other property or assets.

 

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(f) Except as set forth on Section 4.20(f) of the Disclosure Letter, to the
Knowledge of Seller or any Acquired Company, there are no Hazardous Materials
present on or in the Environment at the Properties, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part thereof, or incorporated into any structure therein or
thereon.
(g) Except as set forth on Section 4.20(g) of the Disclosure Letter, to the
Knowledge of Seller or any Acquired Company, neither Seller nor any Acquired
Company, nor any other Person for whose conduct they are or may be held
responsible, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Properties or assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has or had an interest, except in
full compliance with all applicable Environmental, Health and Safety Laws.
(h) Except as set forth on Section 4.20(h) of the Disclosure Letter, to the
Knowledge of Seller or any Acquired Company, there has been no Release or
Threatened Release of any Hazardous Materials at or from the Facilities or from
or by any other properties and assets (whether real, personal, or mixed) in
which Seller or any Acquired Company has or had an interest, or any adjoining
property, whether by Seller, an Acquired Company, or any other Person.
(i) Except as set forth on Section 4.20(i) of the Disclosure Letter, (as to
Seller’s representation and warranty only, to Seller’s Knowledge) neither Seller
nor any Acquired Company has transported or arranged for the transport of
Hazardous Materials which to the Knowledge of Seller or any Acquired Company has
or may become the subject of any environmental action under any Environmental,
Health, and Safety Law.
(j) Seller and the Acquired Companies have (as to Seller’s representation and
warranty only, to Seller’s Knowledge) delivered or made available to Buyer true
and complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Seller or any Acquired Company pertaining
to Hazardous Materials or Hazardous Activities in, on, or under the Facilities,
or concerning compliance by Sellers, any Acquired Company, or any other Person
for whose conduct they are or may be held responsible, with Environmental,
Health and Safety Laws.
Section 4.21 Employees and Labor Matters.
(a) To the Knowledge of Seller and the Acquired Companies, no executive, key
employee, or group of employees has any plans to terminate employment with the
Acquired Companies. Except as disclosed in Section 4.21(a) of the Disclosure
Letter, to the Knowledge of Seller and the Acquired Companies, no employee has
any claim, or basis for any claim, against the Acquired Companies that would
reasonably be expected to result in a material Liability of any Acquired
Company.

 

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(b) Section 4.21(b) of the Disclosure Letter contains a list of (i) all full,
part-time and hourly employees of the Acquired Companies as of a date not more
than ten (10) days prior to the date of this Agreement (the “Employees”),
(ii) all consultants and other independent contractors to the Acquired Companies
who have rendered services material to the business of the Acquired Companies
within the last twelve (12) months, and (iii) the directors, executive officers
and any advisory board members of the Acquired Companies, if any, including an
organizational chart of each. Section 4.21(b) of the Disclosure Letter also sets
forth for each Employee the following information as of a date not more than ten
(10) days prior to the date of this Agreement: (v) title (if manager level or
above), (w) base or hourly compensation, (x) accrued and unused vacation and
sick pay (to the extent such vacation and sick pay constitutes an obligation
which will be due and payable upon termination of such employee), (y) any
severance obligation of the Acquired Companies which may result upon
consummation of the transactions contemplated by this Agreement, and (z) bonuses
paid or accrued with respect to the current fiscal year in the aggregate for all
Employees. Except as set forth on Section 4.21(b) of the Disclosure Letter, and
except as provided by Law, the employment of all persons presently employed or
retained by each Acquired Company is terminable at will.
(c) Since January 1, 2007, the Acquired Companies have not experienced any work
stoppage, slow-down, picket, strike, lock-out or other labor disturbance, nor is
any such work stoppage, slow-down, picket, strike, lock-out or other labor
disturbance presently occurring or, to the Knowledge of Seller and the Acquired
Companies, Threatened. To the Knowledge of Seller and the Acquired Companies,
(i) there are no organizational efforts presently being made or Threatened by or
on behalf of any labor union with respect to any Employees, and (ii) since
January 1, 2007, no union or other labor organization has attempted to organize
any current or former employees of the Acquired Companies. Neither Seller, the
Acquired Companies nor to their Knowledge any of the ERISA Affiliates are or
were a party to any collective bargaining agreement.
(d) Except as disclosed in Section 4.21(d) of the Disclosure letter, there are
no claims, controversies, labor disturbances, investigations, Proceedings or
complaints pending or, to Knowledge of Seller and the Acquired Companies,
Threatened, by any Governmental Authority, any Employees, any party or parties
representing any of such Employees, or any former employer of a current
Employee, against the Acquired Companies before any court, arbitrator or other
tribunal. There are no unfair labor practice charges, charges of discrimination,
wrongful termination or other similar complaints pending against the Acquired
Companies involving employees now or previously employed by the Acquired
Companies that would have a Material Adverse Effect, nor, to the Knowledge of
Seller and the Acquired Companies, do any facts or circumstances exist that
could provide a reasonable basis for the same.

 

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(e) There has not been with respect to any Acquired Company (i) a “plant
closing” (as defined in the Worker Adjustment and Retraining Notification Act
(the “WARN Act”) or any similar state, local or foreign Law) affecting any site
of employment or one or more facilities or operating units within any site of
employment or facility, or (ii) a “mass layoff” (as defined in the WARN Act, or
any similar state, local or foreign Law) affecting any site of employment or
facility. None of the employees of any Acquired Company has suffered an
“employment loss” (as defined in the WARN Act or any similar state, local or
foreign Law) during the ninety-day period prior to the date of this Agreement.
Section 4.22 Intellectual Property.
(a) Each Acquired Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for or
used in the operation of the business of such Acquired Company as presently
conducted. Each item of Intellectual Property owned or used by each Acquired
Company immediately prior to the Closing hereunder will be owned or available
for use by such Acquired Company on identical terms and conditions immediately
subsequent to the Closing hereunder. Each Acquired Company has taken all
necessary and desirable action to maintain and protect each item of Intellectual
Property that it owns or uses.
(b) Each Acquired Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of Seller and the managers, directors,
officers and employees of such Acquired Company has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that such
Acquired Company must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of Seller and the Acquired
Companies, no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of any
Acquired Company.
(c) Section 4.22(c) of the Disclosure Letter identifies each patent, if any, and
each registration which has been issued to each Acquired Company with respect to
any of its Intellectual Property, identifies each pending patent application, if
any, and each application for registration which such Acquired Company has made
with respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which such Acquired Company has granted to any
third party with respect to any of its Intellectual Property (together with any
exceptions). Seller has delivered or made available to Buyer correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and has made available to Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section 4.22(c) of
the Disclosure Letter also identifies each trade name or unregistered trademark
used by each Acquired Company in connection with its business. With respect to
each item of Intellectual Property required to be identified in Section 4.22(c)
of the Disclosure Letter:
(i) the respective Acquired Company possesses all right, title, and interest in
and to the item, free and clear of any Encumbrance, license, or other
restriction;

 

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(ii) the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or Threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) the respective Acquired Company has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) Section 4.22(d) of the Disclosure Letter identifies each item of
Intellectual Property that any third party owns and that any Acquired Company
uses pursuant to license, sublicense, agreement, or permission. Seller has
delivered or made available to Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
Section 4.22(d) of the Disclosure Letter:
(i) the license, sublicense, agreement, or permission covering the item is
legal, valid, binding, enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or permission will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or permission is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the representations and warranties set
forth in subsections (i) through (iv) above are true and correct with respect to
the underlying license;
(vi) the underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or is Threatened which challenges the legality,
validity, or enforceability of the underlying item of Intellectual Property; and
(viii) the respective Acquired Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.

 

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(e) To the Knowledge of Seller and each Acquired Company, no Acquired Company
will interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of such Acquired Company’s business as presently
conducted.
Section 4.23 Certain Payments.
No Acquired Company or director, officer, agent or employee of any Acquired
Company, or to the Knowledge of Seller and the Acquired Companies, any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions, or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of any Acquired Company, or (iv) in violation of any Law, or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies.
Section 4.24 Affiliated Transactions and Certain Other Agreements.
(a) Section 4.24(a) of the Disclosure Letter sets forth a list of those persons
and entities who are “affiliates” of the Acquired Companies within the meaning
of Rule 145 promulgated under the Securities Act or for purposes of Accounting
Series Releases 130 and 135 of the SEC (the “Acquired Company Affiliates”).
(b) Other than as set forth on Section 4.24(b) of the Disclosure Letter with
reasonable detail, including the names of parties involved and a description of
the disclosed transaction, (i) there are no agreements or Liabilities between
any Acquired Company, on the one hand, and any officer, employee, director,
stockholder of any Acquired Company or any Acquired Company Affiliate, on the
other hand, (ii) the Acquired Companies do not provide or cause to be provided
any assets, services or facilities to any such officer, employee, director or
stockholder of any Acquired Company or any Acquired Company Affiliate; (iii) no
officer, employee, director or stockholder of any Acquired Company or Acquired
Company Affiliate provides or causes to be provided any assets, services or
facilities to the Acquired Companies; and (iv) the Acquired Companies do not
beneficially own, directly or indirectly, any investment assets of any current
or former officer, employee, director or stockholder of any Acquired Company or
Acquired Company Affiliate.
(c) Each of the agreements and Liabilities listed in Section 4.24(b) of the
Disclosure Letter were entered into or incurred, as the case may be, on terms no
less favorable to the Acquired Companies than if such agreement or liability was
entered into or incurred on an arm’s-length basis on competitive terms.

 

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Section 4.25 Customer and Supplier Relationships.
(a) Section 4.25(a) of the Disclosure Letter lists the ten (10) largest
customers of the Acquired Companies for the fiscal years ended December 31, 2007
and December 31, 2008 and for the three months ending March 31, 2009. To the
Knowledge of Seller and the Acquired Companies, except as set forth on
Section 4.25(a) of the Disclosure Letter, there are no facts or circumstances
(including the consummation of the transactions contemplated hereby) that are
likely to result in the loss of any one such customer or group of customers of
any Acquired Company or a Material Adverse Change in the relationship of any
Acquired Company with such a customer or group of customers.
(b) Section 4.25(b) of the Disclosure Letter lists the ten (10) largest
suppliers of the Acquired Companies for the fiscal years ended December 31, 2007
and December 31, 2008 and for the three months ending March 31, 2009. To the
Knowledge of Seller and the Acquired Companies, there are no facts or
circumstances (including the consummation of the transactions contemplated
hereby) that are likely to result in the loss of any one such supplier or group
of suppliers of any Acquired Company or a Material Adverse Change in the
relationship of any Acquired Company with such a supplier or group of suppliers.
Section 4.26 Foreign Corrupt Practices Act.
Neither the Acquired Companies nor any officer, director, employee or agent
thereof acting on behalf of any Acquired Company has done any act or authorized,
directed or participated in any act in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, applied to such
Person.
Section 4.27 Anti-Takeover Statute.
No “business combination,” “fair price,” “moratorium,” “control share
acquisition” or other similar anti-takeover statute, regulation or similar Law
applies or purports to apply to the authorization, execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated herein.
Section 4.28 Brokers or Finders.
The Acquired Companies and their agents have incurred no obligation or
Liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with this Agreement or any of
the transactions contemplated herein.

 

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
BUYER
Buyer represents and warrants to Seller that the statements contained in this
Article V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article V).
Section 5.1 Organization of Buyer.
Buyer is a corporation duly organized, validly existing, and in good standing
under the Laws of the State of California.
Section 5.2 Authorization of Transaction.
Buyer has full power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and conditions,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Any and all
corporate acts and other proceedings necessary for the due and valid
authorization, execution, delivery and performance by Buyer of this Agreement
and the exhibits and schedules hereto and the consummation by Buyer of the
transactions contemplated hereby have been validly and appropriately taken.
Section 5.3 Noncontravention.
Neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will violate any Law to which Buyer is
subject or any provision of its Organizational Documents.
Section 5.4 Brokers’ Fees.
Buyer and its agents have incurred no obligation or Liability, contingent or
otherwise, for brokerage or finders’ fees, or agents’ commissions, or other
similar payment in connection with this Agreement or any of the transactions
contemplated herein.

 

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ARTICLE VI
CLOSING CONDITIONS; TERMINATION
Section 6.1 Closing Conditions of Buyer.
The obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any one or more of which may be waived (but
only in writing) by Buyer:
(a) Representations, Warranties and Covenants of Seller and AMG; No Material
Adverse Effect. (i) All of the representations and warranties made by Seller and
AMG in this Agreement are true and correct in all material respects as of the
Closing Date, (ii) Seller shall have performed and complied with all agreements
and covenants required by this Agreement to be performed by it on or prior to
the Closing Date, and (iii) no Material Adverse Effect shall have occurred since
the date of this Agreement.
(b) No Injunction or Proceeding. No action or proceeding shall be pending before
any Governmental Authority (i) to enjoin, restrain or prohibit the consummation
of the transactions contemplated hereby or (ii) which if adversely decided would
have a Material Adverse Effect. No Governmental Authority shall have enacted,
issued or promulgated any statute, rule, regulation or Order that would enjoin,
restrain or prohibit the consummation of the transactions contemplated hereby or
which would have a Material Adverse Effect.
(c) Consents and Approvals. All filings, notices, approvals, and consents, or
waivers thereof, required pursuant to this Agreement shall have been obtained in
a form reasonably satisfactory to Buyer.
(d) Release of Liability Under Seller’s Credit Facilities. Seller shall have
obtained releases of liability of the Acquired Companies from Bank of America,
N.A. under the Seller Loan Agreement and any other agreements relating thereto
and from any other Person to whom any Acquired Company is a guarantor or
otherwise liable for any Liability or obligation (including indebtedness) of
Seller or any of its Affiliates (other than the Acquired Companies), in each
case in form reasonably satisfactory to Buyer.
(e) Fairness Opinion. Seller shall have received a fairness opinion from an
investment banking firm of regional or national reputation, and Seller shall
have delivered to Buyer a copy of such opinion, on or before the Closing Date.
(f) Seller’s Closing Deliveries. Seller shall deliver, or cause to be delivered,
to Buyer at the Closing the following:
(i) a certificate, executed by an executive officer of Seller, certifying as to
the satisfaction of Section 6.1(a) above at it applies to Seller;
(ii) a certificate, executed by an executive officer of AMG, certifying as to
the satisfaction of Section 6.1(a) above at it applies to AMG;

 

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(iii) the Closing Intercompany Balances Certificate, certified by an executive
officer of Seller;
(iv) copies of all documents evidencing compliance with Section 2.3 above in a
form reasonably acceptable to Buyer;
(v) copies of all filings, notices, approvals, and consents, or waivers thereof,
required pursuant to this Agreement, certified by an officer of Seller;
(vi) written documentation in a form satisfactory to Buyer evidencing that all
consents, approvals and waivers listed in Sections 4.1(g) and 4.4 of the
Disclosure Letter have been obtained;
(vii) an executed copy of the action by Seller’s board of directors, and any
actions required by the Acquired Companies’ respective boards of directors or
other corporate authority performing similar functions, approving this Agreement
and the transactions contemplated hereby;
(viii) a duly executed assignment document transferring the Interest from Seller
to Buyer in a form reasonably acceptable to Buyer;
(ix) the Non-Competition and Non-Disclosure Agreement in the form attached
hereto as Exhibit A (the “Non-Competition and Non-Disclosure Agreement”), duly
executed by Seller;
(x) a legal opinion from Seller’s counsel dated as of the Closing Date as to the
matters set forth on Exhibit B attached hereto; and
(xi) a certificate of non-foreign status, in the form set forth in Treasury
Regulations Section 1.1445-2(b)(2), signed under penalties of perjury. Seller
understands that such certificate will be retained by Buyer and made available
to Governmental Authorities upon request.
Section 6.2 Closing Conditions of Seller.
The obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any one or more of which may be waived (but
only in writing) by Seller:
(a) Representations, Warranties and Covenants of Buyer. (i) All of the
representations and warranties made by Buyer in this Agreement are true and
correct in all material respects as of the Closing Date, and (ii) Buyer shall
have performed and complied with all agreements and covenants required by this
Agreement to be performed by it on or prior to the Closing Date.

 

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(b) No Injunction or Proceeding. No action or proceeding shall be pending before
any Governmental Authority (i) to enjoin, restrain or prohibit the consummation
of the transactions contemplated hereby or (ii) which if adversely decided would
have a Material Adverse Effect. No Governmental Authority shall have enacted,
issued or promulgated any statute, rule, regulation or Order that would enjoin,
restrain or prohibit the consummation of the transactions contemplated hereby or
which would have a Material Adverse Effect.
(c) Consents and Approvals. All filings, notices, approvals, and consents, or
waivers thereof, required pursuant to this Agreement shall have been obtained in
a form reasonably satisfactory to Buyer.
(d) Fairness Opinion. Seller shall have received a fairness opinion from an
investment banking firm of regional or national reputation on or before the
Closing Date.
(e) Buyer’s Closing Deliveries. Buyer shall deliver to Seller at the Closing the
following:
(i) the Closing Payment;
(ii) a certificate, executed by an executive officer of Buyer, certifying as to
the satisfaction of Section 6.2(a) above;
(iii) an execution copy of the action by Buyer’s manager approving this
Agreement and the transactions contemplated herein;
(iv) a legal opinion from Buyer’s counsel dated as of the Closing Date as to the
matters set forth on Exhibit C attached hereto; and
(v) the Non-Competition and Non-Disclosure Agreement, duly executed by Buyer.
Section 6.3 Termination.
(a) Termination of Agreement. This Agreement may be terminated at any time prior
to the Closing:
(i) By mutual consent of Buyer and Seller set forth in writing;
(ii) By and at the option of Buyer if the Closing shall not have occurred by
June 5, 2009; provided that Buyer shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have been
the proximate cause of, or resulted in, the failure to consummate the Closing;
(iii) By and at the option of Seller, by written notice to Buyer, if the Closing
shall not have occurred by June 5, 2009, provided that (A) Seller shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have been the proximate cause of, or resulted in, the failure
to consummate the Closing, and (B) Seller shall have rendered to Buyer payment
in full of the amount specified in Section 6.3(c) below concurrently with
delivery of its notice of termination;

 

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(iv) By and at the option of Seller, by written notice to Buyer, upon Seller
and/or AMG entering into a definitive agreement for a Superior Competing Offer
as contemplated by Section 7.4(c) provided that Seller shall have rendered to
Buyer payment in full of the amount specified in Section 6.3(c) below
concurrently with delivery of its notice of termination;
(v) By Buyer, by written notice to Seller, if events occur or conditions exist
which would render impossible or commercially unreasonable the satisfaction of
one or more of the conditions to the obligation of Buyer to consummate the
transactions contemplated hereby as set forth in Section 6.1;
(vi) By Seller, by written notice to Buyer, if events occur or conditions exist
which would render impossible or commercially unreasonable the satisfaction of
one or more of the conditions to the obligation of Seller to consummate the
transactions contemplated hereby as set forth in Section 6.2 provided that
Seller shall have rendered to Buyer payment in full of the amount specified in
Section 6.3(c) below concurrently with delivery of its notice of termination; or
(vii) By either Buyer or Seller, by written notice to the other party, if the
other party has materially breached any representation, warranty, covenant or
agreement contained herein and has not cured such breach within five
(5) Business Days or it is unable to be cured.
(b) Effect of Termination. In the event that this Agreement is terminated
pursuant to Section 6.3(a), all further obligations of the Parties under this
Agreement shall terminate; provided that the obligations of the Parties
contained in Sections 6.3(c) and (d) below shall survive any such termination.
(c) Termination Fee. In the event this Agreement is terminated by Seller for any
reason other than pursuant to Section 6.3(a)(vii) hereof, or by Buyer pursuant
to Section 6.3(a) hereof, Seller shall promptly pay (i) Buyer Two Hundred Fifty
Thousand Dollars ($250,000), by wire transfer of same day funds to an account
designated by Buyer and (ii) reimburse Buyer for all reasonable costs and
expenses as would otherwise be the obligation of Buyer pursuant to Section 9.11.
(d) Expenses. Without limiting the rights and remedies of any Party with respect
to a breach of any other Party’s representations, warranties or covenants under
this Agreement or any other document delivered in connection herewith, in the
event the transactions contemplated by this Agreement shall not be consummated,
the Parties hereto shall, except as otherwise provided in Section 6.3(c) above,
bear their own respective cost and expenses as provided in Section 9.11.

 

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ARTICLE VII
COVENANTS
The Parties agree as set forth in Sections 7.1 through 7.7 below with respect to
the period prior to and on the Closing Date and as set forth in Sections 7.8
through 7.18 below with respect to the period after the Closing Date.
Section 7.1 No Inconsistent Action; Reasonable Effort.
The Parties shall not, directly or indirectly, take any action which is
materially inconsistent with their respective obligations under this Agreement
and will make a reasonable effort, subject to the terms and conditions of this
Agreement, to consummate the transactions contemplated hereby. Without limiting
the foregoing, Seller shall use commercially reasonable efforts to obtain, at
its cost and expense prior to the Closing Date: (a) all filings, notices,
approvals and consents or waivers necessary for Seller and the Acquired
Companies to consummate the transactions contemplated hereby, (b) the fairness
opinion described in Sections 6.1(e) and 6.2(d) above, and (c) the releases
described in Section 6.1(d) above.
Section 7.2 Access to Books and Records and Personnel.
Upon reasonable prior notice during normal business hours, Seller shall make the
books, accounts, inventory, personal property, records (financial and other),
technical information, Contracts and other documents and information relating to
the Acquired Companies and their business available for examination, audit and
inspection by Buyer and its officers, employees, financial advisors, financing
sources, consultants, accountants, attorneys and authorized representatives;
provided, that such access is not unreasonably disruptive to Seller or the
Acquired Companies, their employees or their business and is conducted in such a
mutually agreed manner so as to maintain the confidentiality of the discussions
and transactions contemplated by this Agreement. Seller shall furnish or make
available to Buyer as promptly as practicable such documents or copies thereof,
and other information concerning the Acquired Companies and their business,
including, without limitation, any financial and operating data or other
periodic financial information, as Buyer shall, from time to time, reasonably
request. In addition, Seller shall give Buyer reasonable access at mutually
agreed upon times and places to such officers, managers, key employees,
accountants, advisors and other representatives of Seller and the Acquired
Companies as Buyer shall reasonably request.

 

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Section 7.3 Conduct of Business by Acquired Companies.
Between the date of this Agreement and the Closing Date, Seller shall cause the
Acquired Companies to be operated only in the Ordinary Course of Business and
shall pay on a timely basis all of its liabilities and other obligations. Seller
will use its commercially reasonable efforts to: (i) maintain in effect all
Licenses and Permits which are necessary for the operation and management of the
business of the Acquired Companies as presently conducted, (ii) maintain,
preserve and keep the tangible assets and properties of the Acquired Companies
in reasonable condition and repair (ordinary wear and tear excepted) and utilize
such assets and properties only in the Ordinary Course of Business, and
(iii) maintain good business relationships with material suppliers, customers,
licensors, lessors and others having substantial business dealings with the
Acquired Companies. Except as otherwise expressly permitted by this Agreement,
or as otherwise consented to or approved by Buyer in writing, no Acquired
Company shall:
(a) amend its Organization Documents, permit any redemption or repurchase of
membership interests or shares, or take any corporate or other action if any
such amendment or action would have an adverse effect on the ability of Seller
and/or AMG to consummate the transactions contemplated by this Agreement;
(b) create or incur any Encumbrance, or fail to take commercially reasonable
action to discharge any involuntary Encumbrance, against or in respect of any
material assets of the Acquired Companies, except as may be created or incurred
in the Ordinary Course of Business;
(c) (i) amend, terminate or fail to renew any material Contract, except in the
Ordinary Course of Business where such amendment, termination or failure to
renew would not be reasonably expected to result in a Material Adverse Effect,
or (ii) materially default (or take or omit to take any action that, with or
without the giving of notice or passage of time or both, would constitute a
material default) under any material Contract;
(d) enter into any new Contract, or make any proposal or offer to enter into a
new Contract, with a value in excess of $25,000, except in the Ordinary Course
of Business;
(e) dispose of or permit to lapse any rights to the use of any material
Intellectual Property;
(f) dispose of, dividend or distribute any assets or properties (I) outside of
the Ordinary Course of Business or (II) to Seller or its Affiliates (other than
the Acquired Companies), except in accordance with Section 2.3;
(g) fail to comply with any applicable Laws and Orders;
(h) enter into any settlement agreement in excess of $25,000 that is binding on
any of the Acquired Companies or their assets;
(i) acquire (by merger, consolidation or acquisition of stock) any other Person
or all or substantially all of the assets of any other Person;
(j) incur any indebtedness in excess of $25,000, unless incurred in the Ordinary
Course of Business;

 

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(k) grant, guarantee or endorse, or make any other accommodation or arrangement
making one or more of the Acquired Companies responsible for, or their assets
subject to, the Liabilities of (I) any other Person, other than Seller or its
Affiliates (other than the Acquired Companies), other than in the Ordinary
Course of Business or (II) Seller or its Affiliates (other than the Acquired
Companies);
(l) make any change in tax or accounting practices or policies, except as
required by GAAP;
(m) allow the presently existing insurance coverage of any Acquired Company to
lapse, except where (i) such coverage is no longer reasonably available, or
(ii) substitute coverage is secured;
(n) except in accordance with past practices or pursuant to the terms of
employment agreements, employee benefit plans, programs, arrangements or
policies in effect on the date of this Agreement, grant any material increase in
the salary or other compensation of, grant any material bonus to, or enter into
any material transaction of any other nature with, any Employee;
(o) take any action to institute any new severance, change of control or
termination pay practices with respect to any Employees or to materially
increase the benefits payable under the Acquired Companies’ respective severance
or termination pay practices;
(p) adopt or amend, in any material respect, except as may be required by
applicable Law or Order, any collective bargaining, profit sharing, stock
option, restricted stock, pension, retirement or deferred compensation plan;
(q) make, permit to exist or commit to make any loans, advances or extensions of
credit to or for the benefit of (I) any Person (other than Seller or its
Affiliates (other than the Acquired Companies)), other than in the Ordinary
Course of Business or (II) Seller or its Affiliates (other than the Acquired
Companies);
(r) pay any amount to, or for the benefit of, Seller or its Affiliates (other
than the Acquired Companies) or take, or omit to take, any action that would
result in the Intercompany Balances on the Closing Date differing in any amount
from the Intercompany Balances set forth in the Preliminary Intercompany
Balances;
(s) make, amend or revoke any Tax election, amend any Tax Return, or change
accounting period or method of accounting without the prior consent of Buyer; or
(t) authorize any of, or commit or agree to take any of, the foregoing actions.

 

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Section 7.4 Competing Proposals.
Buyer acknowledges and agrees that, during the period beginning on the date of
this Agreement and continuing until 11:59 a.m. Pacific Time on June 1, 2009 (the
“Solicitation Period”), Seller, each of the Acquired Companies, and their
respective officers, directors, managers, employees, investment bankers,
attorneys and other advisors and representatives (collectively, the “Seller
Representatives”) are permitted to (i) directly or indirectly solicit, initiate
or encourage the submission of competing proposals (collectively, “Alternate
Solicitation Activities”) from any other Person to acquire the Interest or
otherwise acquire all of the Acquired Companies (an “Alternate Transaction”) and
(ii) directly or indirectly participate in discussions or negotiations
regarding, and furnish to any Person with respect thereto, and take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Alternate Transaction
(collectively, “Alternate Discussions”); provided, however, that (A) Seller
shall not, nor shall it authorize or permit any other Seller Representative to,
provide or make available to any other Person any non-public information (other
than any immaterial non-public information) with respect to the Acquired
Companies without first entering into a customary confidentiality agreement with
such Person that is not less restrictive than any confidentiality agreement
entered into between or among Seller and/or AMG, on the one hand, and Buyer, on
the other hand, at which time Seller shall notify Buyer that it has entered into
a confidentiality agreement with such Person, and (B) Seller shall promptly
provide to Buyer any non-public information concerning any Acquired Company that
is provided or made available to such Person or its representatives which was
not previously provided or made available to Buyer. Unless Seller and/or AMG
enters into one or more written term sheets with Persons other than Buyer (each,
a “Competing Offeror”) prior to the expiration of the Solicitation Period for an
Alternate Transaction that does not have a “financing out” condition to the
Competing Offeror’s obligation to consummate the Alternate Transaction (each, a
“Competing Offer”), then from and after the end of the Solicitation Period and
continuing through the date of termination (if any) of this Agreement pursuant
to Section 6.3 above, Seller and the Seller Representatives shall be prohibited
from engaging in any manner, directly or indirectly, in any Alternate
Solicitation Activities or Alternate Discussions and shall immediately terminate
any ongoing Alternate Solicitation Activities or Alternate Discussions.
Section 7.5 Buyer’s Right of First Refusal.
Seller shall require that each Competing Offeror submit its executed written
firm and final term sheet to the Seller’s board of directors on or before the
end of the Solicitation Period. The board of directors of Seller shall review
each final term sheet for each Competing Offer and determine, in its business
judgment, which of such Competing Offers provides the highest all cash purchase
price above and beyond this Agreement (such a Competing Offer, if any, that is
determined to be superior to this Agreement, the “Superior Competing Offer”). In
the event the board of directors of Seller determines that there is a Superior
Competing Offer, Seller shall prepare and send a written notice (the “Competing
Offer Notice”) to Buyer no later than 5:00 p.m. Pacific Time on 5:00 p.m.
Pacific Time on May 22, 2009 clearly indicating that such a term sheet has been
entered into and attaching as an exhibit thereto a complete executed copy of
such term sheet. In the event the board of directors of Seller determines that
there is not a Superior Competing Offer, Seller and the Seller Representatives
shall immediately terminate any Alternate Solicitation Activities or Alternate
Discussions, shall not engage, directly or indirectly, in any further Alternate
Solicitation Activities or Alternate Discussions, and shall completely cease to
pursue any Competing Offers, and Seller and Buyer shall work in good faith to
consummate the transactions contemplated by this Agreement.

 

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(a) In the event Seller timely delivers to Buyer a Competing Offer Notice, for
four Business Days after the delivery of the Competing Offer Notice (the “Option
Period”, subject to the potential revised definition thereof set forth in
Section 7.5(c) below), Buyer shall have the right to deliver to Seller a written
notice signed by Buyer indicating Buyer’s agreement to match the terms of the
Superior Competing Offer (a “Buyer Acceptance Notice”).
(b) Upon Seller’s receipt of a Buyer Acceptance Notice prior to the expiration
of the Option Period, Seller and the Seller Representatives shall immediately
terminate any Alternate Solicitation Activities or Alternate Discussions and
completely cease to pursue any Superior Competing Offer and Seller and Buyer
shall work in good faith to enter into an amendment to this Agreement as to the
purchase price to make this Agreement consistent with the Superior Competing
Offer to which the Buyer Acceptance Notice Relates
(c) If Seller does not receive a Buyer Acceptance Notice with respect to the
Competing Offer Notice prior to the expiration of the Option Period, then Buyer
shall conclusively be deemed to have waived its rights under this Section 7.5
and Seller and/or AMG and the Competing Offeror (or any Affiliate of the
Competing Offeror contemplated by the term sheet for the Superior Competing
Offer) shall be permitted to enter into a definitive agreement for, and
consummate, the Superior Competing Offer; subject to Seller’s delivery of a
notice pursuant to Section 6.3(a)(iv) hereof and Seller’s payment to Buyer of
the amount specified in Section 6.3(c) hereof in accordance with the terms
thereof; provided, however, that if there is a material change in the terms of
the Superior Competing Offer as set forth in the definitive agreement therefor
as compared to the terms set forth in the term sheet for such Superior Competing
Offer, then the modified terms of the Superior Competing Offer as set forth in
the definitive agreement therefor shall again be subject to the terms of this
Section 7.5.
Section 7.6 Intercompany Balance; Financial Statement.
(a) Intercompany Balance. Seller shall promptly notify Buyer in writing of any
change in the Intercompany Balance from the Intercompany Balance set forth in
the Preliminary Intercompany Balance. In the event of any dispute between Seller
and Buyer regarding such change (or the failure of Seller to notify of a
change), Seller and Buyer shall work diligently and in good faith to resolve any
such dispute, with the resolution of such dispute to be set forth in writing (or
through clear and specific email communications between authorized
representatives of Seller and Buyer regarding the resolution of such dispute)
between Buyer and Seller.

 

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(b) Financial Statements. Prior to the Closing, Seller also shall deliver to
Buyer on a monthly basis as soon as it is available a true and correct copy of
an unaudited balance sheet and statements of operations, change in stockholders’
equity (including the related notes and cash flow for each Acquired Company as
of and for each calendar month, commencing with April 2009 and continuing until
Closing.
Section 7.7 Other Pre-Closing Actions.
(a) Acquired Company Adjustments. Prior to the Closing, the Acquired Companies
shall make the payments or adjustments to the other Acquired Companies in
accordance with Schedule 7.7.
(b) Tax Assets Write-Offs. Upon the request of Buyer, Seller shall cooperate
with Buyer to write off Tax assets to the maximum extent allowable for the short
period Tax Return ending on or prior to the Closing Date in order to be within
Code Section 382(h)(3) (B) built-in loss threshold requirements.
Section 7.8 General.
In case at any time after the Closing any further action is necessary to carry
out the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request. Seller acknowledges and
agrees that from and after the Closing, Buyer will be entitled to possession of
all documents, books, records (including Tax records), agreements, and financial
data of any sort relating to each Acquired Company.
Section 7.9 Litigation Support.
In the event and for so long as any Party actively is contesting or defending
against any action, suit, Proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving any Acquired Company,
the other Party will cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefore under Article VIII below).
Section 7.10 Transition.
Seller will not take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, or other business
associate of any Acquired Company from maintaining the same business
relationships with such Acquired Company after the Closing as it maintained with
such Acquired Company prior to the Closing. Seller will refer all customer
inquiries relating to the businesses of each Acquired Company to Buyer from and
after the Closing.

 

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Section 7.11 Solicitation of Seller and Target Employees.
Seller covenants and agrees that beginning on the Closing Date and continuing
for a period of eighteen (18) months thereafter (the “Non-Solicitation Period”),
it will not anywhere in the world (the “Non-Solicitation Area”) (i) solicit or
hire any of the employees of any Acquired Company who were employed by such
Acquired Company prior to the Closing, (ii) interfere with the relationship of
any Acquired Company with any such employees, or (iii) personally target or
solicit, or assist another to target or solicit, customers of any Acquired
Company for activities related to the businesses of the Acquired Companies or
influence, or attempt to influence, any of the customers of any Acquired Company
not to do business with any Acquired Company; provided, however, that Seller may
engage in general solicitations for employees in the Ordinary Course of Business
which are directed at the public in general and/or found in general publications
for employees. Seller agrees that the restrictions contained in this
Section 7.11 are reasonable as to time and geographic scope because of the
nature of the business of the Acquired Companies and Seller agrees, in
particular, that the geographic scope of this restriction is reasonable because
companies engaged in the businesses of the Acquired Companies compete throughout
the Non-Solicitation Area. Seller acknowledges that the Acquired Companies are
in direct competition with all other companies engaged in the businesses of the
Acquired Companies throughout the Non-Solicitation Area, and because of the
nature of such businesses, Seller agrees that the covenants contained in this
Section 7.11 cannot reasonably be limited to any smaller geographic area.
Section 7.12 Tax Matters.
(a) Tax Returns For Tax Periods Ending Prior to the Closing Date. Seller shall
prepare or cause to be prepared and duly and timely file or cause to be filed
all Tax Returns for each of the Acquired Companies that are due for any Tax
period ending on or prior to the Closing Date. Prior to filing, Seller shall
permit Buyer to review and comment on each such Tax Return described in the
preceding sentence not filed prior to execution of this Agreement and shall make
such revisions to such Tax Returns as are reasonably requested by Buyer;
provided, however, that comments are provided in a timely manner such that
Seller shall have a reasonable period of time to review such comments and make
revisions prior to filing, and such comments are consistent with positions taken
in prior Tax Returns. No position shall be taken in any such Tax Return that is
inconsistent with the past practice of the Acquired Companies without Buyer’s
written consent. No such Tax Return may make, amend or revoke any Tax election
or change any accounting period, method of accounting or accounting procedure
without Buyer’s prior written consent, which may be withheld in its sole
discretion.

 

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(b) Tax Returns for Straddle Periods. Buyer shall prepare or cause to be
prepared and duly and timely file or cause to be filed any Tax Returns of each
of the Acquired Companies for any Straddle Period. With respect to each Acquired
Company, Seller shall pay to Buyer within seven (7) days of a request from
Buyer, that amount equal to the portion of such Taxes which relates to the
Pre-Closing portion of such Tax Period. To the extent permitted by applicable
law, the parties shall elect (or cause the Acquired Companies) to treat the
period that includes the Closing Date with respect to any Tax as ending at the
close of the Closing Date and shall take such steps as may be necessary
therefor. For purposes of this Agreement, any Taxes of an Acquired Company for a
Straddle Period shall be allocated between the Pre-Closing Tax Period and the
Post-Closing Tax Period based on an interim closing of the books as of the close
of the Closing Date, provided, however, that any real property or personal
property taxes and any annual exemption amounts shall be allocated based on the
relative number of days in the Pre-Closing Tax Period and the Post-Closing Tax
Period. Buyer shall permit Seller to review and comment on each such Tax Return
described in the preceding sentence prior to filing and shall make such
revisions to such Tax Returns as are reasonably requested by Seller; provided,
however, that comments are provided in a timely manner such that Buyer shall
have a reasonable period of time to review such comments and make revisions
prior to filing, and such comments are consistent with positions taken in prior
Tax Returns. Except to the extent permitted by applicable Law, no position shall
be taken in any such Tax Return which is inconsistent with the past practice of
the Acquired Companies without Seller’s written consent.
(c) Cooperation on Tax Matters. Seller, Buyer and the Acquired Companies shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Agreement and any
audit, litigation or other Proceeding with respect to Taxes; provided that the
Party requesting cooperation shall be responsible for all out-of-pocket costs
incurred by the cooperating Party. Such cooperation shall include the retention
and (upon the other Party’s request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other Proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
(d) Certain Taxes. All transfer, documentary, sales, use, stamp, recording,
registration and other similar Taxes and fees (including any penalties and
interest) incurred in connection with the transactions contemplated by this
Agreement (collectively, “Transfer Taxes”) shall be paid by Seller when due, and
Seller will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes and, if required by
applicable law, Buyer will join in the execution of any such Tax Returns and
other documentation. Seller shall provide Buyer with (i) evidence satisfactory
to Buyer that such Transfer Taxes have been paid by Seller and (ii) a clearance
certificate or similar document(s) which may be required by any state
Governmental Authority to relieve the Buyer of any obligation to withhold any
portion of the payments to Seller pursuant to this Agreement.
(e) Tax Election. Seller shall not make (or permit any Affiliate to make) any
election under Section 336(e) of the Code (or any similar provision of
applicable state, local or foreign Law) with respect to any of the Acquired
Companies or transactions contemplated by this Agreement.

 

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(f) No Adverse Actions. Seller shall not take or fail to take (or permit the
common parent of its affiliated group under Code Section 1502 or any similar
provision of applicable state, local or foreign Law, to take or fail to take)
any action under the U.S. federal consolidated income tax return regulations,
including making an election under Treasury Regulation Section 1.1502-36 (or any
similar provision of applicable state, local or foreign Law) that could
adversely affect any tax attribute of Buyer, any of the Acquired Companies or
any of their Affiliates.
(g) Amended Returns. Except to the extent reasonably necessary to address any
audit or claim or the outcome thereof, or to the extent required by applicable
Law, Buyer shall not file, and shall not permit the Acquired Companies to file,
any amended Tax Return with respect to any Pre-Closing Tax Period without the
prior written consent of Seller, which consent shall not unreasonably be
withheld.
Section 7.13 Access to Records.
Following the Closing, Buyer shall permit Seller and its authorized
representatives to have reasonable access and duplicating rights during normal
business hours, upon reasonable prior notice to Buyer, to the books and records
of the Acquired Companies for periods prior to the Closing Date, to the extent
that such access may reasonably be required: (i) in connection with the
preparation of Seller’s accounting records or with any audits, (ii) in
connection with the preparation of any Tax Returns or with any tax audits, or
(iii) in connection with any suit, claim, action, Proceeding or investigation
relating to the Acquired Companies; provided that Seller shall reimburse Buyer
promptly for all reasonable and necessary out-of-pocket costs and expenses
incurred by Buyer in connection with any such request.
Section 7.14 Use of Proceeds.
Seller will not conceal, gift or otherwise dispose of any cash consideration
received by Seller pursuant to this Agreement in a manner that may prejudice the
rights of any creditor of Seller.
Section 7.15 Further Assurances.
In the case at any time after the Closing that any further action is reasonably
necessary to carry out the purposes of this Agreement, the proper officers of
Buyer and Seller shall take any such reasonably necessary action.
Section 7.16 D&O Insurance. For six years from the Closing Date, Seller shall
cause to be maintained in effect for the benefit of Joseph J. Ueberroth an
insurance policy that provides coverage for any claims regarding breach of any
fiduciary duty relating to this Agreement and all of the transactions
contemplated hereby on terms with respect to coverage and in amounts no less
favorable than those maintained by Seller for the benefit of Joseph J. Ueberroth
as of the date of this Agreement.

 

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Section 7.17 Benefit Plans. For a period of sixty (60) days from the Closing (or
such shorter period as may be requested by Buyer), Seller shall continue to
maintain the employees of the Acquired Companies on the Employee Plans and
Foreign Plans and provide them with all coverage and benefits thereunder. Buyer
shall reimburse Seller for the direct cost to Seller for maintaining the
employees of the Acquired Companies on the Employee Plans and Foreign Plans
within fourteen (14) days of receipt of an invoice from Seller detailing such
costs.
Section 7.18 Insurance Refund. Within thirty (30) days of the Closing, Seller
shall pay to Buyer an amount equal to the portion of the premiums and other
amounts paid for all forms of insurance maintained by Seller on behalf of, or
for the benefit of, any of the Acquired Companies on their business or employees
which is attributable to periods commencing immediately after the Closing Date.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty or covenant at
the time of Closing) and continue in full force and effect for eighteen
(18) months following the Closing, except with respect to representations and
warranties contained in Sections 4.1(c) (Interest Ownership), 4.5
(Capitalization), 4.12 (Taxes), 4.13 (Employee Benefits) and 4.20
(Environmental, Health and Safety Matters) hereof, which shall survive the
Closing hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations as it may be waived or extended). By “survival” the
Parties do not intend to suggest that any representation or warranty hereunder
is made at any time other than the times specified herein (as of the date of
this Agreement and as of the Closing Date). The covenants and agreements of the
Parties contained herein shall continue in accordance with their respective
terms and survive forever thereafter (subject to any applicable statutes of
limitations as it may be waived or extended). The period of time a
representation, warranty, covenant or agreement survives the Closing pursuant to
this Section 8.1 shall be the “Survival Period” with respect to such
representation, warranty, covenant or agreement. So long as an Indemnified Party
gives notice of an indemnification claim on or before the expiration of the
applicable Survival Period, such Indemnified Party shall be entitled to pursue
its rights to indemnification under Sections 8.2, 8.3 or 8.4 hereof, as
applicable. No party hereunder shall have any liability under this Article VIII
for any indemnification claim made after the expiration of the applicable
Survival Period. In the event notice of any claim for indemnification under
Sections 8.2, 8.3 or 8.4 hereof shall have been given within the applicable
Survival Period and such claim has not been finally resolved by the expiration
of such Survival Period, the representations, warranties, covenants or
agreements that are the subject of such claim shall survive the end of the
Survival Period of such representations, warranties, covenants and agreements
until such claim is finally resolved, but such representations and warranties
shall only survive with respect to such asserted claim. Any claim by an
Indemnified Party for indemnification shall not be adversely affected by any
investigation by or opportunity to investigate afforded to such party, nor shall
such a claim be adversely affected by such party’s Knowledge on or before the
Closing Date of any breach of the type specified in Section 8.2, 8.3 or 8.4 or
of any state of facts that may give rise to such a breach. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not adversely
affect the right to indemnification, payment of Damages or other remedy based on
such representations, warranties, covenants or obligations.

 

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Section 8.2 Indemnification of Buyer.
Subject to the provisions of this Article VIII, Seller shall indemnify, defend,
save and keep Buyer and its respective Affiliates (including each Acquired
Company), their respective members, managers, officers, directors, successors
and assigns (collectively, the “Buyer Indemnitees”), harmless against and from
all liability, demands, claims, actions or causes of action, assessments,
losses, fines, penalties, costs, damages and expenses, including without
limitation, reasonable attorneys’ fees, court costs and other fees,
disbursements and expenses, whether payable in cash, property or otherwise
(collectively, “Damages”) sustained or incurred by any of the Buyer Indemnitees
to the extent they are a result of, arise out of or are by virtue of: (i) any
breach of, or inaccuracy in, any representation or warranty, of any Acquired
Company or Seller, set forth in this Agreement or any exhibit or schedule
hereto, or any written statement or certificate furnished or to be furnished to
Buyer pursuant hereto or in any closing document delivered by any Acquired
Company or Seller to Buyer in connection herewith, (ii) any breach or
non-fulfillment of any agreement or covenant on the part of any Acquired Company
or Seller, set forth in this Agreement or any exhibit or schedule hereto, or any
written statement or certificate furnished or to be furnished to Buyer pursuant
hereto or in any closing document delivered by any Acquired Company or Seller to
Buyer in connection herewith, (iii) any claim or cause of action for fraudulent
transfers relating to any matter occurring on or prior to the Closing Date under
any Law and by or for the benefit of Seller or any Acquired Company; (iv) any
claim related to any Bankruptcy or Insolvency Proceeding of Seller; (v) any
claim by any employee of the Acquired Companies for any payments or benefits as
a result of the termination, during a period commencing ninety (90) days prior
to the date hereof and ending on the Closing Date, of his or her employment with
an Acquired Company or its successors under any Contract dated prior to the
Closing Date to which any Acquired Company and such participant are parties or
under any severance policy, practice or plan of the Acquired Companies, as
applied to such participant prior to, on, or on the date following the Closing
Date; (vi) any Environmental Actions relating to, arising out of or resulting
from the Environmental Conditions of any Seller Facility or any act or omission
of any Acquired Company on or prior to the Closing Date; (vii) any claim related
to breach of any fiduciary duty by Joseph J. Ueberroth in connection with this
Agreement or the transactions contemplated hereby, (viii) any claim that the
Purchase Price was not reasonably equivalent value for the Interest, and
(ix) any claim brought by, or on behalf of Seller’s stockholders other than
pursuant to Section 8.4 below. Such obligations apply regardless of the presence
of a Third Party Claim (as defined below). For purposes of determining the
amount of Damages for which indemnification is provided hereunder (but not for
the purpose of determining whether a breach of a representation, warranty or
covenant has occurred), each of the representations, warranties and covenants
made by any Party in this Agreement, or in any certificate or other instrument
delivered pursuant hereto, shall be deemed to have been made without the
inclusion of limitations or qualifications as to materiality such as the word
“material,” if with the inclusion of such limitation or qualification the
representation, warranty or covenant was breached.

 

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Section 8.3 Indemnification for Taxes.
Seller shall indemnify, save and hold Buyer harmless from and against any and
all losses incurred in connection with, arising out of, resulting from or
incident to (a) any Taxes of any of the Acquired Companies with respect to any
Pre-Closing Tax Period, (or any Straddle Period) to the extent the Tax is
allocable (as determined in Section 7.12(b) hereof) to the Pre-Closing Tax
Period), and (b) the unpaid Taxes of any Person (other than any of the Acquired
Companies) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract, or
otherwise.
Section 8.4 Indemnification of Seller.
Subject to the provisions of this Article VIII, Buyer shall indemnify, defend,
save and keep Seller and its Affiliates (other than the Acquired Companies), and
their respective officers, directors, successors and assigns (collectively, the
“Seller Indemnitees”) harmless against and from all Damages sustained or
incurred by Seller Indemnitees to the extent they are a result of, arise out of
or are by virtue of (i) any misrepresentations or breach of any representation
or warranty set forth in this Agreement or any exhibit or schedule hereto, or
any written statement or certificate furnished or to be furnished to Seller
pursuant hereto or in any closing document delivered by Buyer to Seller in
connection herewith, (ii) any non-fulfillment of any agreement or covenant on
the part of Buyer, set forth in this Agreement or any exhibit or schedule
hereto, or any written statement or certificate furnished or to be furnished to
Seller pursuant hereto or in any closing document delivered by Buyer to Seller
in connection herewith, or (iii) the nonpayment or nonperformance of any
Liabilities or obligations of the Acquired Companies other than Liabilities for
which Seller has any indemnification obligations under this Article VIII. Such
obligations apply regardless of the presence of a Third Party Claim (as defined
below). For purposes of determining the amount of Damages for which
indemnification is provided hereunder (but not for the purpose of determining
whether a breach of a representation, warranty or covenant has occurred), each
of the representations, warranties and covenants made by any party in this
Agreement or in any certificate or other instrument delivered pursuant hereto,
shall be deemed to have been made without the inclusion of limitations or
qualifications as to materiality such as the word “material,” if with the
inclusion of such limitation or qualification the representation, warranty or
covenant was breached.

 

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Section 8.5 Procedures for Indemnification.
(a) If a claim for Damages (an “Indemnity Claim”), other than Third-Party Claims
under Section 8.5(b) below, is to be made by a Person entitled to
indemnification under this Article VIII (an “Indemnified Party”), such party
shall give written notice briefly describing the claim and the total monetary
damages sought (each, a “Notice”) to the Seller or Buyer, as applicable (each an
“Indemnifying Party”) as soon as practicable after such Indemnified Party
becomes aware of any fact, condition or event which gives rise to Damages for
which indemnification may be sought under this Article VIII. Any failure to
submit any such notice of claim to the Indemnifying Party shall not relieve any
Indemnifying Party of any liability hereunder, except to the extent that the
Indemnifying Party demonstrates that the Indemnifying Party was actually
prejudiced by such failure. The Indemnifying Party shall be deemed to have
accepted the Notice and the Indemnifying Party shall be deemed to have agreed to
pay the Damages at issue if the Indemnifying Party does not send a notice of
disagreement to the Indemnified Party within thirty (30) calendar days after
receiving the Notice. If the Indemnifying Party does not send a notice of
disagreement to the Indemnified Party within thirty (30) calendar days after
receiving the Notice, the Indemnifying Party shall promptly pay to the
Indemnified Party the amount sufficient to pay the Damages.
(b) If an Indemnity Claim is to be made by an Indemnified Party entitled to
indemnification hereunder in respect of, arising out of or involving a claim
made by any third party (each, a “Third-Party Claim”) against the Indemnified
Party, the Indemnified Party shall give a Notice to the Indemnifying Party as
soon as practicable after becoming aware of such Third-Party Claim. The failure
of any Indemnified Party to give timely Notice hereunder shall not affect rights
to indemnification hereunder, except to the extent that the Indemnifying Party
demonstrates that the Indemnifying Party was actually prejudiced by such
failure. After such Notice, if the Indemnifying Party acknowledges in writing to
an Indemnified Party that the Indemnifying Party is liable and has indemnity
obligations for any Damages resulting from any such Third-Party Claim (and, in
the case Seller is the Indemnifying Party, if Buyer consents, which consent may
be withheld in Buyer’s sole and absolute discretion, and, further, in the case
Buyer is the Indemnifying Party, if Seller consents, which consent may be
withheld in Seller’s sole and absolute discretion), then the Indemnifying Party
shall be entitled, if it so elects at its own cost, risk and expense, (i) to
take control of the defense and investigation of such Third-Party Claim, (ii) to
employ and engage attorneys of its own choice (provided that such attorneys are
reasonably acceptable to the Indemnified Party) to handle and defend the same,
unless the named parties to such action or proceeding include the Indemnified
Party and the Indemnifying Party, and any such Indemnified Party has been
advised in writing by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, in which event such Indemnified Party
shall be entitled, at the Indemnifying Parties’ cost, risk and expense, to
separate counsel of its own choosing, and (iii) to compromise or settle such
claim, which compromise or settlement shall be made only with the written
consent of the Indemnified Party, such consent not to be unreasonably withheld,
provided that any such compromise or settlement shall provide for the absolute
and unconditional release of the Indemnified Parties from any Liability with
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Party assumes the defense of a Third-Party Claim (to the extent permitted
above), the Indemnified Party shall cooperate in all reasonable respects with
the Indemnifying Party and its attorneys in the investigation, trial and defense
of such Third-Party Claim and any appeal arising therefrom; provided, however,
that the Indemnified Party may, at its own cost, participate in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The Parties shall cooperate with each other in any
notifications to insurers. If the Indemnifying Party fails to assume the defense
of such claim within fifteen (15) calendar days after receipt of the Notice
(whether as a result of its election not to assume such defense or, as
applicable, the refusal of Buyer or Seller to grant a request of the other to
assume such defense), the Indemnified Party against which such claim has been
asserted will have the right to undertake, at the Indemnifying Parties’ cost,
risk and expense, the defense, compromise or settlement of such Third-Party
Claim on behalf of and for the account and risk of the Indemnifying Parties;
provided, however, that such claim shall not be compromised or settled without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. If the Indemnified Party assumes the defense of the
claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement;
provided, however, that the Indemnifying Party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The Indemnifying Party shall be liable for any settlement of
any Third-Party Claim effected pursuant to and in accordance with this
Section 8.5 and for any final judgment (subject to any right of appeal), and
each Indemnifying Party agrees to indemnify and hold harmless the Indemnified
Party from and against any Damages by reason of such settlement or judgment.
Section 8.6 Resolution of Conflicts and Claims.
(a) If an Indemnifying Party objects in writing to any Indemnity Claim for
indemnification made by an Indemnified Party in any written Notice (an
“Objection Notice”), Seller and Buyer shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims, and
Seller and Buyer shall provide information to the other party (as reasonably
requested) related to the issues set forth in the Objection Notice. If Seller
and Buyer should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both Parties.
(b) If no such agreement is reached after good faith negotiation, either Seller
or Buyer may demand mediation of the dispute, unless the amount of the damage or
loss is at issue in a pending action or proceeding involving a Third-Party
Claim, in which event mediation shall not be commenced until such amount is
ascertained or both Parties agree to mediation. In any such mediation, Seller
and Buyer agree to employ a mediator to assist them in reaching resolution of
such dispute according to the Commercial Mediation Rules of the AAA. The
mediator shall be a corporate attorney practicing in Orange County, California,
with at least fifteen (15) years experience in mergers and acquisitions. The
fees and expenses of the mediator shall be shared equally by Seller and Buyer.
If, after mediation efforts, Seller and Buyer should agree as to all or a
portion of a claim, a memorandum setting forth such agreement shall be prepared
and signed by both Parties. If after reasonable efforts, and over a period of
sixty (60) calendar days, the Parties are unable to reach agreement on such
dispute utilizing the mediator, the Parties shall be permitted to proceed with
any other remedy available to such Party.

 

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Section 8.7 Payment of Damages.
(a) All amounts under this Article VIII shall be paid within five (5) calendar
days after such amount is determined either by mutual agreement of the Parties
or pursuant to the mediation proceeding described in Section 8.6(b) of this
Agreement or on the date on which both such amount and the Indemnifying Party’s
obligation to pay such amount have been determined by a final judgment of a
court or administrative body having jurisdiction over such proceeding.
(b) Any claims for Damages asserted by Buyer or any Indemnified Party affiliated
with Buyer shall be satisfied by payment of cash or other immediately available
funds from Seller to Buyer. Any claims for Damages asserted by Seller or any
Indemnified Party affiliated with Seller (but not an Acquired Company) shall be
satisfied by Buyer’s payment of cash or other immediately available funds.
Section 8.8 Limitations on Indemnity.
An Indemnifying Party shall not have any liability for indemnification pursuant
to Section 8.2(i) or Section 8.4(i) unless and until the aggregate amount of all
Damages which are incurred or suffered by the Indemnified Party exceeds Fifty
Thousand Dollars ($50,000) (the “Threshold”); provided, however, that (a) in the
event the aggregate amount of Damages for which such Indemnified Party is
seeking indemnification exceeds the Threshold, such Indemnified Party shall be
entitled to recover the full amount of such Damages, including the Damages
comprising the Threshold and (b) Buyer shall not be entitled to indemnification
pursuant to Section 8.2(i) for any Damages resulting from any breach of, or
inaccuracy in, any representation or warranty, of any Acquired Company or Seller
in the event that Seller can prove by a preponderance of the evidence that
Joseph J. Ueberroth, an officer of Buyer, had actual knowledge of the event or
condition constituting such breach or inaccuracy; notwithstanding the foregoing,
except with respect to Section 8.2(i), the knowledge of Joseph J. Ueberroth
shall not affect, eliminate, limit or otherwise modify the rights of Buyer to
indemnification or any other remedies under this Agreement. An Indemnifying
Party shall not be liable for any Damages, or be required to make payments for
indemnification pursuant to Section 8.2(i) or Section 8.4(i), in an aggregate
amount in excess of Two Million Six Hundred Twenty-Five Thousand Dollars
($2,625,000) (the “Cap”). In addition, an Indemnifying Party shall not be liable
for any Damages, or be required to make payments for indemnification, to the
extent the subject matter of the claim is covered by insurance and such
insurance proceeds have been actually received by the Indemnified Party (net of
any costs and expenses incurred in obtaining such insurance proceeds). If an
Indemnifying Party pays an Indemnified Party for a claim and subsequently
insurance proceeds in respect of such claim are collected by the Indemnified
Party, then the Indemnified Party shall remit the insurance proceeds (net of any
costs and expenses incurred in obtaining such insurance proceeds) to the
Indemnifying Party. An Indemnified Party shall use reasonable efforts to obtain
from any applicable insurance company any insurance proceeds in respect of any
claim for which such Indemnified Party seeks indemnification under this
Article VIII. Notwithstanding anything to the contrary herein, if an Indemnified
Party is seeking, or is entitled to seek, indemnification from an Indemnifying
Party for Damages due to the such Indemnifying Party’s fraud or willful
misconduct, the limitations in this Section 8.8 (including the Threshold and the
Cap) shall not be applicable to, or otherwise limit an Indemnified Party’s
recovery for, such claim.

 

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Section 8.9 Sole and Exclusive Remedy.
From and after the Closing, the remedies provided for in this Article VIII shall
be the sole and exclusive remedy of any Indemnified Party for any claim arising
out of or related to this Agreement, the exhibits and schedules hereto or the
transactions contemplated hereby or thereby (regardless of the Law or legal
theory upon which claim is based), including, but not limited to, the breach of
any representation, warranty or covenant contained in this Agreement, the
Disclosure Letter, any exhibit or schedules to this Agreement, or any other
certificate or document delivered by the Parties hereto pursuant to the terms
hereof; provided, however, that (a) nothing contained in this Agreement shall
limit or impair any right that an Indemnified Party may have to sue and obtain
equitable relief, including specific performance and other injunctive relief, or
any right or remedy that the Indemnified Party may have against any Indemnifying
Party for any Damages incurred as a result of claims brought on the basis of
fraud or willful misconduct and (b) this Section 8.9 shall not apply (i) in any
Proceeding in which a remedy sought by or on behalf of Seller is to rescind this
Agreement, set aside the sale of the Interest or otherwise unwind the
transaction contemplated hereunder for any reason whatsoever and (ii) if a
rescission, set aside of the sale or other unwinding of such transaction occurs
for any reason whatsoever.
Section 8.10 Release by Seller.
Seller, as of the Closing Date, hereby releases and discharges each Acquired
Company and its employees, owners, assets, members, managers, officers and
directors from, and agrees and covenants that in no event will Seller or any of
its Affiliates commence any litigation or other legal or administrative
proceeding against such Acquired Company or any of its employees, owners,
assets, members, managers, officers or directors, either in law or equity,
relating to any and all claims and demands, known and unknown, suspected and
unsuspected, disclosed and undisclosed, for damages, actual, consequential, or
otherwise, past, present and future, arising out of or in any way connected with
the ownership of the Interest, under any agreement or Contract prior to or at
the Closing Date or the Acquired Companies’ operations. Notwithstanding this
Section 8.9, Seller does not release any Acquired Company under this Section 8.9
from and against any Liability (i) for which Buyer has asserted an Indemnity
Claim and (ii) which is covered by a third-party insurance policy held by Seller
and Seller has been advised by such third-party insurance carrier that the
release of such Liability will result in non-coverage of the Liability
represented by the Indemnity Claim, but in any case only to the extent such
Liability is subject to an Indemnification Claim.

 

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ARTICLE IX
MISCELLANEOUS
Section 9.1 Press Releases and Public Announcements.
Neither Party shall issue any press release or make any public announcement or
other disclosure relating to the existence or subject matter of this Agreement
without the prior written consent of the other Party; provided, however, that
any Party may make any public announcement or disclosure concerning its
publicly-traded securities it believes in good faith is required by applicable
Law, any listing or trading agreement, or the rules and regulations of the
National Association of Securities Dealers Automated Quotations (“NASDAQ”) (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Party prior to making the disclosure). At or after the execution of
this Agreement, Seller and Buyer shall jointly issue a public announcement
and/or press release and/or other disclosure, as shall be mutually agreed, of
the transactions contemplated by this Agreement.
Section 9.2 No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.
Section 9.3 Entire Agreement.
This Agreement (including the documents the forms of which are attached as
exhibits and schedules hereto) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, representations or
obligations by or among the Parties, written or oral, to the extent they related
in any way to the subject matter hereof.
Section 9.4 Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party; provided,
however, that Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
Buyer nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
Section 9.5 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together will constitute one and the same
instrument.

 

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Section 9.6 Headings.
The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 9.7 Notices.
All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given on the earlier of (a) when actually
received, (b) two business days after it is sent by overnight courier, or
(c) two business days after it is sent by registered or certified mail (return
receipt requested, postage prepaid) and addressed to the intended recipient as
set forth below:

     
If to Seller:
  Ambassadors International, Inc.
 
  1071 Camelback Street 
 
  Newport Beach, CA 92660
 
  Telephone: (949) 759-5900
 
  Facsimile: (949) 759-5901
 
  Attn: Chief Financial Officer
 
   
Copy to:
  Rutan & Tucker, LLP
 
  Fourteenth Floor
 
  611 Anton Blvd. 
 
  Costa Mesa, CA 92694
 
  Telephone: (714) 641-5100
 
  Facsimile: (714) 546-9035
 
  Attn: Derek Dundas, Esq.
 
   
If to Buyer:
  Bellwether Financial Group, Inc.
 
  626 Seaward Road 
 
  Corona del Mar, CA 92625
 
  Telephone: (949) 759-3369
 
  Facsimile: (949) 759-3379
 
  Attn: Joseph J. Ueberroth,
 
            President
 
   
Copy to:
  Loeb & Loeb LLP
 
  10100 Santa Monica Boulevard 
 
  Suite 2200
 
  Los Angeles, California 90067
 
  Telephone: (310) 282-2121
 
  Facsimile: (310) 919-3970
 
  Attn: Gerald M. Chizever, Esq.

Either Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Either
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.

 

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Section 9.8 Governing Law.
This Agreement shall be governed by and construed in accordance with the
domestic Laws of the State of Delaware without giving effect to any choice or
conflict of Law provision or rule (whether of the State of Delaware any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of Delaware.
Section 9.9 Amendments, Modifications and Waivers.
No amendment, modification or waiver of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by Buyer and Seller. No
waiver by either Party of any default, misrepresentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
Section 9.10 Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.
Section 9.11 Expenses.
Except as provided in Section 6.3(c) above, each of the Parties will bear its
own costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, the
negotiation, execution and delivery of this Agreement and all documents related
hereto and any expenses related to the due diligence investigation; provided,
however, that (a) Seller shall bear and be responsible for any costs and
expenses (including any of legal, accounting and audit fees and expenses)
incurred by the Acquired Companies in connection with the foregoing, and
(b) such obligations of Seller shall be considered direct obligations of Seller
and shall not be taken into account in determining the Intercompany Balances.

 

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Section 9.12 Construction.
Any reference to any federal, state, local, or foreign statute or Law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
Section 9.13 Incorporation of Exhibits and Schedules.
The exhibits and schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
Section 9.14 Specific Performance.
Each of the Parties acknowledges and agrees that the other Party would be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Party and the matter (subject to
the provisions set forth in Section 9.15 below), in addition to any other remedy
to which they may be entitled, at law or in equity.
Section 9.15 Arbitration.
Except for with respect to disputes, claims or controversies arising under
Article VIII, the Parties shall negotiate in good faith to resolve any dispute,
claim, or controversy of any nature arising out of or relating to this Agreement
or the transactions contemplated or consummated hereunder, including, without
limitation, any action or claim based on tort, contract or statute, or
concerning the interpretation, effect, termination, validity, performance and/or
breach of this Agreement (each, a “Dispute”). If no resolution of such Dispute
can be reached after good faith negotiation and prior to 30 days after delivery
of notice of such Dispute, any Party may demand arbitration of the Dispute. In
any such arbitration, the Parties agree to employ an arbitrator from the
American Arbitration Association (the “AAA”) to assist them in reaching
resolution of such Dispute according to the Rules of Commercial Arbitration. The
arbitrator shall be a corporate attorney practicing in Orange County,
California, with at least fifteen (15) years experience in acquisitions. In the
event that, within 30 days after the submission of any Dispute to arbitration,
the Parties cannot mutually agree on one arbitrator, then, within 15 days after
the end of such 30 day period, each Party shall select one arbitrator. The two
arbitrators so selected shall select a third arbitrator, and rulings of a
majority of the three shall be the rulings of the arbitrators as a panel. If one
Party fails to select an arbitrator during this 15 day period, then the Parties
agree that the arbitration will be conducted by one arbitrator selected by the
other Party. The fees and expenses of the arbitrator(s) shall be shared equally
by the Parties. The arbitrator(s) may proceed to an award, notwithstanding the
failure of either Party to participate in the proceedings. The arbitrator(s)
shall, within forty-five (45) calendar days after the conclusion of the
arbitration hearing, issue a written award and statement of decision describing
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based, including the calculation of any damages awarded. The arbitrator(s) shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys’ fees and costs, to the same extent as a
competent court of law or equity, should the arbitrator(s) determine that
discovery was refused or objected to without substantial justification. The
award of the arbitrator(s) shall be the sole and exclusive remedy of the
Parties. Judgment on the award rendered by the arbitrator(s) may be enforced in
any court having competent jurisdiction thereof, subject only to the revocation
on grounds of fraud or clear bias on the part of the arbitrator(s).
Notwithstanding anything contained in this Section 9.15 to the contrary, each
Party shall have the right to institute judicial proceedings, subject to
Section 9.16, against the other Party or anyone acting by, through or under such
other party, in order to enforce the instituting Party’s rights hereunder
through specific performance, injunction or other relief.
Section 9.16 Submission to Jurisdiction.
Subject to Section 9.15 above, each of the Parties submits to the exclusive
jurisdiction of any federal court sitting in the State of California, County of
Orange, in any action or Proceeding arising out of or relating to this Agreement
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of the other Party with respect thereto. Either
Party may make service on the other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 9.7 above. Nothing in this Section 9.16,
however, shall affect the right of either Party to serve legal process in any
other manner permitted by law or at equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or at
equity.
Section 9.17 Waiver of Trial by Jury.
IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE PARTIES HERETO
CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF
THE FORM OF ACTION OR PROCEEDING.

 

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Section 9.18 Attorney’s Fees. If Seller or AMG, on the one hand, or Buyer, on
the other hand, shall bring a Proceeding against the other to compel arbitration
pursuant to Sections 9.15 hereof, to confirm or vacate any arbitration judgment
or award, or to enforce the same, or otherwise arising out of this Agreement,
the unsuccessful party shall pay to the prevailing party all attorneys’ fees and
costs actually incurred by the prevailing party, in addition to any other relief
to which it may be entitled. As used in this Section 9.18 and elsewhere in this
Agreement, “actual attorneys’ fees” or “attorneys’ fees actually incurred” means
the full and actual cost of any legal services actually performed in connection
with the mater for which such fees are sought calculated on the basis of the
usual fees charged by the attorneys performing such services, and shall not be
limited to “reasonable attorneys’ fees: as that term may be defined in statutory
or decisional authority.
*****
(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Parties hereto have executed this MEMBERSHIP INTEREST
PURCHASE AGREEMENT as of the date first above written.

                  AMBASSADORS INTERNATIONAL, INC.    
 
           
 
  By:        
 
     
 
(Signature)    
 
           
 
     
 
Name Printed    
 
           
 
     
 
Title    
 
                AMBASSADORS MARINE GROUP, LLC    
 
           
 
  By:        
 
     
 
(Signature)    
 
           
 
     
 
Name Printed    
 
           
 
     
 
Title    
 
                BELLWETHER FINANCIAL GROUP, INC.    
 
           
 
  By:        
 
     
 
Joseph Ueberroth, President    

 

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Exhibit A — Non-Competition and Non-Disclosure Agreement

 

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Exhibit B — Form of Legal Opinion from Seller’s Counsel
Seller’s counsel shall opine as to the following:
1. Seller is a corporation duly authorized, validly existing, and in good
standing under the Laws of Delaware and has all necessary corporate power and
authority to own its properties and assets and conduct the business presently
being conducted by it.
2. Seller has full corporate power and authority to execute and deliver the
Agreement and the Non-Competition and Non-Disclosure Agreement and to perform
its obligations thereunder.
3. Any and all corporate acts and other corporate proceedings necessary for the
due and valid authorization, execution, delivery and performance by Seller of
the Agreement and the Non-Competition and Non-Disclosure Agreement and the
consummation by Seller of the transactions contemplated hereby have been validly
and appropriately taken.
4. The Agreement and the Non-Competition and Non-Disclosure Agreement have been
duly executed and delivered by Seller. The Agreement constitutes the valid and
legally binding obligation of Seller, enforceable in accordance with its terms
and conditions, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
[subject to customary exceptions and that no opinion will be expressed
concerning the validity, binding nature or enforceability of the Non-Competition
and Non-Disclosure Agreement.]
5. To the best knowledge of such counsel, subject to obtaining the consents as
set forth in Section 4.1(g) of the Disclosure Letter, Seller is not, and will
not be, required to give any notice to, make any filing with, or obtain any
consent, authorization or approval of, any Person, including any Governmental
Authority, under California or federal law, in connection with the execution and
delivery of this Agreement and the exhibits and schedules hereto or the
consummation or performance of the transactions contemplated herein.

 

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Exhibit C — Form of Legal Opinion from Buyer’s Counsel
Buyer’s counsel shall opine as to the following:
1. Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all necessary corporate power
and authority to own its properties and assets and conduct the business
presently being conducted by it.
2. Buyer has full corporate power and authority to execute and deliver the
Agreement and the Non-Competition and Non-Disclosure Agreement and to perform
its obligations thereunder.
3. Any and all corporate acts and other corporate proceedings necessary for the
due and valid authorization, execution, delivery and performance by Buyer of the
Agreement and the Non-Competition and Non-Disclosure Agreement and the
consummation by Buyer of the transactions contemplated thereby have been validly
and appropriately taken. [subject to customary exceptions and that no opinion
will be expressed concerning the validity, binding nature or enforceability of
the Non-Competition and Non-Disclosure Agreement.]
4. The Agreement and the Non-Competition and Non-Disclosure Agreement have been
duly executed and delivered by Buyer. The Agreement constitutes the valid and
legally binding obligation of Buyer, enforceable in accordance with its terms
and conditions, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

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Schedule 2.6
Purchase Price Allocation

         
Nishida Tekko America Corporation & BMI Acquisition Company
  $ 4,700,000  
 
       
Bellport Group, Inc.
  $ 550,000  

 

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Schedule 7.7
Acquired Companies Adjustment
[To be provided on or before Closing]
[Seller’s signature page to Membership Interest Purchase Agreement]

 

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