Exhibit 10.2


 


STOCK
PURCHASE AGREEMENT


 


 


by
and among


 


DJ
ORTHOPEDICS, LLC,


 


the
TAILWIND STOCKHOLDERS,


 


the
DLJ STOCKHOLDERS,


 


the
CREDIT OPPORTUNITIES STOCKHOLDER


 


and


 


TAILWIND
MANAGEMENT LP


 


(as
Stockholder Representative)


 


 


Dated
as of February 27, 2006


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  PURCHASE AND SALE OF THE SHARES

  	
  1

  
	
  1.1

  	
  The Stock Purchase

  	
  1

  
	
  1.2

  	
  Closing

  	
  1

  
	
  1.3

  	
  Cash and Debt at
  Closing

  	
  4

  
	
  1.4

  	
  Indemnity and Earnout
  Escrow

  	
  5

  
	
  1.5

  	
  Retention Program
  Escrow

  	
  5

  
	
  1.6

  	
  Treatment of Earnout
  Obligations

  	
  6

  
	
  1.7

  	
  Stockholder
  Representative

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REPRESENTATIONS AND WARRANTIES CONCERNING THE
  COMPANY AND THE COMPANY SUBSIDIARIES

  	
  10

  
	
  2.1

  	
  Existence; Good
  Standing

  	
  10

  
	
  2.2

  	
  No Conflict; Consents

  	
  10

  
	
  2.3

  	
  Capitalization

  	
  11

  
	
  2.4

  	
  Subsidiaries

  	
  12

  
	
  2.5

  	
  Financial Statements

  	
  12

  
	
  2.6

  	
  Absence of Certain
  Changes

  	
  13

  
	
  2.7

  	
  Undisclosed Liabilities

  	
  15

  
	
  2.8

  	
  Customers and Suppliers

  	
  15

  
	
  2.9

  	
  Title to Assets

  	
  15

  
	
  2.10

  	
  Significant Contracts

  	
  16

  
	
  2.11

  	
  Intellectual Property

  	
  18

  
	
  2.12

  	
  Real Property

  	
  18

  
	
  2.13

  	
  Litigation

  	
  19

  
	
  2.14

  	
  Employee Benefit Plans

  	
  19

  
	
  2.15

  	
  Compliance with Law

  	
  22

  
	
  2.16

  	
  Environmental Matters

  	
  23

  
	
  2.17

  	
  Taxes

  	
  25

  
	
  2.18

  	
  Permits

  	
  27

  
	
  2.19

  	
  Insurance

  	
  27

  
	
  2.20

  	
  Labor Matters

  	
  27

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  2.21

  	
  Healthcare Matters

  	
  28

  
	
  2.22

  	
  Powers of Attorney

  	
  29

  
	
  2.23

  	
  Payments

  	
  29

  
	
  2.24

  	
  Controls and Procedures

  	
  30

  
	
  2.25

  	
  Affiliate Transactions

  	
  30

  
	
  2.26

  	
  Books and Records

  	
  30

  
	
  2.27

  	
  Bank Accounts

  	
  31

  
	
  2.28

  	
  Accounts Receivable;
  Inventory

  	
  31

  
	
  2.29

  	
  Brokers

  	
  31

  
	
  2.30

  	
  Disclosure

  	
  31

  
	
  2.31

  	
  Reliance

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF EACH SELLER

  	
  32

  
	
  3.1

  	
  Existence; Good
  Standing; Authority; Enforceability

  	
  32

  
	
  3.2

  	
  No Conflicts; Consents

  	
  32

  
	
  3.3

  	
  Litigation

  	
  33

  
	
  3.4

  	
  Title to Shares

  	
  33

  
	
  3.5

  	
  Brokers

  	
  34

  
	
  3.6

  	
  Reliance

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

  	
  34

  
	
  4.1

  	
  Existence; Good
  Standing; Authority; Enforceability

  	
  34

  
	
  4.2

  	
  No Conflicts; Consents

  	
  34

  
	
  4.3

  	
  Litigation

  	
  35

  
	
  4.4

  	
  Financial Ability to
  Perform

  	
  35

  
	
  4.5

  	
  Investment
  Representations

  	
  35

  
	
  4.6

  	
  Projections

  	
  35

  
	
  4.7

  	
  Brokers

  	
  36

  
	
  4.8

  	
  Reliance

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  COVENANTS

  	
  36

  
	
  5.1

  	
  Conduct of the Sellers
  and the Purchaser

  	
  36

  
	
  5.2

  	
  Conduct of the Company
  and the Company Subsidiaries

  	
  36

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Control of Operations

  	
  39

  
	
  5.4

  	
  Regulatory and Other
  Approvals; 280G Consent

  	
  39

  
	
  5.5

  	
  Access and Information

  	
  41

  
	
  5.6

  	
  Exclusivity

  	
  43

  
	
  5.7

  	
  Notification During the
  Pre-Closing Period of Breaches

  	
  43

  
	
  5.8

  	
  Publicity

  	
  43

  
	
  5.9

  	
  Employee Matters; Sale
  Bonus Program; Retention Program

  	
  44

  
	
  5.10

  	
  Transfer Taxes

  	
  45

  
	
  5.11

  	
  Indemnification of
  Directors and Officers

  	
  46

  
	
  5.12

  	
  Certain Investments by
  the Tailwind Stockholders

  	
  47

  
	
  5.13

  	
  Environmental Matters

  	
  47

  
	
  5.14

  	
  No Amendment of the
  Aircast Asset Purchase Agreement and Related Documents Pre- and Post-Closing

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  CONDITIONS TO CLOSING

  	
  48

  
	
  6.1

  	
  Conditions to the
  Obligation of the Purchaser

  	
  48

  
	
  6.2

  	
  Conditions to the
  Obligation of the Sellers

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  INDEMNIFICATION

  	
  51

  
	
  7.1

  	
  Survival of
  Representations and Warranties and Covenants and Agreements

  	
  51

  
	
  7.2

  	
  Indemnification
  Obligations

  	
  51

  
	
  7.3

  	
  Limitations on
  Indemnification Amounts

  	
  52

  
	
  7.4

  	
  Indemnification Claim
  Procedure

  	
  52

  
	
  7.5

  	
  Third Party Claims

  	
  53

  
	
  7.6

  	
  Requirement to First
  Pursue Remedies from Certain Parties

  	
  55

  
	
  7.7

  	
  Insurance Proceeds

  	
  59

  
	
  7.8

  	
  Mitigation of Damages

  	
  59

  
	
  7.9

  	
  Subrogation

  	
  60

  
	
  7.10

  	
  Limitations

  	
  60

  
	
  7.11

  	
  Tax Treatment of Seller
  Indemnification Payments

  	
  60

  
	
  7.12

  	
  Exclusive Remedy

  	
  60

  
	
  7.13

  	
  Conflict of Interest

  	
  61

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  TERMINATION

  	
  61

  
	
  8.1

  	
  Termination

  	
  61

  
	
  8.2

  	
  Effect of Termination

  	
  62

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  DEFINITIONS

  	
  63

  
	
  9.1

  	
  Definition of Certain
  Terms

  	
  63

  
	
  9.2

  	
  Disclosure Schedules

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  GENERAL PROVISIONS

  	
  75

  
	
  10.1

  	
  Expenses

  	
  75

  
	
  10.2

  	
  Further Actions

  	
  76

  
	
  10.3

  	
  Notices

  	
  76

  
	
  10.4

  	
  Assignment; Successors

  	
  77

  
	
  10.5

  	
  Amendment

  	
  77

  
	
  10.6

  	
  Waiver

  	
  77

  
	
  10.7

  	
  Entire Agreement

  	
  78

  
	
  10.8

  	
  Severability

  	
  78

  
	
  10.9

  	
  Headings

  	
  78

  
	
  10.10

  	
  Counterparts

  	
  78

  
	
  10.11

  	
  Governing Law

  	
  78

  
	
  10.12

  	
  Consent to
  Jurisdiction, etc.

  	
  79

  
	
  10.13

  	
  Waiver of Punitive and
  Other Damages and Jury Trial

  	
  79

  
	
  10.14

  	
  Remedies

  	
  80

  
	
  10.15

  	
  Third Party
  Beneficiaries

  	
  80

  
	
  10.16

  	
  Interpretation

  	
  81

  



 


iv

















 


STOCK
PURCHASE AGREEMENT


 


STOCK PURCHASE AGREEMENT (this “Agreement”),
dated as of February 27, 2006, by and among dj Orthopedics, LLC, a
Delaware limited liability company (the “Purchaser”); Tailwind
Management LP, a Delaware limited partnership (the “Stockholder
Representative”); TWCP, L.P., a Delaware limited partnership (“TWCP”),
and its Affiliates listed on Schedule A hereto (TWCP and such
Affiliates, the “Tailwind Stockholders”); DLJ Growth Capital Partners,
L.P., a Delaware limited partnership (“DLJ”), GCP Plan Investors, L.P.,
a Delaware limited partnership (“GCP” and, together with DLJ, the “DLJ
Stockholders”); and GSO Credit Opportunities Fund (Helios), L.P., a Cayman
Islands limited partnership (the “Credit Opportunities Stockholder”).  The Tailwind Stockholders, the DLJ
Stockholders and the Credit Opportunities Stockholder are sometimes referred
to herein individually as a “Seller” and, collectively, as the “Sellers”.  Capitalized terms used herein are defined in Article IX.


 


R E C I T A L S:


 


A.    The
Sellers collectively own beneficially and of record all of the issued and
outstanding shares of (i) the Common Stock, par value $0.01 per share (“Common
Stock”), of Aircast Incorporated, a Delaware corporation (the “Company”)
and (ii) the Series A Preferred Stock, par value $0.01 per share (“Preferred
Stock”), of the Company (collectively, the “Shares”).


 


B.    The
Purchaser would like to purchase the Shares from the Sellers, and the Sellers
would like to sell the Shares to the Purchaser (the “Stock Purchase”),
upon the terms and subject to the conditions set forth in this Agreement.


 


A G R E E M E N T:


 


NOW, THEREFORE, in consideration of the
mutual agreements and covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


 


ARTICLE I

PURCHASE AND SALE OF THE SHARES


 


1.1           The
Stock Purchase.  Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, the
Purchaser hereby agrees to purchase from each Seller all of the Shares owned by
such Seller, and each Seller hereby agrees to sell to the Purchaser all of such
Shares, in each case free and clear of all Liens.


 


1.2           Closing.


 


(a)           The
closing of the Stock Purchase (the “Closing”) will take place: (i) at
the offices of Kelley Drye & Warren LLP, located at 101 Park Avenue, New
York, New York 10178, (ii) at 10:00 a.m. (New York time) on the later to
occur of (A) March 30, 2006, or (B) the fifth (5th) Business
Day after the date on which the last to be satisfied or waived of the
conditions set forth in Article VI (other than conditions which, by
their nature, are to be satisfied at the Closing, but subject to the waiver or
satisfaction of those conditions) has been satisfied or waived in accordance
with this Agreement, except that if the satisfaction or waiver of the applicable
conditions occurs


 

















 


after June 30, 2006, as soon as practicable,
but no later than the tenth (10th) Business Day following such
satisfaction or waiver; or (iii) at such other place, time and date as the
Purchaser and the Stockholder Representative shall mutually agree in
writing.  The “Closing Date” shall
be the date upon which the Closing occurs.


 


(b)           Subject
to the terms and conditions of this Agreement, at the Closing the Purchaser
shall pay an aggregate of $291,000,000 in cash (the “Transaction
Consideration”), by wire transfer of immediately available funds, as
follows:


 


(i)            to the creditors of
the Company and the Company Subsidiaries, the amount necessary to pay off the
Funded Debt, after application of the available cash and cash equivalents from
the Company and the Company Subsidiaries in accordance with Section 1.3;


 


(ii)           if and to
the extent that the Earnout Obligations are due for the 2005 fiscal year or are
accelerated as a result of the Stock Purchase and are known on the Closing Date
(in accordance with the terms of the Aircast Asset Purchase Agreement), an
amount necessary to extinguish such Earnout Obligations to the extent so due or
accelerated and to pay any related costs, expenses or interest with respect to
such Earnout Obligations to the extent such costs, expenses or interest may be
payable under the Aircast Asset Purchase Agreement (the “Earnout-Related
Costs”);


 


(iii)          to the advisors of (A)
the Company, (B) the Company Subsidiaries and (C) the Sellers, an amount
necessary to satisfy in full all transaction and other fees incurred by the
Company, the Company Subsidiaries and the Sellers, respectively, in connection
with the transactions contemplated by this Agreement;


 


(iv)          to the legal counsel,
accountants and other professionals of (A) the Company, (B) the Company
Subsidiaries and (C)  the Sellers, an amount necessary to satisfy in full
all outstanding fees and expenses incurred by the Company, the Company
Subsidiaries and the Sellers, respectively, in connection with the transactions
contemplated by this Agreement, other than the Stub Period Audit Expenses;


 


(v)           to the Company, for
distribution to: (A) the members of management of the Company and the Company
Subsidiaries, all amounts necessary to acquire any outstanding capital stock of
the Company or to settle or otherwise terminate in full any outstanding options
or other rights to acquire any capital stock of the Company that may be granted
by the Company to such members of management, consistent with Section 5.6,
prior to the Closing, net of the amounts required to be deducted and withheld
from such payments by the Company and the Company Subsidiaries as income Taxes
and as the management members’ shares of Employment Taxes (such amounts, the “Management
Members’ Withholding Taxes”); (B) the employees of the Company and the
Company Subsidiaries, all amounts necessary to satisfy any obligations under
the Sale Bonus Program, if any, net of the amounts required to be deducted and
withheld from such payments by the Company and the Company Subsidiaries as
income Taxes and as the employees’ shares of Employment Taxes


 


2

















 


(such amounts,
the “Employees’ Withholding Taxes”); (C) the applicable Tax
Authorities, of the Management Members’ Withholding Taxes and the Employees’
Withholding Taxes; (D) the applicable Tax Authorities, of all amounts required
to be paid by the Company and the Company Subsidiaries as the employer share of
Employment Taxes with respect to the payments described in the preceding clauses
(A) and (B); provided, however,
that the Employment Taxes in clauses  (C) and (D) shall not
include any Capped Employment Taxes with respect to any employees of the
Company and the Company Subsidiaries whose annual compensation exceeds the compensation
subject to Capped Employment Taxes, which the Company and the Company
Subsidiaries, as applicable, shall pay after the Closing using funds from
sources other than the Transaction Consideration;


 


(vi)          $25 million (the “Indemnity
and Earnout Escrow Deposit”) to Wells Fargo, N.A. (the “Escrow
Agent”), in accordance with Section 1.4;


 


(vii)         the Retention
Program Escrow Deposit to the Company
for deposit with the Escrow Agent in accordance with Section 1.5;
and


 


(viii)        the balance to the Sellers
to be shared among them as specified in the Closing Memorandum (such balance
together with the payments contemplated by Sections 1.2(b)(iii)(C),
(iv)(C) and (vi), but subject to adjustment pursuant to Section
1.3(b), Section 1.5, Section
1.6(i), Section 7.11 and Section 10.1(b) being the “Purchase
Price”).


 


In order to facilitate the payments
contemplated by this Section 1.2(b), the Stockholder Representative will
deliver the Closing Memorandum to the Purchaser as soon as reasonably
practicable prior to the Closing.  The
Purchaser and the Sellers intend that for Tax purposes the payment of the
Transaction Consideration shall be characterized as follows and treated as
occurring in the following order: first,
the Purchaser shall be deemed to pay the Purchase Price to the Sellers as
consideration for the Shares; and then,
immediately thereafter, the Purchaser shall be deemed to make a capital
contribution to the Company of the balance of the Transaction Consideration by
paying such balance to the recipients specified above.


 


(c)           Subject
to the terms and conditions of this Agreement, in addition to the other
deliveries contemplated under this Agreement to be made at the Closing, at and
in connection with the Closing:


 


(i)            the Sellers will
assign and transfer to the Purchaser all of their right, title and interest in
and to the Shares by delivering to the Purchaser the certificates representing
the Shares, duly endorsed in blank or accompanied by duly executed stock powers
endorsed in blank;


 


(ii)           the Sellers will cause
the Company to deliver to the Purchaser the resignation of each director of the
Company and, to the extent requested by the Purchaser in writing at least
twenty (20) Business Days prior to the Closing Date, of each Company
Subsidiary, in each case effective as of the Closing;


 


(iii)          the Sellers will, or
will cause the Company to, deliver to the Purchaser the seal, minute book and
stock transfer records of the Company, and


 


3

















 


deliver all
original corporate records and documents of the Company not then in possession
of the Company but in the possession of the Sellers;


 


(iv)          the Sellers, the
Company, the Stockholder Representative and the Purchaser will execute and
deliver to each other and to the Escrow Agent the Indemnity and Earnout Escrow
Agreement; and


 


(v)           the Sellers, the
Company, the Stockholder Representative and the Purchaser will execute and
deliver to each other and to the Escrow Agent the Retention Program Escrow
Agreement.


 


1.3           Cash
and Debt at Closing.


 


(a)           Immediately
prior to the Closing, except as provided in Section 1.3(b), the Sellers
will cause the Company or the Company Subsidiaries to use cash and cash
equivalents then held by the Company and the Company Subsidiaries to repay the
outstanding principal, interest and other amounts due under the Funded Debt
(the remainder of such amounts due under the Funded Debt will be repaid at the
Closing as described in Section 1.2(b)(i)).  Accordingly, the Sellers and the Purchaser
acknowledge that it is their intent that at and as of the Closing, the Company
and the Company Subsidiaries will have only the cash and cash equivalents
contemplated by Section 1.3(b), and, after the payments
contemplated by Section 1.2(b)(i), there will be no outstanding principal,
interest or other amounts due under the Funded Debt and all Liens associated
with the Funded Debt will be released.


 


(b)           The
Sellers shall cause the Company and the Company Subsidiaries to have, as of the
close of business on the last Business Day preceding the Closing Date, cash
balances in the bank accounts of the Company Subsidiaries referred to in Section 1.3(b)
of the Seller Disclosure Schedule aggregating not less than $1,000,000, using
the conversion ratios of local currencies into U.S. dollars as of the close of
business on the last Business Day preceding the
Closing Date.  Within five (5) Business
Days after the Closing, the Purchaser shall cause the Company or the Company
Subsidiaries to deliver to the Stockholder Representative a bank statement for
each bank account specified in Section 1.3(b) of the Seller Disclosure
Schedule as of the close of business on the last day preceding the Closing Date
on which the applicable bank was open for business and the conversion ratios of
local currencies into U.S. dollars for the relevant local currencies as of the
close of business on the day preceding the date such bank statements are
deposited for delivery to the Stockholder Representative (the “Adjustment
Date Conversion Ratios”).  In the
event that the aggregate cash balance set forth on such bank statements (net of
any overdrafts after application of Section 1.2(b)(i)) (the “Aggregate
Balance Amount”) exceeds $1,000,000 using the Adjustment Date Conversion
Ratios (the amount by which the Aggregate Balance Amount exceeds such amount,
the “Positive Bank Cash Difference Amount”), the Purchaser shall
concurrently with the delivery of such bank statements pay to the Sellers the
amount, in U.S. dollars, of the Positive Bank Cash Difference Amount, up to a
maximum of $1,000,000.  In the event that
the Aggregate Balance Amount is less than $1,000,000 using the Adjustment Date
Conversion Ratios (the amount by which the Aggregate Balance Amount is less
than such amount, the “Negative Bank Cash Difference Amount”), the
Sellers shall within two (2) Business Days after the Stockholder Representative’s
receipt of such bank statements and conversion ratios pay to the Purchaser the
amount, in U.S. dollars, of the Negative Bank Cash Difference Amount.  The amounts, if any, to be paid by or to the
Sellers pursuant to this Section 1.3(b) shall be paid by or to each
Seller in the


 


4

















 


proportion that the number of Shares owned by
such Seller immediately prior to the Closing bears to the number of Shares
outstanding immediately prior to the Closing and shall be treated for Tax
purposes as an adjustment to the Purchase Price.


 


1.4           Indemnity
and Earnout Escrow.  At the Closing,
in accordance with Section 1.2(b)(vi), the Purchaser will pay the
Indemnity and Earnout Escrow Deposit to the Escrow Agent, under an escrow
agreement to be entered into on the Closing Date by the Sellers, the Company,
the Stockholder Representative, the Purchaser and the Escrow Agent in
substantially the form attached as Exhibit A hereto (the “Indemnity
and Earnout Escrow Agreement”).  The
Indemnity and Earnout Escrow Deposit, together with any interest and income
earned thereon (collectively, the “Indemnity and Earnout Escrow Funds”),
will be held until the last to occur of June 30, 2007 or the first anniversary
of the Closing Date (the “Indemnity and Earnout Escrow Period”) to
serve as an escrow fund for: (i) any indemnifiable losses resulting from
breaches of the Sellers’ representations and warranties and covenants and
agreements set forth in this Agreement, pursuant to Article VII;
and (ii) satisfaction of the Sellers’ obligations, if any, with respect to
the Earnout Obligations (as described in Section 1.6).  Interest and income earned on the Indemnity
and Earnout Escrow Funds shall be applied first to satisfy any fees and
expenses of the Escrow Agent under the Indemnity and Earnout Escrow Agreement,
and the amount of any fees and expenses of the Escrow Agent under the Indemnity
and Earnout Escrow Agreement that exceed the amount of such interest and income
earned on the Indemnity and Earnout Escrow Funds will be paid directly by the
Purchaser.  At the end of the Indemnity
and Earnout Escrow Period, the remaining amount of the Indemnity and Earnout
Escrow Funds, less: (i) any amounts subject to a pending Purchaser
indemnification claim (including claims with respect to a Multiple Source of
Recovery Matter under Section 7.6(b)); and (ii) any then outstanding
fees and expenses of the Escrow Agent (but not in excess of the interest and
income earned on the Indemnity and Earnout Escrow Funds which are then held as
part of the Indemnity and Earnout Escrow Funds), shall be disbursed by the
Escrow Agent to the Sellers in accordance with the terms and conditions of the Indemnity
and Earnout Escrow Agreement.


 


1.5           Retention
Program Escrow.  Immediately upon the
Company’s receipt of the payment contemplated by Section 1.2(b)(vii),
the Purchaser will cause the Company to pay the Retention Program Escrow
Deposit to the Escrow Agent, under an escrow agreement to be entered into on
the Closing Date by and among the Sellers, the Company, the Stockholder
Representative, the Purchaser and the Escrow Agent in substantially the form
attached as Exhibit B hereto (the “Retention Program Escrow
Agreement”).  The Retention Program
Escrow Deposit, together with any interest and income earned thereon
(collectively, the “Retention Program Escrow Funds”), will be held
from the Closing until the fifth (5th) Business Day after the one
(1) year anniversary of the Closing Date (the “Retention Program Escrow
Period”) to serve as an escrow fund for the satisfaction of the Company’s
and the Company Subsidiaries’ obligations, if any, with respect to the
Retention Program (as described in Section 5.9(c)).  The Retention Program Escrow Agreement shall
provide for the Company or its designee to have authority to draw funds to make
payments on the Retention Program upon delivery of an officer’s certificate of
Purchaser confirming funds are being used in compliance with the Retention
Program.  Interest and income earned on
the Retention Program Escrow Funds shall be applied first to satisfy any fees
and expenses of the Escrow Agent under the Retention Program Escrow Agreement,
and the amount of any fees and expenses of the Escrow Agent under the Retention
Program Escrow Agreement that exceed the amount of such interest and income
earned on the Retention Program Escrow Funds will be paid directly by the
Purchaser.  At the end of the Retention
Program Escrow Period, the remaining amount of the


 


5

















 


Retention Program Escrow Funds, if any, less any then outstanding fees
and expenses of the Escrow Agent (but not in excess of the interest and income
earned on the Retention Program Escrow Funds which are then held as part of the
Retention Program Escrow Funds), shall be disbursed by the Escrow Agent (on
behalf of the Company) to the Sellers in accordance with the terms and
conditions of the Retention Program Escrow Agreement.  Any such amount paid to the Sellers shall be
treated for all Tax purposes as an increase to the Purchase Price.


 


1.6           Treatment
of Earnout Obligations.


 


(a)           The
parties agree and acknowledge that, pursuant to Section 1.8 of the Aircast
Asset Purchase Agreement, Aircast Intermediate Holdco and Aircast US Opco
(collectively, with the successors and assigns of either or both of them, the “Earnout
Obligors”) have the obligation to make certain payments to Old Aircast Inc.
and Old Aircast LLC or their respective assigns (collectively, the “Old
Aircast Sellers”) upon the satisfaction of conditions specified therein
relating to the financial performance of Aircast Intermediate Holdco and its
Subsidiaries during the time periods specified therein, in each case on the
terms and conditions set forth therein (any such obligations, the “Earnout
Obligations”).  The Purchaser and the
Sellers agree that, except to the extent due or owing (at any time) for the
2005 fiscal year or accelerated as described in Section 1.2(b)(ii)
or Section 1.6(f), the Earnout Obligors will remain responsible for the
Earnout Obligations and all Earnout-Related Costs; provided, however, that the Sellers will pay to Aircast
Intermediate Holdco or its designee(s) on behalf of the Earnout Obligors: (i)
eighty percent (80%) of the aggregate amount paid to the Old Aircast Sellers in
complete and final settlement and release of the Earnout Obligations (the “Settlement
Payment”) and any Earnout-Related Costs related thereto if such settlement
occurs within ninety (90) days after the Closing Date; or (ii) ninety percent
(90%) of the aggregate of any payout to the Old Aircast Sellers under the
Earnout Obligations and any Settlement Payment (if the settlement occurs after
the ninetieth (90th) day after the Closing Date) and any related
Earnout-Related Costs (such eighty percent (80%) or ninety percent (90%) share
of the Settlement Payment and Earnout-Related Costs, each the “Sellers’
Share”) and provided further, however
that any Earnout-Related Costs arising from or related to any failure by the
Earnout Obligors to comply with any provision of Section 1.8 of the
Aircast Asset Purchase Agreement after the Closing, as more fully set forth in Section
1.6(b), will not be included in the calculation of the Sellers’ Share for
purposes of this Section 1.6(a).


 


(b)           Unless
and until the Earnout Obligations are settled or accelerated and paid as set
forth in this Section 1.6, from and after the Closing, the Purchaser
will use its commercially reasonable best efforts to cause the Earnout Obligors
and the Purchaser’s other Subsidiaries to comply with all of the obligations
set forth in Section 1.8 of the Aircast Asset Purchase Agreement relating to
the Earnout Obligations, including: (i) the obligation set forth in Section
1.8(c) of the Aircast Asset Purchase Agreement to determine the “Net Sales” for
each subsequent “Earnout Year” on a pro
forma basis to remove the effects upon the calculation of the actual
“Net Sales” for each such “Earnout Year” of the “Change of Control” resulting
from the Closing hereunder (the quoted terms in this sentence have the
respective meanings set forth in the Aircast Asset Purchase Agreement); and
(ii) the obligation to pay to the Old Aircast Sellers any amounts that are
required to be paid by the Earnout Obligors to the Old Aircast Sellers from
time to time with respect to the Earnout Obligations, in accordance with the
applicable terms and conditions of the Aircast Asset Purchase Agreement or
pursuant to a Settlement Agreement.


 


6

















 


(c)           After
the Closing, the Purchaser will use commercially reasonable best efforts to
deliver to the Stockholder Representative approximately thirty (30) days prior
to the “Earnout Audit Completion Date” (as defined in the Aircast Asset
Purchase Agreement) (or, in the case of a “Change of Control”, prior to the
date that is thirty (30) days following the closing thereof) a draft
calculation of the “Net Sales” for the preceding fiscal year ended December 31
(or, in the case of a “Change of Control,” for the twelve (12) month period
ended on the prior month end).  The
Stockholder Representative shall have fifteen (15) days to review and update
the draft calculation and shall, at or before the end of such fifteen (15) day
period, provide the Purchaser with any written objections to the Purchaser’s
draft calculation and, if applicable, with the Stockholder Representative’s own
calculation of “Net Sales” for the appropriate period.  If the Stockholder Representative fails to
provide any written objection by the end of such fifteen (15) day period, then
the Stockholder Representative shall be deemed to have irrevocably agreed that
the Purchaser and its Subsidiaries complied with Section 1.6(b) with
respect to such calculation.


 


(d)           As
between the Sellers, on the one hand, and the Purchaser and, after the Closing,
the Earnout Obligors, on the other, both prior to and after the Closing, the
Sellers will control the negotiation and consummation of any settlement of the
Earnout Obligations (with the Sellers being represented for this purpose by the
Stockholder Representative); provided,
however, that (i) the Purchaser
shall be afforded a reasonable period of time, and in any event not less than
five (5) Business Days, to review the terms and conditions of any such
settlement; and (ii) the consummation of any such settlement shall be subject
to the prior written consent of the Purchaser unless such settlement includes a
complete release with respect to the Earnout Obligations of the Earnout
Obligors by the Old Aircast Sellers.  The
Purchaser acknowledges that, notwithstanding anything to the contrary in this Section
1.6, the Sellers shall only be obligated to negotiate in good faith to
pursue a settlement of the Earnout Obligations, but there can be no assurance
that such a settlement will be reached, and except for their payment
obligations under this Section 1.6, the Sellers will have no liability
to the Purchaser or any other Person for the failure to reach such a
settlement.  During such settlement
negotiation process, the Stockholder Representative will keep the Purchaser
informed, on a reasonably prompt basis and in reasonable detail, concerning the
progress of such negotiations, including: (x) providing the Purchaser with copies
of any draft term sheets, settlement agreements and other documents being
circulated among the Stockholder Representative and its representatives, on the
one hand, and the Old Aircast Sellers and their representatives, on the other
hand; (y) providing reasonable advance notice to the Purchaser (to the extent
that reasonable advance notice has been provided to the Stockholder
Representative) of any teleconferences and meetings between the Stockholder
Representative and its representatives, on the one hand, and the Old Aircast
Sellers and their representatives, on the other hand, that are part of the
settlement negotiation process; and (z) requesting release of the Purchaser
from the Earnout Obligations.  The
Purchaser will be permitted by the Sellers and the Stockholder Representative
to attend and participate in any such teleconferences and meetings, assuming
that the Old Aircast Sellers do not object directly to the Purchaser to such
attendance and participation.


 


(e)           The
consummation of any settlement of the Earnout Obligations pursuant to Section
1.6(d) (the “Settlement Closing”) will occur after the Closing Date
at such date and time during normal business hours on a Business Day as are
determined by the Stockholder Representative and the Old Aircast Sellers.  As soon as reasonably practicable after the
Stockholder Representative has reached an agreement in principle to settle the
Earnout Obligations with the Old Aircast Sellers, but in any event not less
than five (5) Business Days prior to the anticipated date of consummation of
the Settlement Closing, the Stockholder Representative shall provide to the


 


7

















 


Purchaser written notice of such anticipated
Settlement Closing, which shall include the date, time and place of the
Settlement Closing and a copy of the settlement agreement evidencing such
settlement (the form of which shall have been previously agreed to by the Old
Aircast Sellers) (the “Settlement Agreement”).  At the Settlement Closing; (i) the Purchaser
shall cause the Earnout Obligors to execute and deliver the Settlement
Agreement (if not previously executed); (ii) the Sellers shall pay to Aircast
Intermediate Holdco or its designee(s) the Sellers’ Share and (iii) the
Purchaser shall cause the Settlement Payment and any Earnout-Related Costs to
be paid to the Old Aircast Sellers.  The
Sellers’ Share shall be paid: (x) by release from the Indemnity and Earnout
Escrow Funds (if the Settlement Closing occurs on or prior to the end of the
Indemnity and Earnout Escrow Period and to the extent there are sufficient
Indemnity and Earnout Escrow Funds, as of the Settlement Closing, to satisfy
each Seller’s portion of the Sellers’ Share); and (y) solely to the extent that
the Settlement Closing occurs after the end of the Indemnity and Earnout Escrow
Period or to the extent that the Sellers’ Share exceeds the then-available
Indemnity and Earnout Escrow Funds, by payment by the Sellers of such remaining
part of the Sellers’ Share, by inter-bank transfer or wire transfer of
immediately available funds, or in such other form as the Purchaser may agree,
to Aircast Intermediate Holdco or its designee(s).


 


(f)            If the Earnout
Obligors are unable to determine, prior to a time reasonably in advance of the
Closing, whether the Earnout Obligations would be accelerated as a result of
the consummation of the Stock Purchase, then after the Closing the Purchaser
will use its commercially reasonable best efforts to deliver to the Stockholder
Representative a draft calculation of the “Net Sales” for the twelve (12) month
period ended on the calendar month-end next preceding the Closing Date (the “Twelve
Month Calculation”).  The Purchaser
will use its commercially reasonable best efforts to deliver the draft Twelve
Month Calculation prior to the date that is thirty (30) days after the Closing
Date.  The Stockholder Representative
shall have fifteen (15) days to review and update the draft Twelve Month
Calculation and shall, at or before the end of the applicable review period,
provide the Purchaser with any written objections to the Purchaser’s draft
Twelve Month Calculation, and, if applicable, with the Stockholder
Representative’s own calculations of “Net Sales” for such period.  If the Stockholder Representative fails to
provide any written objection by the end of such fifteen (15) day period, then
the Stockholder Representative shall be deemed to have irrevocably agreed that
the Purchaser and its Subsidiaries complied with Section 1.6(b) with
respect to the Twelve Month Calculation. 
If the Earnout Obligations
accelerate as a result of the consummation of the Stock Purchase, the Sellers
shall pay to Aircast Intermediate Holdco or its designee(s) (on behalf of the
Purchaser) the amount of the Earnout Obligations so accelerated at the time
that payment is required to made by the Earnout Obligors to the Old Aircast
Sellers.


 


(g)           To
the extent reasonably necessary for any settlement negotiations related to the
Earnout Obligations continuing after the Closing or for purposes related to the
payments or calculations contemplated by Section 1.6(c) and Section
1.6(f), the Purchaser shall (and shall cause the Company and the Company
Subsidiaries to) provide to the Stockholder Representative and its
representatives reasonable access to the books and records of the Company and
the Company Subsidiaries reasonably related to the calculation of “Net Sales”
as described in Section 1.6(b), and make available the personnel,
accountants and other advisors of the Company and the Company Subsidiaries (and
their respective books and records reasonably related to the calculation of “Net
Sales” as described in Section 1.6(b), except to the extent subject to
attorney-client privilege that would be waived by such provision), in each case
(I) as is reasonably requested by the Stockholder Representative in connection
with the settlement negotiation process, (II) at the location of the


 


8

















 


Earnout Obligors, as applicable, (III) during
normal business hours, (IV) upon reasonable advance notice and (V) subject to
any reasonable confidentiality and securities trading restrictions imposed by
the Purchaser and delivered to the Stockholder Representative in writing a
reasonable amount of time prior to the provision of such access.


 


(h)           All
references in this Section 1.6 to the Company and the Company
Subsidiaries shall also apply to any successor to, or assignee of, the Company
or any Company Subsidiary.


 


(i)            Any
amount paid by the Sellers pursuant to this Section 1.6 shall be treated
for all Tax purposes as a reduction to the Purchase Price.


 


(j)            Except
as set forth in Section 1.2(b)(ii) and this Section 1.6, and
except for breaches of Section 1.8 of the Aircast Asset Purchase Agreement
occurring prior to the Closing, the Sellers will have no responsibility,
financial or otherwise, for any Earnout Obligations or any costs or expenses
incurred in connection therewith.


 


(k)           Except
as expressly provided in this Agreement, nothing in this Section 1.6 is
intended to or shall limit or restrict the right of the Purchaser to operate
its, the Company’s or the Company Subsidiaries’ business in such a manner as it
may determine in the Purchaser’s sole discretion after the Closing (including
the disposition of assets or properties as it may elect).


 


1.7           Stockholder
Representative.


 


(a)           Each
Seller has designated and appointed the Stockholder Representative as the
representative and attorney in fact of such Seller for the sole purpose of
acting on its behalf with respect to this Agreement, the Indemnity and Earnout
Escrow Agreement, the Retention Program Escrow Agreement and any other document
entered into in connection herewith or therewith, including full power and
authority on behalf of such Seller: (i) to take all actions the Stockholder
Representative deems necessary or appropriate in connection with the
pre-closing covenants of the Sellers set forth in this Agreement and the
satisfaction or waiver of closing conditions under this Agreement, including
exercise of the powers, authority and discretion conferred on the Sellers
hereunder to waive any terms and conditions of this Agreement and to give and
receive notices; (ii) to take all actions the Stockholder Representative
deems necessary or appropriate in connection with negotiating, settling,
compromising and otherwise handling the Earnout Obligations; (iii) to take all
actions the Stockholder Representative deems necessary or appropriate in
connection with the Retention Program and the Retention Program Escrow
Agreement; (iv) to take all actions the Stockholder Representative deems
necessary or appropriate in connection with the Sale Bonus Program; (v) to take
all actions the Stockholder Representative deems necessary or appropriate in
connection with the post-closing implementation of this Agreement and the
Indemnity and Earnout Escrow Agreement, including negotiating, settling,
compromising and otherwise handling any claims for indemnification made by a
Purchaser Indemnified Party with respect to the Sellers’ representations and
warranties set forth in Article II and covenants and agreements set
forth in this Agreement (including authorizing the delivery to the Purchaser of
all or any portion of the Indemnity and Earnout Escrow Funds in satisfaction of
any such indemnification claim), pursuing or responding to litigation and
complying with orders of courts with respect to any such indemnification
claims; and (vi) to take all other actions the Stockholder Representative deems
necessary or appropriate for the accomplishment of the foregoing.


 


9

















 


(b)           The
Purchaser shall be entitled to conclusively rely on all statements,
representations and decisions of the Stockholder Representative as those of the
Sellers, without any independent investigation or verification.


 


(c)           If
the Stockholder Representative is dissolved, resigns from such position, files
for bankruptcy or is the subject of an involuntary bankruptcy petition that is
not dismissed within thirty (30) days after filing, it shall designate a replacement
Stockholder Representative prior to such dissolution, resignation or bankruptcy
or, if the Stockholder Representative shall fail to do so, a replacement
Stockholder Representative shall be appointed by TWCP.  If the Stockholder Representative fails to so
appoint a successor Stockholder Representative in the manner described above
and TWCP also fails to appoint a successor Stockholder Representative within
thirty (30) days after the dissolution, resignation or bankruptcy of the
Stockholder Representative, the provisions set forth in this Agreement, the
Indemnity and Earnout Escrow Agreement and the Retention Program Escrow
Agreement requiring the consent or action of the Stockholder Representative
shall be deemed to be require the consent or action of all of the Sellers.  Any change in the Stockholder Representative
shall be effective only upon delivery to the Purchaser of written notice
thereof either from the Stockholder Representative or TWCP, as applicable.


 


ARTICLE II

REPRESENTATIONS AND WARRANTIES

CONCERNING THE COMPANY AND THE COMPANY SUBSIDIARIES


 


The Sellers represent and warrant to the
Purchaser, jointly but not severally, as follows, except as disclosed in the
Seller Disclosure Schedule (which shall be prepared in accordance with Section
9.2):


 


2.1           Existence;
Good Standing.  The Company is a
corporation duly incorporated and organized, validly existing and in good
standing under the laws of the State of Delaware and has all required corporate
power and authority to own or lease its properties and assets and to conduct
its business as presently conducted.  The
Company is duly qualified to do business and in good standing as a foreign
corporation in all jurisdictions in which the failure to be so qualified would
be reasonably likely to have a Material Adverse Effect.  Section 2.1 of the Seller Disclosure
Schedule sets forth a complete and accurate list of each jurisdiction in which
the Company is qualified to do business as a foreign corporation.


 


2.2           No
Conflict; Consents.


 


(a)           The execution and
delivery by the Stockholder Representative and the Sellers of this Agreement,
the Indemnity and Earnout Escrow Agreement, the Retention Program Escrow
Agreement and any other documents required to be executed and delivered by the
Stockholder Representative and the Sellers under this Agreement (collectively,
the “Seller Documents”) do not, and the consummation of the transactions
contemplated hereunder and thereunder (assuming the Required Consents are
obtained on or prior to Closing) will not: (i) violate the Organizational
Documents of the Company or any Company Subsidiary; (ii) constitute a material
breach of or result in a material default under (with or without the giving of
notice or the lapse of time), or result in the other party having a right of
termination, cancellation or acceleration under, any Significant Contract;
(iii) result, in any material respect, in a violation of any Applicable Law;
(iv) result in the creation or imposition of any Liens upon any of the assets
or properties of the Company or any of


 


10

















 


the Company Subsidiaries or upon the Shares
(other than any Liens arising due to actions of the Purchaser); (v) except as
contemplated by the Retention Program or Sale Bonus Program, result in the
payment of, or the creation of any obligation, absolute or contingent, to pay,
on behalf of the Company or any Company Subsidiary, any severance, termination,
“golden parachute” or other similar payment, whether pursuant to a Contract or
under Applicable Law with respect to any U.S. employee of the Company or any
Company Subsidiary, any amount; (vi) except as contemplated by the Retention
Program or Sale Bonus Program, result in the payment of, or the creation of any
obligation, absolute or contingent, to pay, on behalf of the Company or any
Company Subsidiary, any severance, termination, “golden parachute” or other
similar payment, which is material in amount, whether pursuant to a Contract or
under Applicable Law with respect to any non-U.S. employee of the Company or
any Company Subsidiary; or (vii) give any Governmental Authority the right to
revoke, suspend, modify or terminate any material Company Permit.


 


(b)           Except
as set forth in Section 2.2(b) of the Seller Disclosure Schedule
(collectively, the “Required Consents”) and except as would not result
in any material respect in a violation of Applicable Law, no notice to, or
consent of or with, any Governmental Authority or any Judicial Authority or,
with respect to any Significant Contract, any third Person, is required to be
obtained by the Company or any Company Subsidiary in connection with the
execution and delivery by the Stockholder Representative and the Sellers of
this Agreement and the other Seller Documents or the consummation of the transactions
contemplated hereunder and thereunder.


 


2.3           Capitalization.  The authorized capital stock of the Company
consists of: (i) 25,000,000 shares of Common Stock, of which an aggregate of
8,325,000 shares are issued and outstanding on the date of this Agreement; and
(ii) 12,492,500 shares of Preferred Stock, of which an aggregate of
7,492,500 shares are issued and outstanding on the date of this Agreement.  All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and none of them are subject to or were issued
in violation of any pre-emptive rights, rights of first offer or first refusal
or similar rights, or in violation of the Securities Act or any other applicable
securities law.  On the date of this
Agreement there are no, and, except as issued under the terms of Section 5.6
and as terminated pursuant to Section 1.2(b)(v), as of the Closing Date
there will be no, outstanding subscriptions, options, warrants or other
agreements or commitments or other rights of any kind to acquire (including
securities exercisable or exchangeable for or convertible into), or obligating
the Company to issue, any shares of capital stock of the Company, or giving any
Person the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the benefit of the holders of any shares of the
capital stock of the Company (solely in their capacity as a holder).  The Company is not subject to any obligation
(contingent or otherwise) to repurchase, redeem, call or otherwise retire, or
to register, any shares of its capital stock. 
On the date of this Agreement the Shares collectively constitute, and,
except as issued under the terms of Section 5.6 and as terminated
pursuant to Section 1.2(b)(v), on the Closing Date the Shares will
constitute, all of the issued and outstanding shares of capital stock of the
Company, and as of the date of this Agreement the Shares are owned of record
and beneficially as set forth on Schedule A hereto.  Except for Contracts among the Sellers that
will be terminated at or prior to the Closing, there are no Contracts with
respect to the: (i) voting of any shares of capital stock of the Company
(including any proxy or director nomination rights); or (ii) transfer of, or
transfer restrictions on, any shares of capital stock of the Company.


 


11

















 


2.4           Subsidiaries.


 


(a)           Section
2.4(a) of the Seller Disclosure Schedule lists the legal name and jurisdiction
of incorporation or formation, as applicable, of all Company Subsidiaries.  Each of the Company Subsidiaries is a
corporation or other entity duly incorporated or formed, duly organized,
validly existing and in good standing (to the extent each such concept is
applicable to such type of entity) under the laws of the jurisdiction of its
organization, and has all required corporate or other entity power and
authority under the laws of the jurisdiction of its organization to own or
lease its properties and other assets and to carry on its business as presently
conducted.  Each Company Subsidiary is
duly licensed or qualified and in good standing (to the extent each such
concept is recognized in such jurisdiction and applicable to such type of
entity) in all jurisdictions in which the failure to be so qualified would be
reasonably likely to have a Material Adverse Effect.  Section 2.4(a) of the Seller
Disclosure Schedule sets forth a complete and accurate list of each
jurisdiction in which each Company Subsidiary is qualified to do business as a
foreign corporation or other entity.


 


(b)           All
of the issued and outstanding shares of capital stock (including for purposes
of this Section 2.4(b) any equity equivalent to capital stock) of each
of the Company Subsidiaries have been duly authorized and validly issued and
are fully paid (and not repaid, including in violation of any applicable
provisions on the preservation of stated capital), and nonassessable (to the
extent each such concept is recognized in such jurisdiction and applicable to
such type of entity) and none of them are subject to or were issued in
violation of any pre-emptive rights, rights of first offer or first refusal or
similar rights, or in violation of the Securities Act or any other applicable
securities law.  There are no outstanding
subscriptions, options, warrants or other agreements or commitments or other
rights of any kind to acquire (including securities exercisable or exchangeable
for or convertible into), or obligating any of the Company Subsidiaries to
issue, any shares of capital stock or other equity interests of such Company
Subsidiary, or giving any Person the right to receive any benefits or rights
similar to any rights enjoyed by or accruing to the benefit of the holders of any
shares of the capital stock or other equity interests of such Company
Subsidiary (solely in their capacity as a holder).  None of the Company Subsidiaries is subject
to any obligation (contingent or otherwise) to repurchase, redeem, call or
otherwise retire, or to register, any shares of its capital stock.  Except for Contracts among the Sellers that
will be terminated at or prior to the Closing, there are no Contracts with
respect to: (i) voting any shares of capital stock of any Company Subsidiary
(including any proxy or director nomination rights); or (ii) transfer of, or
transfer restrictions on, any shares of capital stock or other equity interests
of any Company Subsidiary.  All of the
outstanding capital stock or other equity interests of each Company Subsidiary
are owned by the Company, directly or indirectly, and are free and clear of any
Liens.  Except for the Company
Subsidiaries, the Company does not own, and none of the Company Subsidiaries
own, any capital stock of, or other equity interests in, any other Person.


 


2.5           Financial
Statements.


 


(a)           Attached
as Section 2.5(a) of the Seller Disclosure Schedule are: (a) the audited
consolidated balance sheet of Aircast Intermediate Holdco and its Subsidiaries
(collectively, the “Financial Statement Parties”) as at September 30,
2005, together with the related audited consolidated statements of income,
stockholder’s equity and cash flows of the Financial Statement Parties for the
nine (9) month period then ended (the “Audited Financial Statements”);
and (b) the unaudited consolidated balance sheet of the Financial Statement
Parties as of December 31, 2005,


 


12

















 


together with the related unaudited
consolidated statement of income of the Financial Statement Parties for the
twelve (12) month period then ended (the “Unaudited Financial
Statements” and, together with the Audited Financial Statements, the “Financial
Statements”).  The Financial
Statements have been prepared in accordance with GAAP (other than, in the case
of the Unaudited Financial Statements, audit adjustments that will not,
individually or in the aggregate, be material and the omission of footnotes)
and, in all material respects, the books and records, consistent with past
practices of the Financial Statement Parties, and present fairly, in all
material respects, the consolidated financial condition of the Financial
Statement Parties as of such dates and the consolidated results of operations
of the Financial Statement Parties for the periods then ended.  None of the Company or any of the Company
Subsidiaries is a party to, or has a commitment to become a party to, any
off-balance sheet arrangements.


 


(b)           The
consolidated balance sheets of the Company as of December 31, 2004 and December
31, 2005 and the consolidated statements of income of the Company for the
twelve (12) month period ended December 31, 2005 and from inception to
December 31, 2004 will be consistent, in all material respects, with the
Unaudited Financial Statements and the historical financial statements of the
Financial Statement Parties, as the case may be, except as set forth on Section
2.5(b) of the Seller Disclosure Schedule.


 


2.6           Absence
of Certain Changes.  Between
September 30, 2005 and the date of this Agreement, there has been no:


 


(a)           transaction
entered into by the Company or any Company Subsidiary other than in the
ordinary course of business, except as a result of the preparation for or
otherwise arising out of the transactions contemplated by this Agreement;


 


(b)           amendment,
rescission or termination of (or receipt of written notice of termination of)
any Significant Contract or Company Permit, except as disclosed on Section
2.6(b) of the Seller Disclosure Schedule and except for amendments made in
the ordinary course of business;


 


(c)           sale,
lease or other disposition of, or mortgage, pledge or other encumbrance (other
than Permitted Liens) of, any material asset of the Company or any of the
Company Subsidiaries, except sales of inventory in the ordinary course of
business;


 


(d)           between
September 30, 2005 and December 31, 2005, capital expenditure by the Company or
any of the Company Subsidiaries (or series of related capital expenditures) not
reflected on the Unaudited Financial Statements, and between January 1, 2006
and the date of this Agreement, there has been no capital expenditure by the
Company or any of the Company Subsidiaries (or series of related capital
expenditures) involving more than $1,000,000 (or its applicable local currency
equivalent), individually or in the aggregate;


 


(e)           creation,
incurrence, assumption, or guarantee by the Company or any of the Company
Subsidiaries of any Indebtedness;


 


(f)            except
for the benefit of any newly hired non-U.S. employees or as required by
applicable Law or any Employee Plan, increase, or incurrence of an obligation
to increase, by the Company or any of the Company Subsidiaries of any bonuses,
salaries or other compensation (i) payable to any employee, except for
increases made or obligations incurred in the ordinary


 


13

















 


course of business or (ii) in excess of five
percent (5%), individually or in the aggregate (as compared to such
compensation in effect at September 30, 2005), to any director, officer,
limited liability company manager or managing director (or functional
equivalents of the foregoing or other management-level employees);


 


(g)           except
as required by applicable Law, adoption of, or amendment to, or announcement of
a pending adoption or amendment to, or change in the calculation of payments to
or benefits under, any Employee Plan;


 


(h)           acquisition
of or agreement to acquire by merging with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, association or other business entity, in a transaction or series of
related transactions by the Company or any Company Subsidiary;


 


(i)            except
as required by a change in GAAP (or in the case of non-U.S. Company
Subsidiaries, the applicable accounting rules in their respective jurisdictions
of operation) or applicable Law: (i) change in the Company’s or any Company
Subsidiary’s tax or accounting principles, (ii) material change in the Company’s
or any Company Subsidiary’s accounting practices or methods or any method of
calculating any bad debt, contingency or other reserve for accounting,
financial reporting or tax purposes, (iii) material tax election or settlement;
or (iv) compromise of any material income tax liability with any Governmental
Authority;


 


(j)            adoption,
amendment, rescission, termination of (or receipt of written notice of
termination of) or lapse of, or material claims made or existing claims denied
(in whole or in part, but excluding general reservations of rights with respect
to claims (that, to the Knowledge of the Sellers, are covered claims)) under,
any policies of insurance of the Company or any of the Company Subsidiaries;


 


(k)           hiring
or appointment or entering into of a commitment to hire or appoint any
director, officer, manager, limited liability company manager or managing
director of or to the Company or any of the Company Subsidiaries, or
termination or resignation, or, notice or termination or resignation delivered
in writing to the Company or any of the Company Subsidiaries, regarding any
such Persons;


 


(l)            default
on or other failure to satisfy any material obligation or material liability of
the Company or any Company Subsidiary;


 


(m)          declaration,
setting aside, or payment of any dividend or distribution in respect of any
capital stock of the Company, or any redemption, purchase or other acquisition
of any securities of the Company;


 


(n)           loan
or advance to, guarantee for the benefit of, or investments in, any Person (other
than: (i) intercompany Indebtedness as described in Section 2.6(n) of
the Seller Disclosure Schedule; (ii) advances of payroll or tuition made in the
ordinary course of business to employees who are not directors, officers,
managers, limited liability company managers or managing directors; and (iii)
advances of reimbursable expenses in the ordinary course of business) by the
Company or any of the Company Subsidiaries;


 


14

















 


(o)           destruction
of, damage to, or loss (whether or not covered by insurance) of any of the
material assets or material properties owned or used by the Company or any of
the Company Subsidiaries, or termination, amendment, modification, waiver or
release of any material right or other asset of material value to the Company
or any of the Company Subsidiaries;


 


(p)           to
the extent not included in the foregoing subsections (a) – (o) of this Section
2.6, change, development, condition, event or circumstance occurring
between September 30, 2005 and December 31, 2005 in the Business which has had
or would reasonably be expected to have a Material Adverse Effect or a material
adverse effect on the ability of the Sellers to consummate the transactions
contemplated by this Agreement and the other Seller Documents; or


 


(q)           entry
by the Company or any Company Subsidiary into a Contract to do any of the
matters listed in the foregoing subsections (a) – (p) of this Section 2.6.


 


2.7           Undisclosed
Liabilities.  There are no
liabilities (whether absolute, accrued, contingent or otherwise) of the Company
or any Company Subsidiary that would be required to be reflected on an audited
consolidated balance sheet of the Company and the Company Subsidiaries, or in
the notes thereto, prepared in accordance with GAAP, other than (a) those
recorded in the Audited Financial Statements and (b) those incurred in the
ordinary course of business since September 30, 2005.  Notwithstanding anything to the contrary in
this Agreement, the representations and warranties provided in this Section
2.7 do not include any liabilities for matters with respect to which other
representations and warranties are provided in this Article II
(excluding the representations and warranties set forth in Sections 2.2,
2.3, 2.4, 2.5, 2.22, 2.26, 2.27, 2.29
and 2.31). 


 


2.8           Customers
and Suppliers.  Section 2.8 of
the Seller Disclosure Schedule lists the twenty (20) largest customers
(collectively, the “Significant Customers”), and the twenty (20) largest
suppliers (other than professional advisors such as attorneys and accountants)
(collectively, the “Significant Suppliers”), of the Company and the
Company Subsidiaries (measured by consolidated revenues and consolidated
expenses, respectively, of the Company and the Company Subsidiaries for the
period from December 31, 2004 to December 31, 2005).  As of the date of this Agreement, from
December 31, 2005 to the date of this Agreement, no Significant Customer or
Significant Supplier has canceled or otherwise terminated, or made a material
adverse change in, or made any written threat to the Company or any of the
Company Subsidiaries that such Significant Customer plans to cancel or
otherwise terminate or make a material adverse change in, its relationship with
the Company or any of the Company Subsidiaries.


 


2.9           Title
to Assets.  Except with respect to
the Owned Real Property and Leased Real Property (as to which the sole
representations and warranties of the Sellers are made in Section 2.12)
and the Business Intellectual Property (as to which the sole representations
and warranties of the Sellers are made in Section 2.11), the Company,
directly or indirectly, owns and has good title to or, in the case of leased
property and assets, has valid leasehold interests in, all property and assets
necessary for the conduct of the Business as presently conducted.  All of such property and assets are either
reflected on the Audited Financial Statements or were acquired since September
30, 2005, except for properties and assets sold since September 30, 2005 in the
ordinary course of business.  None of
such properties and assets is subject to any Lien other than any: (a) Permitted
Liens; (b) in the case of leased properties and assets, Liens and other matters
affecting the lessors’ interests in such properties and assets; or (c) Liens
set forth on Section 2.9 of the Seller Disclosure


 


15

















 


Schedule.  The plant, machinery,
equipment and leasehold improvements of the Company and the Company
Subsidiaries are in all material respects in good operating condition,
reasonable wear and tear excepted and are adequate for the purposes for which
they are being used.


 


2.10         Significant
Contracts.


 


(a)           Section
2.10(a) of the Seller Disclosure Schedule contains a list of all of the
following to which the Company or any Company Subsidiary is a party
(collectively, the “Significant Contracts”):


 


(i)            each Contract, and to
the Knowledge of the Sellers, each Oral Contract, providing for the performance
of services or delivery of goods or materials by or to customers of or
suppliers to the Company or any Company Subsidiary which (A) provides for
consideration to be furnished to or by the Company or any Company Subsidiary of
value in excess of $250,000 during calendar year 2005 or (B) requires consideration
to be furnished to or by the Company or any Company Subsidiary of value in
excess of $250,000 during calendar year 2006 (after giving effect to automatic,
customary or routine renewals to any such Contract or Oral Contract), in each
case identifying each such Contract or Oral Contract that, to the Knowledge of
the Sellers, is with a sole source supplier;


 


(ii)           each lease or sublease
or other rental or occupancy Contract involving aggregate payments in excess of
$100,000 during calendar year 2005 or requiring aggregate payments in excess of
$100,000 during calendar year 2006;


 


(iii)          each licensing or other
Contract, and to the Knowledge of the Sellers each Oral Contract, granting the
Company or any Company Subsidiary, or pursuant to which the Company or any of
the Company Subsidiaries has granted to any Person, the right to use
Intellectual Property that is material to the operation of the Business;


 


(iv)          all broker, dealer,
manufacturer’s representative, franchise, agency, sales promotion, market research,
marketing, independent sales representative and advertising Contracts, and to
the Knowledge of the Sellers all such Oral Contracts, which (A) involved
consideration of more than $100,000 in the aggregate (for any such Contract or
Oral Contract) during calendar year 2005, (B) requires consideration of more
than $100,000 in the aggregate (for any such Contract or Oral Contract) during
calendar year 2006 (after giving effect to any automatic, customary or routine
renewals) or (C) which by their terms are not terminable by the Company or any
Company Subsidiary party thereto on ninety (90) days’ notice or less;


 


(v)           each Contract, and to
the Knowledge of the Sellers, each Oral Contract, to make capital expenditures
in excess of $100,000 with respect to the Business;


 


(vi)          each Contract, or to the
Knowledge of the Sellers, each Oral Contract, to sell, lease or otherwise
dispose of any assets or properties of the Company or any Company Subsidiary in
excess of $100,000 in the aggregate, other than sales of inventory in the
ordinary course of business;


 


16

















 


(vii)         each collective
bargaining agreement with any labor union or other employee representative of a
group of employees relating to wages, hours and other conditions of employment;


 


(viii)        each joint venture
agreement, partnership agreement or limited liability company agreement
(including to the Knowledge of the Sellers any such Oral Contract) to which the
Company or any Company Subsidiary is party;


 


(ix)           each Contract, and to
the Knowledge of the Sellers each Oral Contract, that limits the right of the
Company or any Company Subsidiary to compete in any industry or geographic
area;


 


(x)            each Contract, or to
the Knowledge of the Sellers, each Oral Contract, that obligates the Company or
any Company Subsidiary to clean up or remediate any Hazardous Substances (but
excluding indemnification and contribution rights under Contracts not primarily
pertaining to environmental obligations);


 


(xi)           each Contract, and to
the Knowledge of the Sellers each Oral Contract, relating to the acquisition or
disposition of any business, or any operating division, business unit or
product line thereof (whether by merger, consolidation, reorganization,
acquisition of assets or otherwise), relating to the Business as currently
conducted;


 


(xii)          all Contracts, and to
the Knowledge of the Sellers all Oral Contracts, relating to Indebtedness of
the Business, or pursuant to which the Company or any Company Subsidiary
guarantees, indemnifies or otherwise agrees to support the obligations of, any
Person (other than the Company or the Company Subsidiaries), in excess of
$100,000 in the aggregate (other than in the ordinary course of business in
connection with sales of inventory);


 


(xiii)         all Contracts, and to the
Knowledge of the Sellers all Oral Contracts with employees (other than offer
letters delivered in the ordinary course of business), independent contractors
or consultants of the Company and Company Subsidiaries, in each case requiring
total payments during calendar year 2005 or 2006, respectively (excluding any
automatic, customary or routine renewals) of more than $100,000; and


 


(xiv)        each other Contract, and
to the Knowledge of the Sellers each Oral Contract, not otherwise listed pursuant
to the preceding clauses (i) through (xiii), that creates
future payment or performance obligations by the Company or any Company
Subsidiary that requires consideration to be furnished to or by the Company or
any Company Subsidiary of value in excess of $100,000 during calendar year 2006
or any calendar year thereafter, respectively and which by its terms is not
terminable by the Company or the Company Subsidiary party thereto without
penalty to the Company or the Company Subsidiary party thereto on ninety (90)
days’ notice or less (provided that no Contract or Oral Contract need be listed
pursuant to this clause (xiv) if such Contract or Oral Contract is
listed pursuant to clause (i) or would


 


17

















 


be listed
pursuant to clause (i) if the disclosure threshold in such clause (i)
were $100,000 instead of $250,000).


 


(b)           Except
with respect to Real Estate Leases (as to which the sole representations and
warranties of the Sellers are made in Section 2.12):  (i) each of the Significant Contracts is a
valid and binding obligation of the Company or the Company Subsidiary party
thereto, enforceable against the Company or such Company Subsidiary and, to the
Knowledge of the Sellers, the other parties thereto, subject to the Equitable
Exceptions; and (ii) neither the Company nor the applicable Company Subsidiary
is in material breach of any Significant Contract nor, to the Knowledge of the
Sellers, is any other party thereto in material breach thereof.  The Sellers have made available to the
Purchaser complete and accurate (in all material respects) copies of each of
the Significant Contracts.


 


2.11         Intellectual
Property.  Section 2.11 of the
Seller Disclosure Schedule lists each patent, utility model, industrial design,
registered trademark, design mark, service mark and trade name, registered
copyright and domain name, and each published application for any of the
foregoing, domestic and foreign, that is necessary for the operation of the
Business (collectively, the “Business Intellectual Property”).  Except as set forth on Section 2.11 of
the Seller Disclosure Schedule: (a) the Company has, directly or indirectly,
the entire right, title and interest in and to the Business Intellectual
Property, free and clear of all Liens, except for Permitted Liens; (b) there is
no claim or notice of infringement of the Intellectual Property rights of any
other Person pending or, to the Knowledge of the Sellers, threatened against
the Company or any Company Subsidiary; (c) each material item of Business
Intellectual Property of the Company or any U.S. Company Subsidiary is valid,
subsisting, in full force and effect and has not been abandoned or passed into
the public domain, and all necessary registration, maintenance and renewal documentation
and fees in connection with such item of Business Intellectual Property have
been timely filed with appropriate authorities and paid; (d) to the Knowledge
of the Sellers, each material item of Business Intellectual Property of any
non-U.S. Company Subsidiary is valid, subsisting, in full force and effect and
has not been abandoned or passed into the public domain, and all necessary
registration, maintenance and renewal documentation and fees in connection with
such item of Business Intellectual Property have been timely filed with
appropriate authorities and paid; (e) to the Knowledge of the Sellers, no
Person is infringing on or misappropriating any Business Intellectual Property;
(f) to the Knowledge of the Sellers, neither the operation of the Business nor
the sale of Products infringes or misappropriates the Intellectual Property
rights of any other Person; (g) no present or former employee of the Company or
any Company Subsidiary has any proprietary, financial or other interest, direct
or indirect, in any Business Intellectual Property; and (h) the Company and the
Company Subsidiaries have taken commercially reasonable precautions to protect
inventions, trade secrets and know how constituting material Business
Intellectual Property, including the execution of appropriate agreements.


 


2.12         Real
Property.  Section 2.12 of the
Seller Disclosure Schedule lists: (a) all real property owned by the Company or
any Company Subsidiary (and in Germany, any quasi-real property rights in rem (grundstucksgleiche rechle))
(collectively, the “Owned Real Property”); and (b) all real property
that is leased or subleased to the Company or any Company Subsidiary
(collectively, the “Leased Real Property”).  The Company, directly or indirectly, has good
and marketable fee simple title to each item of Owned Real Property, in each
case free and clear of all Liens, other than Permitted Liens.  The use of the Owned Real Property for the
purposes to which it is presently being used is permitted as of right under all
applicable zoning Laws and is not subject


 


18

















 


to “permitted nonconforming” use or structure classifications.  To the Knowledge of the Sellers, neither the
Company nor any Company Subsidiary has received any notice that any
improvements situated in whole or in part at any Owned Real Property are not in
material compliance with all applicable Laws, and all such improvements are in
all material respects in good repair and condition, ordinary wear and tear
excepted, and are adequate for the purposes for which they are being used.  Except as set forth in Section 2.12 of
the Seller Disclosure Schedule: (i) each of the Real Estate Leases is a valid
and binding obligation of the Company or the Company Subsidiary party thereto, enforceable
against the Company or such Company Subsidiary and, to the Knowledge of the
Sellers, the other parties thereto, subject to the Equitable Exceptions; (ii)
to the Knowledge of the Sellers, the use of each Leased Real Property for the
purpose to which it is presently being used is permitted as of right under the
applicable Real Estate Lease and all applicable zoning Laws, and is not subject
to “permitted nonconforming” use or structure classifications; (iii) to the
Knowledge of the Sellers, neither the Company nor any Company Subsidiary has
received written notice that any improvements situated in whole or in part on
any Leased Real Property are not in compliance with all applicable Laws, and
all such improvements are in all material respects in good repair and
condition, ordinary wear and tear excepted, and are adequate for the purposes
for which they are being used; and (iv) neither the Company nor the applicable
Company Subsidiary is in material breach of any Real Estate Lease nor, to the
Knowledge of the Sellers, is any other party thereto in material breach
thereof.  To the Knowledge of the
Sellers, no Person is in possession or occupancy of the Owned Real Property or
the Leased Real Property other than the Company or the applicable Company Subsidiary.  The Owned Real Property and Leased Real
Property constitute all of the real property interests owned, leased or
occupied in whole or in part by the Company or any Company Subsidiary.


 


2.13         Litigation.  There is no Proceeding pending or, to the
Knowledge of the Sellers, threatened in writing against the Company or any
Company Subsidiary.  There is no
Proceeding pending in which the Company or any of the Company Subsidiaries is
the plaintiff or complainant.  None of
the Company or Company Subsidiaries is subject to any Order (other than cash
settlements under which all financial obligations have been discharged).  To the Knowledge of the Sellers, no
investigation by a Governmental Authority exists with respect to the Company or
any Company Subsidiary.


 


2.14         Employee
Benefit Plans.


 


(a)           Section
2.14(a) of the Seller Disclosure Schedule sets forth a complete and
accurate list of each: (i) “employee pension benefit plan,” as defined in
Section 3(2) of ERISA (other than any plan exempt from ERISA by reason of
Section 4(b)(4) of ERISA); (ii) “employee welfare benefit plan,” as defined in
Section 3(1) of ERISA (other than any plan exempt from ERISA by reason of
Section 4(b)(4) of ERISA) (each, a “Welfare Plan”); and (iii)
employment, consulting, severance or other similar agreement, contract, plan or
program providing for payment in lieu of cash compensation, deferred
compensation (that is material in amount), profit-sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or for post-retirement insurance, compensation or benefits,
whether written or oral (except that any representation and warranty under this
Section 2.14(a) as to any of the foregoing that is oral shall be solely
to the Knowledge of the Sellers), which is maintained or contributed to by the
Company or any of the Company Subsidiaries or to or in respect of which the
Company or any of the Company Subsidiaries has any outstanding liability or
obligation under, and which, in each case, covers any current or former
employee, director, officer or consultant of the Company or any


 


19

















 


Company Subsidiary or their respective
dependents (each such agreement, contract, plan or program listed in Section
2.14(a) of the Seller Disclosure Schedule, an “Employee Plan”).  The Sellers have made available to the
Purchaser complete and accurate (in all material respects) copies of each
Employee Plan and, with respect to each Employee Plan, complete and accurate (in
all material respects) copies of (I) any associated trust, custodial, insurance
or service agreements, (II) any annual report, actuarial report or disclosure
materials (including specifically any summary plan descriptions) submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder and (III) the most recently received IRS determination letters and
any Governmental Authority opinions, rulings, compliance statements, closing
agreements or similar materials specific to such Employee Plan.  Each Employee Plan is and has been maintained
and operated in compliance in all material respects with its terms and all
provisions of ERISA, the Code and any other Laws applicable thereto.


 


(b)           Each
Employee Plan which is intended to be “qualified” within the meaning of Section
401(a) of the Code has been determined by the IRS to be so qualified and has
received a favorable determination letter from the IRS as to such qualification
(or is otherwise able to rely on a prototype plan sponsor’s IRS opinion letter)
and the trust, if any, forming a part of such plan is exempt from U.S. federal
income tax under Section 501(a) of the Code. 
To the Knowledge of the Sellers, no event has occurred which would be
reasonably expected to cause the loss, revocation or denial of any such
favorable determination letter or which requires, or would be reasonably be
expected to require, action under the compliance resolution programs of the IRS
to preserve such qualification.  No
Employee Plan is currently subject to any Proceeding by the IRS, the Department
of Labor, the Pension Benefit Guaranty Corporation (the “PBGC”) or any
other Governmental Authority or subject to any Proceeding for which, to the
Knowledge of the Sellers, the Company or any of the Company Subsidiaries have
received notice.  Neither the Company nor
any Company Subsidiary or any ERISA Affiliate has since the formation of the
Company or any Company Subsidiary contributed, or been obligated to contribute,
to an Employee Plan which is a “multiemployer plan” (within the meaning of
Sections 3(37) and 4001(a)(3) of ERISA) or has since the formation or the
Company or the Company Subsidiaries maintained a “multiple employer plan”
(within the meaning of Section 4063 or 4064 of ERISA).  No Employee Plan that is subject to Title IV
of ERISA has been sponsored or contributed to by the Company, any Company
Subsidiary or any ERISA Affiliate since the formation of the Company and the
Company Subsidiaries.  Neither the
Company nor any Company Subsidiary has incurred any liability to the PBGC other
than for premiums not yet due and no event or condition exists which could
reasonably be expected to result in liability to the Purchaser under Title IV
of ERISA including by virtue of the Company or any Company Subsidiary being
considered a “single employer” with any other entity (within the meaning of
Section 4001 of ERISA or Section 414 of the Code).  No reportable event, or event or condition
which presents a material risk of termination by the PBGC, has occurred with
respect to any Employee Plan or any retirement plan of an ERISA Affiliate
applicable to current or former employees of the Company or any of the Company
Subsidiaries, which, in each case, is subject to Title IV of ERISA.


 


(c)           All
contributions and premiums required to be made under the terms of any Employee
Plan or by a plan maintained by an ERISA Affiliate or as required by applicable
Law have been timely made or have been properly recorded on the books and
records of the Company and the Company Subsidiaries, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any such plan.  The current value of the assets of each such
Employee Plan, as of the end of the most recently


 


20

















 


ended plan year of that Employee Plan, equals
or exceeded the current value of all benefits liabilities under that Employee
Plan.  No Employee Plan nor any party in
interest with respect to such Employee Plan has engaged in a transaction that
would reasonably be expected to subject the Company directly or indirectly to
liability under Section 4975 of the Code or Section 409 or 502(i) of
ERISA.  No Employee Plan provides for
continuing welfare benefits or coverage for any participant or beneficiary or
covered dependent of a participant after the applicable participant’s
termination of employment, except to the extent required by applicable state
insurance laws and Title I, Part 6 of ERISA. 
No Welfare Plan is (i) a “multiple employer welfare arrangement”(within
the meaning of Section 3(40) of ERISA) or (ii) a “voluntary employees’
beneficiary association” (within the meaning of Section 501(c)(9) of the Code)
or other funding arrangement for the provision of welfare benefits (to the
extent any Welfare Plan is listed in Section 2.14(c) of the Seller
Disclosure Schedule with respect to this sentence, such disclosure shall
include the amount of any such funding). 
Neither the Company nor any Company Subsidiary or ERISA Affiliate is
bound by any collective bargaining agreement or similar agreement to maintain
or contribute to any Employee Plan.


 


(d)           Except
as would not, individually or in the aggregate, result in any material respect
in a violation of applicable Law, each pension, retirement, health, life,
disability, severance and other welfare plan which is maintained by the Company
or any of the Company Subsidiaries and which is exempt from ERISA by reason of
Section 4(b)(4) thereof (each, a “Foreign Plan”) is, and has been,
established, registered for tax purposes (where required) with the applicable
Governmental Authority, qualified, administered and funded (where required) in
compliance with the terms thereof and all applicable Laws.  With respect to each Foreign Plan, all
required filings and reports have been made, in all material respects, in a
timely and complete manner with all Governmental Authorities.  All obligations of the Company or any Company
Subsidiary to or under the Foreign Plans (whether pursuant to the terms thereof
or any applicable Laws) have been, to the extent required under applicable Law
or the terms of such Foreign Plans, satisfied in all material respects, and
there are no outstanding material defaults or material violations thereunder by
the Company or any Company Subsidiary. 
Full payment has been made, in all material respects, in a timely manner
of all amounts which are required to be made as contributions, payments or
premiums to or in respect of any Foreign Plan under applicable Law or under the
applicable Foreign Plan or any agreement relating to a Foreign Plan, and no
material excise taxes, penalties or punitive fees are owing or assessable under
any such Foreign Plan.  To the Knowledge
of the Sellers, no event has occurred with respect to any Foreign Plan
registered with an applicable Tax Authority which would reasonably be expected
to result in the revocation of such registration of such Foreign Plan, or which
would entitle any Governmental Authority (without the consent of the sponsor of
such Foreign Plan) to wind up or terminate any such Foreign Plan, in whole or
in part, or could otherwise reasonably be expected to have an adverse effect on
the tax status of any such Foreign Plan.  No contribution holidays have been
taken under any of the Foreign Plans, and there have been no withdrawals of
assets or transfers of assets from any Foreign Plan, except in accordance with
applicable Laws.


 


(e)           Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will reasonably be expected to: (i) entitle
any employee, consultant, director, officer, limited liability company manager
or managing director (or functional equivalents of the foregoing) of the
Company or any Company Subsidiary to severance pay, unemployment compensation
or any other payment; or (ii) accelerate the time of payment or vesting other
than as required by Law or increase the amount of compensation due any such
employee,


 


21

















 


consultant, director, officer, limited
liability company manager or managing director (or functional equivalents of
the foregoing).  Within the twelve (12)
month period preceding the date hereof, neither the Company nor any Company
Subsidiary has taken any action to entitle, and the Company and the Company
Subsidiaries do not owe, any employee, director, officer, limited liability
company manager or managing director (or functional equivalents of the
foregoing) of the Company or any of the Company Subsidiaries any severance pay
or other compensation that has not been paid, will not be paid on or prior to
the Closing Date, or will not have been properly recorded on the books and
records of the Company and the Company Subsidiaries.


 


(f)            There
is no Proceeding pending, or to the Knowledge of the Sellers, threatened in
writing, other than routine claims for benefits, concerning any Employee Plan
or Foreign Plan, or to the Knowledge of Sellers, any fiduciary or service
provider thereof.


 


(g)           No
written communication from an officer of the Company or any Company Subsidiary
has been made with respect to any Employee Plan or Foreign Plan which, at the
time made, did not accurately reflect the terms and operations of such Employee
Plan or Foreign Plan in all material respects.


 


(h)           The
Company has no Contract with any employee to maintain any Welfare Plan or
Foreign Plan for any period of time.


 


(i)            Each
Employee Plan and Foreign Plan is terminable, at the sole discretion of the
sponsor thereof, subject only to such constraints imposed by applicable Laws.


 


2.15         Compliance
with Law.  Except with respect to:
(a) healthcare law matters (as to which the Sellers’ sole representations and
warranties are in Section 2.21); (b) Environmental Law matters (as to which
the Sellers’ sole representations and warranties are in Section 2.16);
(c) Tax matters (as to which the Sellers’ sole representations and warranties
are in Section 2.17) and (d) violations that would not reasonably be
expected to have, individually or in the aggregate, a material impact on the
Business: neither the Company nor any Company Subsidiary is in violation of any
Laws of Governmental Authorities having jurisdiction over the Company, the
Company Subsidiaries or any of their respective properties or assets
(collectively, “Applicable Laws”); and, to the Knowledge of the Sellers,
neither the Company nor any Company Subsidiary has received any notice from any
Governmental Authority regarding any violation by the Company or any Company
Subsidiary of any Applicable Law. 
Neither the Company nor any of the Company Subsidiaries has Contracted
with, made sales of inventory to, or otherwise had business dealings with, any
Person (i) currently identified on the “Specially Designated Nationals and
Blocked Persons List” maintained by the Office of Foreign Assets Control,
Department of the Treasury (“OFAC”), or on any other similar list
maintained by OFAC pursuant to any authorizing statute, executive order or
regulation, or (ii) with whom it is prohibited to engage in transactions by any
trade embargo, economic sanction, or other prohibition of United States law,
regulation, or executive order of the President of the United States, in each
case except for such Contracts, sales and business dealings which would not
reasonably be expected to have, individually or in the aggregate, a material
impact on the Business.


 


22

















 


2.16         Environmental
Matters.


 


(a)           The
Company, each Company Subsidiary, the Owned Real Property and, to the Knowledge
of the Sellers, the Leased Real Property and any real property formerly owned,
leased or operated by the Company or any Company Subsidiary (the “Former
Real Property”) are not in violation of, and neither the Company nor any
Company Subsidiary has any liability under, any applicable Environmental Law,
except for violations and liabilities that would not be reasonably likely to
have, individually or in the aggregate, a material impact on the Business.  The
NJDEP has never, in writing, ordered or requested that the Company, any of the
Company Subsidiaries or, to the Knowledge of the Sellers, any of the Old
Aircast Sellers perform (or cause the performance of) any investigation,
remediation or other response actions (other than providing access to the Owned
Real Property at 691 Central Avenue to Philips, NJDEP and their respective
contractors and agents) relating to the matters described in Section 2.16(a)
of the Seller Disclosure Schedule.


 


(b)           The
Company and the Company Subsidiaries have obtained, and maintain in full force
and effect, all material Permits required under any applicable Environmental
Laws to operate the Business (collectively, the “Environmental Permits”),
and are not in material violation of any of the terms, conditions or requirements
of the Environmental Permits.  There are
no Proceedings pending or, to the Knowledge of the Sellers, threatened in
writing that (i) seek to revoke, cancel, modify, non-renew or suspend any of
the Environmental Permits, (ii) question or contest the validity of any
Environmental Permit or (iii) seek to impose any condition, administrative
sanction, modification or amendment with respect to any Environmental Permit.


 


(c)           Except
as would not be reasonably likely to have, individually or in the aggregate, a
material impact on the Business: (i) none of the Owned Real Property, Leased
Real Property or, to the Knowledge of the Sellers, Former Real Property has
been affected by any presence of any Hazardous Substance, Release or threat of
Release; (ii) no portion of any of the Owned Real Property or, to the Knowledge
of the Sellers, Leased Real Property or Former Real Property has been used for
(A) the generation, manufacturing, refining, handling, processing, treatment,
transportation, sale, storage or disposal of Hazardous Substances, (B) cleaning
or degreasing of any equipment or (C) services which utilize Hazardous
Substances, except as is customary for the operation of the Business and not in
violation of applicable Environmental Laws; (iii) the Owned Real Property and
the Leased Real Property do not contain and have not contained any (A)
underground tank, (B) asbestos containing building material, (C) landfills or
dumps, (D) “hazardous waste management facility” as defined pursuant to RCRA,
(E) site designated for any removal or cleanup activity pursuant to CERCLA or
any comparable foreign, state or local Law or (F) any other underground storage
receptacle for Hazardous Substances; (iv) the Owned Real Property and the
Leased Real Property (and the buildings and equipment thereon) do not contain
any Hazardous Substances, whether in barrels, tanks, equipment (movable or
fixed) or other containers, deposited or located in land, waters, sumps or in
any other part of the site, incorporated into any structure on the site or
otherwise existing thereon, other than Hazardous Substances the presence and
condition of which do not violate applicable Environmental Laws and would not
be reasonably expected to result in the imposition of liability against the
Company or the Company Subsidiaries under applicable Environmental Laws; (v) to
the Knowledge of the Sellers, neither the Company nor any of the Company
Subsidiaries has received any written notice that there has been any Releases
on, upon, from or into any real property immediately adjacent to any of the
Owned Real Property or the Leased Real Property which would reasonably be
expected to have come to be


 


23

















 


located on such Owned Real Property or Leased
Real Property in concentrations or quantities that require remediation under
applicable Environmental Laws; and (vi) any “hazardous waste” (as defined under
RCRA) that has been generated by the Company or any Company Subsidiary on any
of the Owned Real Property or the Leased Real Property or, to the Knowledge of
the Sellers, the Former Real Property has been transported offsite only by
carriers having identification numbers issued by the United States
Environmental Protection Agency (the “EPA”) and has been treated or disposed
of only by treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws or as otherwise permitted under
applicable Environmental Laws.


 


(d)           To
the Knowledge of the Sellers, neither the Company nor any Company Subsidiary
has received any notice from any Governmental Authority or any written notice
from any other Person that (i) the Company, any Company Subsidiary, the Old
Aircast Sellers or any of the respective subsidiaries of the Old Aircast
Sellers (collectively, the “Old Aircast Parties”) has been identified by
the EPA as a “potentially responsible party” under the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et
seq.) (“CERCLA”), with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986); (ii) relates to any Environmental Claim, or that identifies
a condition or occurrence which would reasonably be expected to form the basis
for an Environmental Claim, against the Company or any Company Subsidiary;
(iii) alleges any past or present violations of any Environmental Laws by the
Company or any of the Company Subsidiaries; or (iv) alleges any event,
condition, circumstance, activity, practice, incident, action or plan which
would reasonably be expected to result in a violation of applicable
Environmental Law or to give rise to any common law or statutory liability, or
otherwise form the basis for any Proceeding, against the Company or any of
Company Subsidiary, in each case (with respect to this clause (iv))
based on or resulting from the generation, use, treatment, storage, disposal,
transport or handling, or Release of any Hazardous Substance and, for purposes
of the preceding clauses (i) - (iv), if such notice is from a
Person other than a Governmental Authority only if the Environmental Claim,
violation of Environmental Law or liability threatened therein would be
reasonably likely to have, individually or in the aggregate, a material impact
on the Business.


 


(e)           All statements contained in the
Sellers’ General Information Notices, Preliminary Assessment Reports and
applications for ISRA approval for the Owned Real Property or Leased Real
Property submitted by or on behalf of the Sellers to the NJDEP for purposes of
complying with ISRA will be accurate and complete in all material respects, and
Sellers have, or prior to the Closing shall have, made available to the
Purchaser complete and accurate (in all material respects) copies of all such
documents.


 


(f)            To the Knowledge of the Sellers,
there is no material restriction imposed by a Governmental Authority on the
ownership, occupancy, use or transferability of the Owned Real Property or
Leased Real Property in connection with (i) any Environmental Law or (ii)
Release, threatened Release or disposal of Hazardous Substances, in each case
other than restrictions that are shown on, or evident on, public records.


 


(g)           There
are no Environmental Claims against any Person whose liability for
environmental remediation or any violation of Environmental Laws, the Company
or the Company Subsidiaries have retained or assumed contractually or by
operation of law (but excluding indemnification and contribution rights under
Contracts not primarily pertaining to environmental obligations).


 


24

















 


(h)           The
Sellers have made available to the Purchaser complete and accurate (in all
material respects) copies of all non-attorney-client privileged environmental
audits and assessments within their possession relating to the environmental
condition or liability of the Company, the Company Subsidiaries, the Owned Real
Property and the Leased Real Property.


 


(i)            None
of the matters set forth in Section 2.16 of the Seller Disclosure
Schedule would reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.


 


(j)            Notwithstanding
anything to the contrary in this Agreement, the representations and warranties
set forth in this Section 2.16 are the sole representations and
warranties of the Sellers relating to any liability or obligation under
Environmental Law.


 


2.17         Taxes.


 


(a)           All
Tax Returns required to be filed with any Governmental Authority by the Company
or any of the Company Subsidiaries have been timely filed and were accurate and
complete in all material respects.  All
Taxes (except those which are de minimus) due
and payable by the Company or any of the Company Subsidiaries (whether or not
shown on any Tax Return) have been timely paid in full.  Neither the Company nor any Company
Subsidiary is currently the beneficiary of or has applied for any extension of
time within which to file any Tax Return with respect to Taxes.  There are no Liens with respect to Taxes on
any of the assets of the Company or any of the Company Subsidiaries, other than
Liens for Taxes not yet due and payable. 
No claim has ever been made in writing by any Governmental Authority in
a jurisdiction in which the Company or any Company Subsidiary does not file Tax
Returns that the Company or any Company Subsidiary is or may be subject to Tax
in that jurisdiction.


 


(b)           The
Company and the Company Subsidiaries have each withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, member or
other third party.


 


(c)           No
dispute concerning any Tax liability of the Company or a Company Subsidiary is
pending or, to the Knowledge of the Sellers, threatened.  No Proceedings with respect to Taxes by a
Governmental Authority are pending or, to the Knowledge of the Sellers, are
being conducted with respect to the Company or any Company Subsidiary.  With respect to Taxes for which the statute
of limitations remains open, neither the Company nor any Company Subsidiary has
received from any Governmental Authority (i) any written notice indicating an
intent to open a Tax audit or other review, (ii) any written request for
information related to Tax matters, or (iii) any written notice of deficiency
or proposed adjustment for any amount of Tax proposed, asserted or assessed
against the Company or any Company Subsidiary or with respect to the assets of
the Company or any Company Subsidiary, in each case other than with respect to
an audit, review or examination that has been completed and closed and with
respect to which the Company and the Company Subsidiaries have paid all Taxes
asserted or assessed by the Governmental Authority.  Neither the Company nor any Company
Subsidiary has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency of a
Tax.


 


25

















 


(d)                                 Neither
the Company nor any Company Subsidiary is party to any Tax sharing
agreement.  Neither the Company nor any
Company Subsidiary has been a member of an affiliated group filing a
consolidated Tax Return for United States federal income Tax purposes.


 


(e)                                  The
Sellers have made available to the Purchaser complete and accurate (in all
material respects) copies of all income Tax Returns of the Company and the
Company Subsidiaries, and of all examination reports and statements of
deficiencies payable by, assessed against or agreed to by any of the Company or
the Company Subsidiaries with respect to such income Tax Returns, for all Tax
periods as to which the statute of limitations remains open.


 


(f)                                    Neither
the Company nor any Company Subsidiary has ever obtained from a Governmental
Authority a ruling with respect to Taxes. 
There is no pending request by the Company or any Company Subsidiary for
a ruling by a Governmental Authority with respect to Taxes.


 


(g)                                 Neither
the Company nor any Company Subsidiary will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result
of any (i) change in method of accounting for a taxable period ending on or
prior to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law);
(ii) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law);
(iii) deferred intercompany gain or any excess loss account described in
Treasury Regulations under Section 1502 of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law); (iv) installment
sale made prior to the Closing Date; or (v) prepaid amount received on or prior
to the Closing Date.


 


(h)                                 Neither
the Company nor any Company Subsidiary is liable for any unpaid Taxes of the
Business for any taxable period beginning before the transfer of assets to the
Company and the Company Subsidiaries pursuant to the Aircast Asset Purchase
Agreement or the Subsidiary Asset Purchase Agreement (as defined in the Aircast
Asset Purchase Agreement) and no notice or claim as to Taxes of the Business
being payable or reimbursable by the Company or a Company Subsidiary has been
made by a seller thereunder or by any Governmental Authority.


 


(i)                                     The
aggregate purchase price paid by the Company and the Company Subsidiaries to
the Old Aircast Sellers pursuant to the Aircast Asset Purchase Agreement and
the Subsidiary Asset Purchase Agreements was allocated to the assets purchased
pursuant to such agreements by Aircast US Opco and the non-United States
Company Subsidiaries in the manner set forth on Schedule 2.17(i), and as
of the closing of such purchases, the Company’s aggregate tax basis, for
federal and applicable state income Tax purposes, and each non-United States
Company Subsidiary’s tax basis, for applicable foreign income Tax purposes, in
each category of assets set forth on Schedule 2.17(i) was the aggregate
amount allocated to the assets in each such category as set forth on Schedule
2.17(i).  Schedule 2.17(i) is
consistent with IRS Form 8594 and any similar forms under applicable state or
foreign Tax Law to be filed by the Company and the Company Subsidiaries with
the appropriate Governmental Authorities before the Closing Date.


 


(j)                                     Neither
the Company nor any Company Subsidiary has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.


 


26

















 


(k)                                  Neither the Company nor any
Company Subsidiary is party to any Contract that has resulted or would result
in any “excess parachute payment” within the meaning of Section 280G(b)(2) of
the Code.


 


2.18                           Permits.  Section 2.18 of the Seller Disclosure
Schedule sets forth an accurate and complete list of all material Permits
reasonably necessary for the operation of the Business (other than any such
Permits that are Environmental Permits) (collectively, the “Company Permits”).  Each of the Company Permits is in full force
and effect in all material respects, and the Company and the Company
Subsidiaries are not in violation of any of the terms, conditions and
requirements of the Company Permits, except for such violations that would not
reasonably be expected to, individually or in the aggregate, have a material impact
on the Business.  Copies of all of the
Company Permits have been made available to the Purchaser, which copies are
complete and accurate (in all material respects).  There is no Proceeding pending or, to the
Knowledge of the Sellers, threatened that: (a) questions or contests the
validity of, or seeks the revocation, nonrenewal or suspension of, any Company
Permit or (b) seeks the imposition of any material condition, administrative
sanction, modification or amendment with respect to any Company Permit.  No consents under any Company Permit are
required to be obtained in connection with the Closing.


 


2.19                           Insurance.  Section 2.19 of the Seller Disclosure
Schedule sets forth an accurate and complete list of all insurance policies
maintained by the Company and the Company Subsidiaries (indicating in each case
which entity holds such policy). 
Complete and accurate (in all material respects) copies of such
insurance policies have been made available to the Purchaser.  Such insurance policies are currently effective,
and are of such types and amounts as are consistent with customary practices
and standards of companies engaged in businesses similar to that of the Company
and the Company Subsidiaries, and the Company and the Company Subsidiaries do
not rely on self-insurance (other than customary deductibles, co-insurance and
retentions).  All premiums with respect
to such insurance policies are currently paid in accordance with the terms of
such policies.  The Company and the
Company Subsidiaries are in compliance in all material respects with all other
terms and conditions of such insurance policies and (a) no material dispute
with any insurance carrier exists with respect to the scope of any insurance
coverage, (b) neither the Sellers, the Company or any Company Subsidiary has
received any written notice of cancellation, termination or reduction in
coverage or any other written indication that any insurance policy is no longer
in full force and effect or will not be renewed, and (c) neither the Company
nor any Company Subsidiary has received any written refusal of coverage or any
written notice that a defense will be afforded with reservation of rights
(other than a general reservation of rights with respect to a claim (that, to
the Knowledge of the Sellers, is a covered claim)).  A list of material insurance claims covering
the period since December 7, 2004 is attached to Section 2.19 of the
Seller Disclosure Schedule.


 


2.20                           Labor
Matters.


 


(a)                                  Neither
the Company nor any Company Subsidiary is a party to any collective bargaining
agreement.  There are no strikes, work
stoppages, slowdowns or lockouts pending or, to the Knowledge of the Sellers,
threatened, which involve the employees of the Company or any Company
Subsidiary.  There are no Proceedings,
grievances, claims, complaints or charges pending, or to the Knowledge of the
Sellers, threatened, before any Judicial Authority or brought by or before any
Governmental Authority against the Company or any Company Subsidiary with
respect to any employment or labor matters. 
There is no organizing activity involving the


 


27

















 


employees of the Company or any Company
Subsidiary pending or, to the Knowledge of the Sellers, threatened in writing
by any labor union or group of employees. 
There are no representation proceedings pending or, to the Knowledge of
the Sellers, threatened before the National Labor Relations Board or its
equivalent in any foreign jurisdiction which relate to the employees of the
Company or any Company Subsidiary, and no labor organization or group of
employees of the Company or any Company Subsidiary has made a pending demand
for recognition by the Company or any Company Subsidiary.


 


(b)                                 Neither
the Company nor any Company Subsidiary has implemented any layoff of employees
that would implicate the WARN Act or any similar foreign, state or local Law
(considered independently from any layoffs that may occur after the Closing).  Section 2.20 of the Seller Disclosure
Schedule sets forth a complete and accurate (in all material respects) list of
the employees of the Company and the Company Subsidiaries at February 16, 2006,
including the current job titles and salary or wage rates of each of such
employees as of the date of this Agreement, showing separately for each such
person who received an annual salary in excess of $25,000 the amounts paid as
salary and bonus payments for the year ended December 31, 2005.


 


2.21                           Healthcare
Matters.


 


(a)                                  The
operations of the Company and the Company Subsidiaries are in compliance with
all applicable Laws (including, for the avoidance of doubt, good manufacturing
practices and good clinical practices) of the United States Food and Drug
Administration (the “FDA”) and comparable Laws of other Governmental
Authorities having jurisdiction over the Products or the operations of the
Company and the Company Subsidiaries, except for such failures to comply that
would not reasonably be expected to, individually or in the aggregate, have a
material impact on the Business.  There
is no pending or, to the Knowledge of the Sellers, threatened, Enforcement
Action concerning the Products or the operations of the Company or any Company
Subsidiary by the FDA or any other Governmental Authority with jurisdiction
over the Products under any such Law, including any comparable state or foreign
laws.  There are no, and there have been
in the last four (4) years no, recalls involving the Products.  To the Knowledge of the Sellers, there are no
pending or outstanding (i) warning letters or other regulatory letters or
sanctions, (ii) inspectional observations or establishment inspection reports,
(iii) field notifications or alerts, (iv) import alerts, holds or detentions or
(v) any other documents received by the Company or Company Subsidiaries from the
FDA or any other Governmental Authority relating to the Products or arising out
of the conduct of the Company or Company Subsidiaries that assert ongoing
material lack of compliance with any such Laws by the Company or Company
Subsidiaries.


 


(b)                                 Neither
the Company nor any of the Company Subsidiaries have received any notice that
any Governmental Authority (including the FDA) has commenced, or to the
Knowledge of the Sellers, threatened to initiate any action to withdraw its
approval for, or request a recall of any Product, or commenced or threatened in
writing to initiate any action to enjoin the production of the Products at any
facility.  To the Knowledge of the
Sellers, there are no facts which are reasonably likely to cause (i) market
withdrawal, recall or suspension of any of the Products under Applicable Law as
in effect on the date of this Agreement, (ii) a change in the marketing
classification of any of the Products under Applicable Law as in effect on the
date of this Agreement, (iii) a material change in the labeling of any of the
Products required by applicable Law as in effect on the date of this Agreement
or (iv) a termination or suspension of marketing of any of


 


28

















 


the Products required by applicable Law as in
effect on the date of this Agreement.  To the Knowledge of the Sellers,
neither the Company nor any Company Subsidiary has received any notice from a
Governmental Authority that the Products cannot be marketed pursuant to their
respective marketing clearances or approvals or otherwise in substantially the
manner currently marketed by the Company or Company Subsidiaries and with the
same marketing claims and materials currently used by the Company or Company
Subsidiaries.  The Company and the
Company Subsidiaries have taken commercially reasonable steps to ensure that
each Product may continue to be marketed under the marketing clearance or
approval relating to such Product.


 


(c)                                  The
Company and the Company Subsidiaries have made available to the Purchaser
complete and accurate (in all material respects) copies of all: (i) adverse
event reports, (ii) written customer complaints and (iii) written medical
incident reports, in each case solely since January 1, 2003 and to the extent
relating to the Products.


 


(d)                                 All
material reports, documents, licenses, registrations, claims and notices
relating to the Products required to be filed, maintained or furnished to any
applicable Governmental Authority by the Company and the Company Subsidiaries
have been so filed, maintained or furnished, and all such reports, documents,
licenses, registrations, claims and notices were complete and correct in all
material respects on the date filed (or were corrected in or supplemented by a
subsequent filing).


 


(e)                                  Neither
the Company nor any Company Subsidiary is in violation of and, to the Knowledge
of the Sellers, neither the Company nor any Company Subsidiary is the subject
of, any pending investigation by a Governmental Authority regarding activities
prohibited under, the U.S. Anti-Kickback Act (42 U.S.C. §1320a-7b(b), et seq.),
the U.S. Stark law (42 U.S.C. §1395nn), the U.S. False Claims Act (31 U.S.C.
3729, et seq.) and any related Laws governing participation in United States
health care programs, or any comparable state or foreign Laws.  There is no Proceeding pending or, to the
Knowledge of the Sellers, threatened against the Company or any of the Company
Subsidiaries which would reasonably be expected to result in the exclusion of
the Company or any of the Company Subsidiaries from any third party payment
program in which they participate.


 


(f)                                    In Germany, the Company or a
Company Subsidiary has applied to the national insurance program (Medizinische Dienst Krankenkassen) for product specific codes for each Product, to the
extent such code is required in order to participate in such national insurance
program.


 


(g)                                 Notwithstanding
anything to the contrary in this Agreement, the representations and warranties
set forth in this Section 2.21 are the sole representations and
warranties of the Sellers relating to the matters referred to in this Section 2.21.


 


2.22                           Powers
of Attorney.  Section 2.22 of
the Seller Disclosure Schedule sets forth a true and complete list of the names
of all Persons holding general or special powers of attorney from the Company
or any of the Company Subsidiaries and a summary of the terms thereof.


 


2.23                           Payments.  To the Knowledge of the Sellers, neither the
Company nor any Company Subsidiary, nor any director, officer, limited
liability company manager, managing director (or functional equivalents of the
foregoing), equityholder, employee, agent or other Person associated


 


29

















 


with or acting on behalf of the Company or any of the Company Subsidiaries,
has used any funds of the Company or any Company Subsidiary for any unlawful
contribution, gift, entertainment or expense relating to political activity, or
made any direct or indirect unlawful payment to any foreign or domestic
official or employee of a Governmental Authority from funds of the Company or
any Company Subsidiary, or made any unlawful rebate or kickback or other
unlawful payment.


 


2.24                           Controls
and Procedures.  The Financial
Statement Parties maintain accurate and complete books and records reflecting
their assets and liabilities and maintain proper and adequate internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed only in accordance with management’s authorization;
(ii) transactions are recorded as necessary to permit preparation of the
financial statements of the Financial Statement Parties in accordance with GAAP
(or, in the case of non-U.S. Company Subsidiaries, the applicable accounting
rules in their respective jurisdiction of operation) and to maintain
accountability for the assets and liabilities of the Financial Statement
Parties; (iii) receipts and expenditures of the Financial Statement Parties are
executed only in accordance with management’s authorization; (iv) unauthorized
acquisition, disposition or use of assets is prevented or timely detected; and
(v) accounts, notes and other receivables are recorded accurately, and proper
and adequate procedures are implemented to effect the collection thereof on a
current and timely basis.  To the
Knowledge of the Sellers, such internal accounting controls are appropriate for
a private company with operations of the size and international scope of the
operations of the Financial Statement Parties. 
There are no material weaknesses in the design or operation of such
internal accounting controls that could adversely affect the Financial
Statement Parties’ ability to initiate, record, process and report financial
data.


 


2.25                           Affiliate
Transactions.  Neither the Company
nor any Company Subsidiary is party to any direct or indirect Contract,
business arrangement or relationship with any Tailwind Stockholder, any
Affiliate of any Tailwind Stockholder (in each case, excluding the Company and
the Company Subsidiaries), director, officer, management-level employee,
limited liability company manager or managing director (or functional
equivalents of the foregoing) of the Company or any Company Subsidiary, or any
of the immediate family members of any of the foregoing.  Except for business relationships that would
be excluded from disclosure as a related party transaction under Instruction 7
to Item 404(a) of Regulation S-K promulgated under the Securities Act, neither
the Company nor any Company Subsidiary is party to any direct or indirect business
arrangement or relationship with any DLJ Stockholder, any Affiliate of any DLJ
Stockholder, the Credit Opportunities Stockholder, any Affiliate of the Credit
Opportunities Stockholder, or any member of the immediate family of any of the
foregoing (in each case, excluding the Company and the Company Subsidiaries)
that are on terms less favorable to the Company or the applicable Company
Subsidiary than would be available to the Company or a Company Subsidiary from
an unaffiliated third party on an arms’ length basis.  Except for payroll advances, tuition advances
and advances of reimbursable expenses, there are no outstanding loans made by
the Company or any of the Company Subsidiaries to any director, officer, limited
liability company manager, management-level employee or managing director (or
functional equivalents of the foregoing) of the Company or any of the Company
Subsidiaries.


 


2.26                           Books
and Records.  The minute books of the
Company and each Company Subsidiary contain complete and accurate records of
all meetings and other corporate or entity (as applicable) actions of its board
of directors (or equivalent) and any committees thereof and of its
stockholders, members or other equityholders. 
The stock (or equivalent) ledger of the Company


 


30

















 


and each of the Company Subsidiaries is complete and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock
(or equivalent) of the Company or such Company Subsidiary.


 


2.27                           Bank
Accounts.  Section 2.27 of the
Seller Disclosure Schedule sets forth the names and locations of all banks,
trust companies, savings and loan associations and other financial institutions
at which the Company or any Company Subsidiary maintains any deposit or
checking account, the account numbers of all such accounts and the names of all
persons authorized to draw thereon or make withdrawals therefrom.


 


2.28                           Accounts
Receivable; Inventory.


 


(a)                                  Since
September 30, 2005, the Company and the Company Subsidiaries have not
materially modified their respective accounts receivable collection policies or
practices and have not offered discounts or credits inconsistent with the past
practices of the Company.  The accounts receivable of the Company and the
Company Subsidiaries at September 30, 2005, as of the last calendar month end
preceding the date hereof, or as of the last calendar month end preceding the
Closing Date, as applicable, were, are or will be, as the case may be,
collectible in the aggregate in the ordinary course of business, subject to
reserves for uncollectible accounts on the Audited Financial Statements, as
adjusted through the last calendar month end preceding the date hereof or as
adjusted through the last calendar month end preceding the Closing Date, as the
case may be, in the ordinary course of business consistent with past
practices.  Each such account receivable
represents bona fide account receivable that arose in the ordinary course of
business for goods delivered or services rendered or to be rendered and are
not, except as otherwise reserved for, subject to any set-offs or
counterclaims.


 


(b)                                 The
inventories of the Company and the Company Subsidiaries are of a quality and
quantity usable and, with respect to finished goods, saleable in the ordinary
course of business consistent with past practice, subject to reserves for
obsolete and slow moving items established in accordance with the Company’s
practices.  The aggregate value of the inventory as reflected in the
balance sheet included in the Audited Financial Statements, as adjusted through
the last calendar month end preceding the date hereof or the last calendar
month end preceding the Closing Date, as applicable, had been written down on
the books of account of the Company to realizable market value or adequate
reserves were provided in accordance with GAAP.


 


2.29                           Brokers.  Neither the Company nor any of the Company
Subsidiaries is obligated to pay any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement.


 


2.30                           Disclosure.  To the Knowledge of the Sellers, none of the
representations or warranties made by the Sellers in this Article II
contains or will contain at the Closing any untrue statement of material fact,
or omits or will omit at the Closing to state any material fact necessary in
order to make the statements contained herein, in light of the circumstances
under which they were made, not misleading.


 


2.31                           Reliance.  The representations and warranties in this Article II
are made by the Sellers with the knowledge and expectation that the Purchaser
is placing complete reliance thereon in entering into, and performing its
obligations under, this Agreement, and the same shall not be


 


31

















 


affected in any respect whatsoever by any investigation conducted by or
on behalf of the Purchaser, whether in contemplation of or pursuant to this
Agreement or otherwise.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

EACH SELLER


 


Each Seller hereby represents and warrants to
the Purchaser, severally and not jointly, as follows:


 


3.1                                 Existence;
Good Standing; Authority; Enforceability.


 


(a)                                  The
Seller is a limited partnership or limited liability company (as applicable)
duly organized, validly existing and in good standing (to the extent such
concept is applicable to such type of entity) under the laws of the
jurisdiction of its formation and has all required limited partnership or
limited liability company power and authority, as applicable, to own or lease
its properties and assets and to conduct its business as presently
conducted.  The Seller is duly licensed
or qualified to do business as a foreign entity and is in good standing under
the laws of each other jurisdiction in which such licensing or qualification is
necessary, except where the failure to be so licensed or qualified or to be in
good standing would not reasonably be expected to have a material adverse
effect on the ability of the Seller to perform its obligations under this
Agreement and the other Seller Documents to which it will be a party or to
consummate the transactions contemplated by this Agreement and such Seller
Documents.


 


(b)                                 The
Seller has all required power and authority to execute and deliver this
Agreement and the other Seller Documents to which it will be a party, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. 
The execution, delivery and performance by the Seller of this Agreement
and the other Seller Documents to which it will be a party, and the
consummation of the transactions contemplated hereby and thereby, have been
duly authorized and approved by all required action on the part of the Seller.


 


(c)                                  This
Agreement has been duly and validly executed and delivered by the Seller and
each Seller Document to be executed and delivered by such Seller at the Closing
will be, at and as of the Closing, duly and validly executed and delivered by
the Seller and (assuming due authorization, execution and delivery by the
Purchaser and each other party thereto) this Agreement constitutes, and each
such Seller Document will constitute, a legal, valid and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms, except
for the Equitable Exceptions.


 


3.2                                 No
Conflicts; Consents.


 


(a)                                  Assuming
the Required Consents are obtained on or prior to the Closing, the execution
and delivery of this Agreement by the Seller does not, the execution and
delivery of the Seller Documents to be executed and delivered by the Seller at
the Closing will not, and the consummation of the transactions contemplated by
this Agreement and the other Seller Documents to which the Seller will be a
party will not: (i) violate its Organizational Documents; (ii) constitute
a material breach of or result in a material default under (with or without the
giving of notice or the lapse of time), or result in the other party having a
right of termination, cancellation or acceleration


 


32

















 


under, any Contract to which the Seller is a
party or by which it or its properties or assets are bound, (iii) result in the
creation or imposition of any Liens; or (iv) violate any Law applicable to the
Seller.


 


(b)                                 Except
as required under the HSR Act or foreign antitrust or competition Laws or as
set forth in Section 2.2(b) of the Seller Disclosure Schedule, no notice
to or consent of or with any Governmental Authority, Judicial Authority or
third Person is required to be obtained by the Seller in connection with the
Seller’s execution and delivery of this Agreement and the other Seller
Documents to which it will be a party or the performance of its obligations
hereunder or thereunder.


 


3.3                                 Litigation.  There is no Proceeding pending or, to such
Individual Seller’s Knowledge, threatened against the Seller, that (i)
questions the validity of this Agreement or any Seller Document to which it
will be a party or any action taken or to be taken by the Seller in connection
herewith or therewith, (ii) seeks to enjoin the consummation of the
transactions contemplated by this Agreement and the Seller Documents; or (iii)
which would reasonably be expected to have, individually or together with any
other such Proceedings, a material adverse effect on the ability of the Seller
to consummate the transactions contemplated by this Agreement and the other
Seller Documents to which it will be a party.


 


3.4                                 Title
to Shares.


 


(a)                                  The
Seller is the beneficial and lawful record owner of its Shares and has good,
valid and marketable title to its Shares, free and clear of any and all
Liens.  On the date of this Agreement:
(i) the Shares are owned of record as set forth on Schedule A
hereto; and (ii) the Shares collectively constitute, and, except as issued
under the terms of Section 5.6 and as terminated pursuant to Section
1.2(b)(v), on the Closing Date the Shares will constitute, all of the
issued and outstanding shares of capital stock of the Company.  Except for Contracts among the Sellers that
will be terminated at or prior to the Closing and except for the Seller’s
Organizational Documents, there are no Contracts between the Seller and any
other Person with respect to the acquisition, disposition or voting of, or any
other matters pertaining to, any of its Shares or any other equity interests of
the Company or any Company Subsidiary. 
The Seller has the power and authority to sell, transfer, assign,
exchange and deliver its Shares, as provided in this Agreement, and such sale,
transfer, assignment, exchange and delivery will convey to the Purchaser good
and marketable title to such Shares, free and clear of any and all Liens and
restrictions other than restrictions of general applicability imposed by
federal or state securities Laws and those imposed on the Shares by the
Purchaser.


 


(b)                                 To
the Individual Seller’s Knowledge, on the date of this Agreement there are no,
and, except as issued under the terms of Section 5.6 and as terminated
pursuant to Section 1.2(b)(v), as of the Closing Date there will be no,
outstanding subscriptions, options, warrants or other agreements or commitments
or other rights of any kind to acquire (including securities exercisable or
exchangeable for or convertible into), or obligating the Company to issue, any
shares of capital stock of the Company, or giving any Person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the benefit of the holders of any shares of the capital stock of the Company
(solely in their capacity as a holder).


 


33

















 


3.5                                 Brokers.  The Seller is not obligated to pay any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement.


 


3.6                                 Reliance.  The representations and warranties in this Article III
are made by each of the Sellers with the knowledge and expectation that the
Purchaser is placing complete reliance thereon in entering into, and performing
its obligations under, this Agreement, and the same shall not be affected in
any respect whatsoever by any investigation conducted by or on behalf of the
Purchaser, whether in contemplation of or pursuant to this Agreement or
otherwise.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER


 


The Purchaser represents and warrants to the Sellers as follows:


 


4.1                                 Existence;
Good Standing; Authority; Enforceability.


 


(a)                                  The
Purchaser is a limited liability company duly formed, validly existing and in
good standing under the laws of the State of Delaware and has all required limited
liability company power and authority to own and lease its properties and
assets and to conduct its business as now conducted.  The Purchaser is duly licensed or qualified
to do business as a foreign entity and is in good standing under the laws of
each other jurisdiction in which such licensing or qualification is necessary,
except where the failure to be so licensed or qualified or to be in good
standing would not reasonably be expected to have a material adverse effect on
the ability of the Purchaser to perform its obligations under this Agreement
and any other documents required to be executed and delivered by the Purchaser
under this Agreement (collectively, the “Purchaser Documents”) and to
consummate the transactions contemplated hereby and thereby.


 


(b)                                 The
Purchaser has all required limited liability company power and authority to
execute and deliver this Agreement and the Purchaser Documents and to
consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance of
this Agreement and the Purchaser Documents, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized and
approved by all required action on the part of the Purchaser.


 


(c)                                  This
Agreement has been duly and validly executed and delivered by the Purchaser and
each Purchaser Document to be executed and delivered at the Closing will be, at
and as of the Closing, duly and validly and executed and delivered by the
Purchaser and (assuming due authorization, execution and delivery by the
Sellers and each other party thereto) this Agreement constitutes, and each
Purchaser Document will constitute, a legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms,
except for the Equitable Exceptions.


 


4.2                                 No
Conflicts; Consents.


 


(a)                                  Assuming
the Required Consents are obtained on or prior to the Closing, the execution
and delivery of this Agreement by the Purchaser does not, the execution and
delivery of the Purchaser Documents to be executed and delivered by the
Purchaser at the Closing will not, and the consummation of the transactions
contemplated by this Agreement and the other Purchaser Documents to which the
Purchaser will be a party will not: (i) violate its Organizational Documents;


 


34

















 


(ii) except as set forth in Section
4.2 of the Purchaser Disclosure Schedule, constitute a material breach of
or result in a material default under (with or without the giving of notice or
the lapse of time), or result in the other party having a right of termination,
cancellation or acceleration under, any Contract to which the Purchaser is a
party or by which it or its properties or assets are bound, (iii) result in the
creation or imposition of any Liens or (iv) violate any Law applicable to the
Purchaser.


 


(b)                                 Except
as required under the HSR Act or foreign antitrust or competition Laws or as
set forth in Section 4.2(b) of the Purchaser Disclosure Schedule, no
notice to or consent of or with any Governmental Authority, Judicial Authority
or third Person is required to be obtained by the Purchaser in connection with
the Purchaser’s execution and delivery of this Agreement and the Purchaser
Documents or the performance of its obligations hereunder or thereunder.


 


4.3                                 Litigation.  There is no Proceeding pending or, to the
Knowledge of the Purchaser, threatened against the Purchaser, that (i)
questions the validity of this Agreement or any Purchaser Document to which it
will be a party or any action taken or to be taken by the Purchaser in
connection herewith or therewith; (ii) seeks to enjoin the consummation of the
transactions contemplated by this Agreement and the Purchaser Documents; or
(iii) which would reasonably be expected to have, individually or together with
any other such Proceedings, a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement and the
other Purchaser Documents.


 


4.4                                 Financial
Ability to Perform.  At the Closing,
the Purchaser will have cash, available lines of credit or other resources of
immediately available funds to be able to consummate the transactions
contemplated by this Agreement and the Purchaser Documents, upon the terms
contemplated by this Agreement and the Purchaser Documents, and to pay its
transaction fees and expenses.


 


4.5                                 Investment
Representations.  The Purchaser is purchasing the Shares for investment purposes and not
with a present view to, or for sale in connection with, any distribution
thereof, within the meaning of the Securities Act.  The Purchaser acknowledges that the Shares
have not been registered under the Securities Act or qualified under applicable
state securities laws and understands the restrictions on resale of the Shares
imposed by the Securities Act and such applicable state securities laws.  The Purchaser also acknowledges that the
Sellers have no obligation to register the Shares, that there is presently no
public market for the Shares, that there may never be a public market for the
Shares, and that, even if such a market develops, the Purchaser may never be
able to sell or dispose of such Shares and, accordingly, the Purchaser must
bear the economic risk of this investment potentially indefinitely.  The Purchaser is an “accredited investor,” as
that term is defined in Rule 501 under Regulation D promulgated under the
Securities Act.


 


4.6                                 Projections.  The Purchaser agrees and acknowledges that
none of the Sellers, the Company or any Company Subsidiary have made or are
making any representations and warranties with respect to: (a) any projections,
estimates or budgets delivered or made available to the Purchaser of future
revenues, future results of operations (or any component thereof), future cash
flows or future financial condition (or any component thereof) of the Company
and the Company Subsidiaries; (b) any due diligence reports supplied to the
Purchaser in connection with the transactions contemplated by this Agreement;
or (c) any other information or documents made available to the Purchaser or
its counsel, accountants or other advisors and representatives with


 


35

















 


respect to the Company and the Company Subsidiaries or their respective
businesses or operations, in each case except as expressly set forth in Article II.


 


4.7                                 Brokers.  The Purchaser is not obligated to pay any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement. 
The Purchaser has not entered into any Contract obligating the Company
or any Company Subsidiary to pay any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement.


 


4.8                                 Reliance.  The representations and warranties in this Article IV
are made by the Purchaser with the knowledge and expectation that the Sellers
are placing complete reliance thereon in entering into, and performing their
obligations under, this Agreement, and the same shall not be affected in any
respect whatsoever by any investigation conducted by or on behalf of the
Sellers, whether in contemplation of or pursuant to this Agreement or
otherwise.


 


ARTICLE V

COVENANTS


 


5.1                                 Conduct
of the Sellers and the Purchaser.


 


(a)                                  Except
as set forth in Section 5.1 of the Seller Disclosure Schedule or as
otherwise consented to by the Purchaser in writing (such consent not to be
unreasonably withheld, conditioned or delayed), from the date of this Agreement
until the Closing (the “Pre-Closing Period”), each of the Sellers shall,
subject to the terms and conditions of this Agreement, (i) not permit any Lien
to encumber such Seller’s Shares, (ii) not waive or relinquish any material
right or claim arising out of, or related to, such Seller’s Shares that would
adversely impact the Purchaser and (iii) not take any action or fail to take
any action that would result in any of the representations and warranties of
such Seller set forth in Article III becoming not true and correct
in all material respects (in the case of representations and warranties not
qualified as to materiality or Material Adverse Effect) or true and correct in
all respects (in the case of representations and warranties not qualified as to
materiality or Material Adverse Effect).


 


(b)                                 Except
as set forth in Section 5.1 of the Purchaser Disclosure Schedule or
as otherwise consented to by the Stockholder Representative in writing (such
consent not to be unreasonably withheld, conditioned or delayed), during
the Pre-Closing Period the Purchaser shall, subject to the terms and
conditions of this Agreement, not take any action or fail to take any action
that would result in any of the representations and warranties of the Purchaser
set forth in Article IV becoming not true and correct in all
material respects (in the case of representations and warranties not qualified
as to materiality) or true and correct in all respects (in the case of
representations and warranties not qualified as to materiality).


 


5.2                                 Conduct
of the Company and the Company Subsidiaries.  Except: (i) as set forth in Section 5.2
of the Seller Disclosure Schedule; (ii) to the extent required under this
Agreement; (iii) to the extent required by applicable Law; or (iv) as
otherwise consented to by the Purchaser in writing (such consent to not be
unreasonably withheld, conditioned or delayed), during the Pre-Closing Period
the Sellers shall cause the Company and the Company Subsidiaries to (1) conduct
the Business in the ordinary course (except that any action contemplated by the
following clauses (b)(II), (c), (d)(II) and (s) may
be taken or, if applicable, refrained from being taken, even if


 


36

















 


outside of the conduct of the Business in the ordinary course), (2) use
commercially reasonable efforts to preserve substantially intact their present
business organization and their relationships with customers, suppliers and
others having business dealings with them, and to keep available the services
of the Company’s present officers and significant employees, and (3):


 


(a)                                  not
amend or terminate any Significant Contract, except in the ordinary course of
business;


 


(b)                                 not
sell, assign, transfer, convey, lease or otherwise dispose of any of its
assets, except for (I) sales of inventory in the ordinary course of business
and (II) the sale, assignment, transfer, conveyance, lease or other
disposal of assets having a value, individually and in the aggregate, not in
excess of $100,000;


 


(c)                                  not
declare, set aside or pay any dividend or distribution in respect of any capital
of the Company (except dividends and distributions paid in cash prior to the
Closing from funds legally available for distribution), or redeem, purchase or
otherwise acquire any securities of the Company (except for redemptions,
purchases and acquisitions for cash consummated prior to the Closing and
disclosed to the Purchaser in writing prior to the consummation thereof);


 


(d)                                 not
incur any Indebtedness other than (I) capital lease obligations, synthetic
lease obligations, sale leaseback obligations and other similar indebtedness
obligations incurred in the ordinary course of business which, individually or
in the aggregate, do not exceed $250,000 and (II) Funded Debt under the
Credit Agreements;


 


(e)                                  not
permit any Lien to encumber any of its assets, or otherwise subject any such
assets to any Lien, other than (i) Permitted Liens or (ii) any Lien to be
removed at or prior to Closing;


 


(f)                                    not
waive or relinquish any material right or claim, other than in the ordinary
course of business;


 


(g)                                 maintain
all of its plant, machinery, equipment and leasehold improvements in good
operating condition and repair in all material respects, ordinary wear and tear
excepted;


 


(h)                                 not
amend any of its Organizational Documents;


 


(i)                                     pay
accounts payable and other obligations and liabilities in the ordinary course
of business consistent with the practices of the Company and the Company
Subsidiaries since inception;


 


(j)                                     maintain
in all material respects inventory levels appropriate for the Business.


 


(k)                                  not
modify the terms of, discount, setoff or accelerate the collection of any
accounts receivable, except in a manner consistent with the practices of the
Company and the Company Subsidiaries since inception;


 


(l)                                     not
take any action or fail to take any action that would result in any of the
representations and warranties of the Sellers set forth in Article II
becoming not true and correct in all material respects (in the case of
representations and warranties not qualified as to materiality or


 


37

















 


Material Adverse Effect) or true and correct
in all respects (in the case of representations and warranties qualified as to
materiality or Material Adverse Effect);


 


(m)                               not
issue, grant, sell or encumber any equity interest, or any right relating
thereto, in the Company or any Company Subsidiary which would result in a
breach of Section 5.6 or make any other changes in the equity
capital structure of the Company or any Company Subsidiary;


 


(n)                                 not
acquire or agree to acquire by merging or consolidating with, or by purchasing
any material portion of the capital stock or assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;


 


(o)                                 not
make or commit to make any capital expenditures except in the ordinary course
of business in amounts not to exceed $4,000,000 in the aggregate, or fail to
make or materially delay any necessary capital expenditures;


 


(p)                                 not
hire any new management-level employees (other than to fill vacancies created
by the termination of employment of current management-level employees), enter
into any employment Contract or collective bargaining agreement with any
management-level employees, modify the terms of any existing such Contract or
agreement or enter into any employment Contract with any current employee who
does not have an employment Contract as of the date of this Agreement;


 


(q)                                 except
in the ordinary course of business consistent with past practice or as required
by applicable Law or any Employee Plan, not grant any increase in the base
compensation of any employee;


 


(r)                                    except
as required by applicable Law, not adopt, amend, modify or terminate any bonus,
profit-sharing, incentive, severance or other Welfare Plan, deferred
compensation, post-retirement benefits or pension plan or the Aircast LLC
401(k) Plan other than amendments made in connection with the extension of, or
the adoption of, any Welfare Plans upon the expiration thereof in the ordinary
course of business which Welfare Plan, as so adopted or amended, provides
benefits comparable to those provided on September 30, 2005 under such expired
Welfare Plan;


 


(s)                                  not
enter into any new Contract, business arrangement or relationship that would be
required to be set forth in Section 2.25 of the Seller Disclosure
Schedule (unless the same will be terminated on or before the Closing without
liability, after the Closing, to the Company or any of the Company
Subsidiaries);


 


(t)                                    except
for a replacement lease or lease renewal for the premises located at 705
Central Avenue, New Providence, New Jersey, not enter into
any material lease, sublease, license or easement of real property or
terminate, renew, extend or amend any lease or sublease for Leased Real
Property;


 


(u)                                 not
make any change in any method of accounting or accounting principles, practices
or policies, other than those required by GAAP (or, in the case of non-U.S.
Company Subsidiaries, the applicable accounting rules in their respective
jurisdictions of operation);


 


38

















 


(v)                                 not
cancel any debts owed to or claims held by it, other than in the ordinary
course of business;


 


(w)                               prepare
and file on or before the due date therefor (after giving effect to any
applicable filing extensions) all Tax Returns required to be filed by the
Company and the Company Subsidiaries on or before the Closing Date, and pay all
Taxes due on such Tax Return or which are otherwise required to be paid by the
Company and the Company Subsidiaries during the Pre-Closing Period;


 


(x)                                   not
prepare or file, or amend, any Tax Return relating to Taxes, other than income
Taxes, for the Company and the Company Subsidiaries inconsistent in any
material respect with past practice or, on any such Tax Return, take any
position that is inconsistent in any material respect with positions taken on
prior Tax Returns unless required by Law, and not consent to the waiver or
extension of any statute of limitation period with respect to a claim for Taxes
(other than income Taxes) or settle any audit or other Proceeding relating to
Taxes (other than income Taxes) payable by the Company and the Company
Subsidiaries;


 


(y)                                 not
breach any provision of the Aircast Asset Purchase Agreement (including the
obligation under Section 1.8 of the Aircast Asset Purchase Agreement to pay
Earnout Obligations when due) or any material provision of any other
Significant Contract; or


 


(z)                                   not
enter into any Contract or otherwise become obligated to do any action
prohibited under the foregoing subsections (a) – (y).


 


5.3                                 Control
of Operations.  Nothing contained in
this Article V shall give the Purchaser, directly or indirectly,
the right to control or direct the operations of the Company and the Company
Subsidiaries prior to the Closing.  Prior
to the Closing, the Company and the Company Subsidiaries shall exercise,
consistent with the terms and conditions of this Agreement, complete control
and supervision over their respective operations.


 


5.4                                 Regulatory
and Other Approvals; 280G Consent.


 


(a)                                  During
the Pre-Closing Period, the Purchaser shall, each Seller shall, and the Sellers
shall cause the Company and the Company Subsidiaries to, in good faith and in a
timely manner, use their respective commercially reasonable efforts to take or
cause to be taken all actions, do or cause to be done all things necessary,
proper or advisable, and execute and deliver such documents, as may be required
to carry out the provisions of this Agreement, consummate the Closing hereunder
and make effective the transactions contemplated by this Agreement, making all
filings with any Governmental Authority (including the HSR Act filings
discussed in Section 5.4(c) and filings under any applicable foreign
antitrust or competition Laws) and obtaining all necessary waivers, consents
and approvals from, and taking all actions reasonably necessary to avoid any
action or proceeding by, any Governmental Authority.  To the extent Purchaser elects to initiate or
defend any action or proceeding that seeks to modify, prohibit or enjoin the
purchase of the Shares or the terms thereof, Sellers shall, and shall cause the
Company to, take all actions reasonably requested by the Purchaser to contest
such action or proceeding.


 


(b)                                 During
the Pre-Closing Period, the Purchaser shall, each Seller shall, and the Sellers
shall cause the Company and the Company Subsidiaries to, use their respective
commercially reasonable efforts to cause the Closing conditions contained in Article VI
applicable


 


39

















 


to such party to be satisfied, and refrain
from taking any actions that would have the effect of delaying, impeding or
preventing satisfaction of any of the Closing conditions contained in Article VI
applicable to such party.


 


(c)                                  Each
of the Purchaser and the Sellers shall file or cause to be filed as promptly as
reasonably practicable with the United States Federal Trade Commission (the “FTC”)
and the United States Department of Justice (the “DOJ”), in each case
pursuant to the HSR Act: (i) the notification and report form, if any,
required for the transactions contemplated hereby, which form shall be filed
not later than five (5) Business Days following the date of this Agreement; and
(ii) any supplemental information requested in connection therewith, which
information shall be filed as soon as reasonably practicable after the request
therefor.  Any such notification and
report form and supplemental information shall be in substantial compliance
with the requirements of the HSR Act.


 


(d)                                 The
Purchaser agrees that, during the Pre-Closing Period, the Purchaser will not,
and it will cause its Affiliates and Subsidiaries to not, enter into any letter
of intent or agreement to acquire, directly or indirectly: (i) any assets
constituting a line of business; (ii) a controlling equity interest; or (iii)
any assets or equity interests, in each case (x) related to a business that
would reasonably be expected to generate annual revenues (or increase the
Purchaser’s annual consolidated revenues) from products competitive with the
Products by an amount equal to or in excess of $10 million or (y) that would
require a filing under the HSR Act or any foreign antitrust or competition Laws
or affect any then existing filing made by the parties hereunder under the HSR Act
or any foreign antitrust or competition Laws or any regulatory approval
obtained in connection therewith.


 


(e)                                  Subject
to applicable Laws relating to the exchange of information, the Sellers, on the
one hand, and the Purchaser, on the other hand, shall each furnish to the other
such necessary information and reasonable assistance as the other may
reasonably request in connection with its preparation of the notices and
requests referred to in this Section 5.4 and any filing or approval
process that is necessary under the HSR Act, foreign antitrust and competition
Law and any other applicable Law.  Except
to the extent limited by applicable Law, the Sellers, on the one hand, and the
Purchaser, on the other hand, shall (i) each keep each other apprised of the
status of any communications with, and any inquiries or requests for additional
information from, any Governmental Authority in connection with this process,
(ii) provide each other the right to review in advance, and to the extent
applicable will consult with each other on, all the information that appears in
any filing made with, or written materials submitted to, any third party or
Governmental Authority in connection with the Stock Purchase and the other
transactions contemplated by this Agreement (in exercising the foregoing right,
each of the parties shall act reasonably and as promptly as practicable) and
(iii) comply as promptly as reasonably practicable and in any event in
accordance with applicable Law with any such inquiry or request.


 


(f)                                    At
least ten (10) Business Days prior to the Closing, the Sellers shall cause the
Company to submit to all Persons entitled to vote (within the meaning of the
Treasury Regulations under Section 280G of the Code), including to the Tailwind
Stockholders, the DLJ Stockholders and the Credit Opportunities Stockholder,
the material facts concerning all potential payments contemplated under the
Retention Program under Section 5.9(b) and the Sale Bonus Program under Section
5.9(c), which shall satisfy all requirements of the Delaware General
Corporation Law and Section 280G(b)(5)(B) of the Code and the Treasury
Regulations thereunder,


 


40

















 


and the Sellers shall cause the Company to
solicit the consent of such stockholders (the “280G Consent”) to any
payments contemplated thereby which would constitute “parachute payments” as
defined in Section 280G(b)(2) of the Code (“Parachute Payments”).  The Company’s board of directors shall
recommend approval of the Parachute Payments, the Retention Program and the
Sale Bonus Program, unless it believes in good faith, based on the written
opinion of the Company’s counsel, that such recommendation would be
inconsistent with the fiduciary duties of the Company’s board of directors
under the Delaware General Corporation Law or Applicable Law.


 


5.5                                 Access
and Information.


 


(a)                                  During
the Pre-Closing Period, subject to the restrictions set forth in Sections 1-4,
7 and 8 of the Confidentiality Agreement dated December 2, 2005, between
the Purchaser and Tailwind Management LP (the “Confidentiality Agreement”),
the Sellers shall cause the Company and each of the Company Subsidiaries to
permit the Purchaser and its representatives to have full access, during normal
business hours and after reasonable prior notice to the Stockholder
Representative, to the properties, books and records of the Company and the
Company Subsidiaries, other than any personnel information protected by
applicable privacy Laws, and shall make available such information and documents
in the Company’s possession relating to the Company and the Company
Subsidiaries as the Purchaser may reasonably request after a determination by
Purchaser that such information or access is reasonably necessary for Purchaser
to complete this transaction; provided,
however, that any such access by the Purchaser or its
representatives shall not unreasonably interfere with the conduct of the
Business of the Company or any Company Subsidiary.  All information provided or obtained pursuant
to the foregoing shall be held by the Purchaser in accordance with and subject
to the terms of the Confidentiality Agreement. 
Prior to making any physical inspection of the Owned Real Property or
the Leased Real Property, the Purchaser shall provide to the Stockholder
Representative: (i) reasonable advance notice of the date and approximate time
that the applicable inspection will be conducted; and (ii) the name of each
individual who will be conducting such inspection.


 


(b)                                 Notwithstanding
anything to the contrary in this Agreement or otherwise, during the Pre-Closing
Period, the Purchaser (and all of the representatives and Affiliates thereof
and any employees, directors and officers thereof) shall contact and
communicate with employees, customers, suppliers and others having a business
relationship with the Company and the Company Subsidiaries in connection with
the transactions contemplated hereby only in accordance with the procedures set
forth in the Confidentiality Agreement.


 


(c)                                  For
a period of seven (7) years after the Closing Date, the Purchaser shall, and
shall cause the Company and each Company Subsidiary to, maintain the books and
records in existence as of the Closing Date relating to the Company, the
Company Subsidiaries and the Business. 
Following the Closing, the Purchaser shall, and shall cause the Company
and each Company Subsidiary to, afford promptly to the Sellers and their
representatives, at the premises of the Company or the Company’s Subsidiaries,
as applicable, after reasonable prior notice, reasonable access to the
properties, books, records, employees and auditors of the Company and the
Company Subsidiaries to the extent necessary to permit the Sellers to determine
any matter relating to their rights and obligations hereunder or to any period
ending on or before the Closing Date, provided,
however, that any such access by the Sellers and their
representatives may not unreasonably interfere with the conduct of the business
of the Company, any Company Subsidiary or the Purchaser.  Following the Closing and until the
expiration of the representations and warranties set


 


41

















 


forth in Section 2.17 or any claim for
indemnification made with respect to Section 2.17, the Purchaser
shall cause the Company and the Company Subsidiaries, prior to filing any
amended income Tax Return relating to Taxes of the Company or any Company
Subsidiary for any Tax period ending on or prior to the Closing Date, to
submit such Tax Return to the Stockholder Representative for the
Sellers’ approval, which shall not be unreasonably, withheld, delayed or
conditioned.  Any access pursuant to this
Section 5.5(c) or Section 1.6, any information retained after the
Closing by any Seller related to the Company or any Company Subsidiary and any
Tax Return submitted to the Sellers or the Stockholder Representative pursuant
to this Section 5(c) shall be subject to the following terms:


 


(i)                                     The
information learned by the Sellers and their representatives from such access
(the “Purchaser Information”) shall be treated by the Sellers and their
representatives as confidential information unless and until (i) such Purchaser
Information becomes generally available to the public through no act or failure
to act by the Sellers or their representatives; (ii) such Purchaser Information
is disclosed to the Sellers or their representatives after the date of this
Agreement on a non-confidential basis by a third party not bound by obligations
of confidentiality with respect to such Purchaser Information; or (iii) such
Purchaser Information is independently acquired or developed by the Sellers or
their representatives without reliance on, or the use of, any of the Purchaser
Information; provided, however, that the
foregoing shall not restrict any Seller’s ability to make disclosures of
Purchaser Information to its limited partners, co-investors, potential
investors, financing sources, placement agents and debtholders, each of whom
shall be subject to customary confidentiality obligations (collectively, the “Permitted
Disclosure Recipients”).


 


(ii)                                  The
Sellers recognize and acknowledge the competitive value and confidential
and proprietary nature of the Purchaser Information and that damage could
result to the Purchaser, the Company and the Company Subsidiaries if any of the
Purchaser Information is disclosed to any third party other than a Permitted
Disclosure Recipient.


 


(iii)                               Except
as provided above with respect to the Permitted Disclosure Recipients, the
Sellers and their representatives will use the Purchaser Information solely for
purposes related to exercising their rights and performing their obligations
under this Agreement and for matters related to them in their capacities as the
former owners and stockholders of the Company and the Company Subsidiaries.


 


(iv)                              The
Sellers shall, and shall cause their representatives to, exercise reasonable
care to prevent disclosure to any third party of Purchaser Information received
by them pursuant to this Section 5.5(c), except as may be necessary or
appropriate for the purposes described in Section 5.5(c)(iii), and the
Sellers will take precautions to protect such Purchaser Information at least as
great as they take to protect their own confidential information.


 


(d)                                 The
Sellers, on the one hand, and the Purchaser, on the other hand, agree to
cooperate fully, as and to the extent reasonably requested by the other, in
connection with the preparation and filing of any Tax Return, claim for refund
or audit and the prosecution or defense of


 


42

















 


any claim, suit or proceeding relating to any
proposed adjustment that relates to the Company, any Company Subsidiary, the
Business or the assets of the Company or any Company Subsidiary, including the
prosecution of any claim against the sellers under the Aircast Asset Purchase
Agreement or a Subsidiary Asset Purchase Agreement.


 


5.6                                 Exclusivity.  During the Pre-Closing Period, the Sellers
shall not, and shall cause the Company, the Company Subsidiaries and each of
their respective directors, officers, agents, brokers or representatives
(collectively, the “Seller Representatives”) not to, initiate or
participate in any negotiation of, enter into any agreement concerning or allow
the consummation of, furnish any information to any third Person with respect
to, or respond (except by reference to prior public announcements) to any
inquiries regarding:  (i) any transfer of
any material portion of the assets of the Company and the Company Subsidiaries;
(ii) any issuance of capital stock of the Company or any transfer of
outstanding capital of the Company resulting in a change of control of the
Company (provided that: (A) no issuance of capital stock of the Company or
transfer of outstanding capital stock of the Company not resulting in a change
of control (including the issuance of any stock options or other rights to
acquire capital stock of the Company to any members of management of the
Company or any of the Company Subsidiaries) shall result in the Purchaser
acquiring less than one hundred percent (100%) of the Company’s outstanding
shares of capital stock (and any outstanding options or other rights to acquire
capital stock of the Company) at the Closing; and (B) no transfer of
outstanding capital stock of the Company shall be made by any of the Tailwind
Stockholders); or (iii) any merger or other business combination transaction,
in each case with any party other than the Purchaser (each, an “Alternative
Transaction”).  If any Seller, the
Company, any Company Subsidiary or any of the Seller Representatives receives
an unsolicited inquiry, offer or proposal relating to an Alternative
Transaction, the Sellers shall as soon as reasonably practicable thereafter
notify the Purchaser thereof, including information as to the contents and terms
of such inquiry, offer or proposal and the identity of the Person making such
inquiry, offer or proposal.


 


5.7                                 Notification
During the Pre-Closing Period of Breaches. 
During the Pre-Closing Period, the Purchaser, on the one hand, and each
Seller, on the other hand, will each notify the other as soon as reasonably
practicable after it becomes aware of any material breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement or of any fact or condition that would cause a condition to the other
party’s obligation to consummate the Closing set forth in Article VI
to not be satisfied.   No such notice
shall be deemed to supplement or amend the Seller Disclosure Schedule or the
Purchaser Disclosure Schedule for the purpose of determining whether any of the
conditions set forth in Article VI have been satisfied.  If a party receives a notice pursuant to this
Section 5.7 but nonetheless proceeds with the Closing, then from and
after the Closing such party shall be deemed to have waived any and all rights
it may have arising from or relating to a breach of representation, warranty,
covenant or agreement described in such notice (including any right to
indemnification pursuant to Article VII); provided,
however, no such waiver shall apply if and to the extent the breach
described in such notice related to the failure of a representation or warranty
of the party who delivered such notice to be true and correct on and as of the
date of this Agreement.


 


5.8                                 Publicity.  The Purchaser and the Stockholder
Representative shall mutually agree on a joint initial press release announcing
the execution and delivery of this Agreement and the transactions contemplated
hereby.  After such initial press release,
each party may issue further press releases, tombstones and similar
announcements without the consent of the other parties, provided that each such
press release, tombstone or similar announcement contains solely


 


43

















 


information that is consistent with the information contained in such
initial press release.  Except as
provided above in this Section 5.8 or solely to the extent required by
applicable Law, no Seller shall make or cause to be made (or permit the Company
or any of the Company Subsidiaries to make prior to the Closing) any public
announcement or issue any public notice in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the
Purchaser and the Stockholder Representative. 
Except as provided above in this Section 5.8 or solely to the
extent required by applicable Law, the Purchaser shall consult with the
Stockholder Representative prior to issuing any press release or otherwise
making any public statements with respect to this Agreement, the transactions
contemplated hereby or any of the Sellers or the Stockholder Representative,
and prior to making any filings with any Governmental Authority (other than the
filings contemplated by Section 5.4) or with any national securities
exchange with respect thereto (and prior to permitting the Company or any
Company Subsidiary to do any of the foregoing after the Closing).


 


5.9                                 Employee
Matters; Sale Bonus Program; Retention Program.


 


(a)                                  Promptly
after the Closing the Purchaser shall use commercially reasonable efforts to
cause its Affiliates (including the Company and the Company Subsidiaries) to
include each employee of the Company or any of the Company Subsidiaries as of
the Closing (each an “Employee” and, collectively, the “Employees”)
in the employee benefit plans and programs then in effect of the Purchaser and
its Affiliates or to conform the employee benefit plans and programs of the
Company and the Company Subsidiaries to be comparable to the benefit plans and
programs of the Purchaser and its Affiliates. 
From and after the Closing, the Purchaser shall, and shall use its
commercially reasonable efforts to cause its Affiliates (including the Company
and the Company Subsidiaries) to, honor, pay, perform and satisfy any and all
obligations and responsibilities to or in respect of each Employee, former
Employee or director of the Company or any Company Subsidiary (as of the
Closing) under the terms of each Employee Plan and each employment agreement or
other written arrangement between the Company or any Company Subsidiary and any
such Employee, former Employee or director, in each case, as in effect
immediately prior to the Closing and disclosed in Section 5.9(a) of the
Seller Disclosure Schedule.  From and
after the Closing, the Purchaser shall use commercially reasonable efforts to
cause each employee benefit plan maintained or contributed to by the Purchaser
or any of its Affiliates (including the Company and the Company Subsidiaries)
in which an Employee participates or will participate to recognize all service
of such Employee with the Company or any of the Company Subsidiaries, including
any service recognized by the Company or any of the Company Subsidiaries under
any Employee Plan prior to the Closing, and, if applicable, to waive any
exclusions for preexisting conditions, in each such case, unless prohibited by
Applicable Law or, with respect to any welfare benefit plan, prohibited by the
terms of such plan.  Nothing in this Section
5.9(a) shall modify the “at will” employee relationship between any
Employee and the Purchaser or any of its Affiliates (including, after the
Closing, the Company and the Company Subsidiaries) or otherwise limit the
ability of the Purchaser or any of its Affiliates (including, after the
Closing, the Company and the Company Subsidiaries) to terminate the employment
of any Employee at any time subject to compliance with the applicable terms of
the employee benefit plans and programs referred to above in this Section
5.9(a) that are then in effect. 
Notwithstanding the foregoing, nothing in this Section 5.9(a)
shall be deemed in any way to restrict the Purchaser and its Affiliates
(including the Company and the Company Subsidiaries after the Closing) from
adopting, amending, rescinding, terminating or replacing any employee benefit
plan, arrangement or agreement in accordance with its terms,


 


44

















 


whether existing before or after the Closing
provided that the Employees, as a whole, are not treated in a manner that would
breach the first sentence of this Section 5.9(a).


 


(b)                                 As
soon as reasonably practicable after the date of this Agreement, the Sellers
shall cause the Company and the Company Subsidiaries to establish a sale bonus
program on the terms and
conditions described on Section
5.9(b) of the Seller Disclosure Schedule (the “Sale Bonus Program”).  During the Pre-Closing Period, the Sellers
will cause the Company and the Company Subsidiaries to not amend, repeal or
waive any term or condition of the Sale Bonus Program without the prior written
consent of the Purchaser (such consent not to be unreasonably withheld,
conditioned or delayed); provided, however,
(i) the Company and the Company Subsidiaries will have the discretion to make
and to modify awards under the Sale Bonus Program in their sole discretion and
(ii) if the Sale Bonus Program expires in accordance with its terms prior to
the Closing, the Company and the Company Subsidiaries may adopt a substantially
similar successor plan.


 


(c)                                  As
soon as reasonably practicable after the date of this Agreement, the Sellers
shall cause the Company and the Company Subsidiaries to establish an employee
retention program on the terms and
conditions described on Section
5.9(c) of the Seller Disclosure Schedule (the “Retention Program”).  During the Pre-Closing Period, the Sellers
will cause the Company and the Company Subsidiaries to not amend, repeal or
waive any term or condition of the Retention Program without the prior written
consent of the Purchaser (such consent not to be unreasonably withheld,
conditioned or delayed); provided, however,
(i) no later than three (3) Business Days prior to Closing, the Company and the
Company Subsidiaries may modify awards under the Retention Program (but not
reduce the aggregate program) if notice is provided to the Purchaser and the
Purchaser consents in writing, such consent not to be unreasonably withheld,
conditioned or delayed, and (ii) if the Retention Program expires in accordance
with its terms prior to the Closing, the Company and the Company Subsidiaries
may adopt a substantially similar successor plan.  From and after the Closing, the Purchaser
will cause the Company and the Company Subsidiaries not to amend, repeal or
waive any term or condition of the Retention Program without the prior written
consent of the Stockholder Representative and if the Stockholder Representative
provides a written notice to the Purchaser that it reasonably believes an
Employee has breached his or her ‘Confidentiality Obligations’ (as such term is
defined in the Retention Program), then the Purchaser will cause the Company to
give written notice to such Employee that he or she has breached the
Confidentiality Obligations.


 


(d)                                 For
the avoidance of doubt, in connection with the transactions contemplated by
this Agreement, the Company and the Company Subsidiaries will remain
responsible for all severance and other obligations under the existing
agreements with employees, and the Sellers will have no responsibility
whatsoever, financial or otherwise, for such obligations, except for their
obligations with respect to the Sale Bonus Program and the Retention Program.


 


5.10                           Transfer
Taxes.  The Purchaser, on the one
hand, and the Sellers, on the other hand, shall each be liable for one-half
(1/2) of all sales, use, transfer, stamp, duties, documentary, registration,
recording and other similar Taxes and fees (collectively, “Transfer Taxes”)
incurred as a result of the change of control of the Company and the Company
Subsidiaries contemplated by this Agreement. 
The Purchaser shall file or shall cause the Company and the Company
Subsidiaries to file all required Tax Returns relating to Transfer Taxes.  To the extent practicable, the amount of such
Transfer Taxes shall be calculated prior to the Closing Date, and payment will
be made by the


 


45

















 


Purchaser or the Sellers, as applicable, to settle the obligations
provided in this Section 5.10.  To
the extent any such party pays or becomes obligated to pay any such Transfer
Taxes after the Closing that was not identified and paid at the Closing in
accordance with the preceding sentence, during the six (6) month period from
and after the Closing such party may (and the Purchaser with respect to the
Company or any Company Subsidiary may), from time to time or at any time,
notify the other parties of such unpaid Transfer Taxes, which notice will be
accompanied by evidence of such party’s payment or obligation to pay such
Transfer Taxes and the amount of such Transfer Taxes.  (For purposes of this Section 5.10,
notice properly given to the Stockholder Representative will be deemed to also
be notice to each Seller.)  Promptly, and
in any event within five (5) Business Days after receipt of such notice, each
other party shall pay to the party that delivered such notice its proportionate
share of such Transfer Taxes.  From and
after the six (6) month anniversary of the Closing, no party shall be entitled
to any further payment from any other party pursuant to this Section 5.10
with respect to any such Transfer Taxes.


 


5.11                           Indemnification
of Directors and Officers.


 


(a)                                  For
at least six (6) years after the Closing Date, the Purchaser shall (and shall
cause the Company and the Company Subsidiaries to), to the fullest extent permitted
under applicable Law and the Organizational Documents of the Company and the
Company Subsidiaries as in effect on the date hereof, maintain the Company and
Company Subsidiaries’ existing indemnification provisions with respect to each
director or officer of the Company or any Company Subsidiary as of the Closing
(collectively, the “Indemnified Directors or Officers”), including
provisions relating to advancement of expenses therein; provided
that if any claim or claims are asserted or made within such six (6) year
period by any Indemnified Director or Officer, all rights to indemnification in
respect of any such claim or claims shall continue until final disposition of
any and all such claim or claims.  None
of the Purchaser, the Company or any Company Subsidiary shall have any
obligation hereunder to any Indemnified Director or Officer with respect to a
Proceeding when and if it shall be determined by a court of competent
jurisdiction in a final non-appealable order or decree that the indemnification
of such Indemnified Director or Officer in the manner contemplated hereby is
prohibited by applicable Law or the terms of existing Organizational
Documents.  In the event the Company or
any Company Subsidiary fails to make any payment when due under this Section
5.11(a), the Purchaser shall make, or cause to be made, such payment.


 


(b)                                 For
at least six (6) years after the Closing Date, the Purchaser shall, and shall
cause the Company and the Company Subsidiaries to, maintain in effect the
current policies of directors’ and officers’ liability insurance maintained by
the Company and the Company Subsidiaries with respect to claims arising from or
related to facts or events that occurred at or before the Closing Date for the
benefit of the Indemnified Directors or Officers; provided,
however, that the Purchaser, the Company or any Company Subsidiary
may purchase six (6) year “tail” coverage covering acts or omissions of the
Indemnified Directors or Officers at or before the Closing Date on
substantially similar terms to the directors’ and officers’ liability insurance
policy or policies maintained by the Company or the applicable Company
Subsidiary or Company Subsidiaries at the date of this Agreement (including
coverage amounts and limitations).  The
Purchaser agrees to, and following the Closing will cause the Company and the
Company Subsidiaries to, not take any action that would have the effect of
limiting the aggregate amount of directors’ and officers’ insurance coverage
required to be maintained for the Indemnified Director or Officer referred to
in this Section 5.11.


 


46

















 


(c)                                  The
covenants set forth in this Section 5.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Directors or
Officers and their respective heirs and legal representatives.  The indemnification provided for herein shall
not be deemed exclusive of any other rights to which an Indemnified Director or
Officer is entitled, whether pursuant to Law, contract or otherwise.


 


(d)                                 If,
after the Closing, the Purchaser, the Company, any Company Subsidiary or any of
their respective successors or assigns shall: (i) merge or consolidate with or
merge into any other Person and shall not be the surviving or continuing Person
of such consolidation or merger; or (ii) transfer all or substantially all of
their respective properties and assets to any Person, then in each such case,
the Purchaser shall take all necessary actions to ensure that the successors or
assigns of the Purchaser, the Company or the applicable Company Subsidiary (as
applicable) shall assume all of the obligations set forth in this Section 5.11.


 


5.12                           Certain
Investments by the Tailwind Stockholders. 
During the period from the date of this Agreement until the second
anniversary of the Closing Date, none of the Tailwind Stockholders (or any fund
formed by Douglas Karp, Lawrence Sorrel, Geoffrey Raker or Jeffrey Calhoun)
shall invest in any Person who is engaged in a business that competes, directly
or indirectly, with the Business if such Person includes any individual: (a)
who is (or has been since December 7, 2004) a member of Senior Management; or
(b) who is a member of the family of Glenn W. Johnson and who was engaged in
the Business prior to the date of this Agreement.  For purposes of this Section 5.12, a
Person will be deemed to include an individual if such individual: (i) is an
officer, director or management-level employee of such Person, or a subsidiary
or division thereof; (ii) is a five percent (5%) or greater stockholder (or
equivalent) of such Person, or a subsidiary or division thereof, if such Person
is not a Person whose securities are listed on a national securities exchange;
(iii) is a one percent (1%) or greater stockholder (or equivalent) of such
Person if such Person is a Person whose securities are listed on a national
securities exchange (for purposes of clauses (ii) and (iii) deeming any option,
warrant or other right to acquire shares (or the equivalent) in such Person as
ownership of the underlying shares (or equivalent)); or (iv) provides
consulting services to such Person for which such individual is entitled to
aggregate consideration in excess of $25,000 per annum or such consulting
services include services that would be deemed management-equivalent services
to such Person if they were performed directly by an employee of such Person.


 


5.13                           Environmental
Matters. With respect to each Leased Real Property and Owned Real Property
located in New Jersey, the Sellers shall (or shall cause the Company and the
Company Subsidiaries to) assemble, prepare and file any information and take
such other commercially reasonable actions as may be required to obtain from
the NJDEP for the transactions contemplated by this Agreement: (i) one or more
ISRA non-applicability determinations through either (A) written confirmation
from the NJDEP that the Owned Real Property or the Leased Real Property located
in the State of New Jersey is not an industrial establishment pursuant to ISRA
or (B) written confirmation that the transactions contemplated herein are not
subject to ISRA; (ii) written approval of the Sellers’ negative
declaration; (iii) a de minimis
quantity exception; (iv) a “No-Further Action” letter or (v) a remediation in
progress letter as each such term is defined under ISRA.


 


5.14                           No
Amendment of the Aircast Asset Purchase Agreement and Related Documents Pre-
and Post-Closing.  Except as
contemplated by Section 1.6, prior to the Closing the Sellers will not,
and will cause the Company or Company Subsidiaries not to, without the prior
written consent


 


47

















 


of the Purchaser, amend, modify or terminate, or waive any right under,
in each case in a manner that would be adverse to the Purchaser, the Aircast
Asset Purchase Agreement or any of the other agreements, documents or
instruments delivered under the Asset Purchase Agreement or in connection with
the transactions contemplated thereby. 
For as long after the Closing as the Purchaser has any indemnification
rights, direct or indirect, against the Old Aircast Sellers (as described in Section
7.6(b)), the Purchaser will not, and will cause its Affiliates (including
the Company and the Company Subsidiaries) to not, without the prior written
consent of the Stockholder Representative, amend, modify or terminate, or waive
any right under, in each case in a manner that would be adverse to the Sellers,
the Aircast Asset Purchase Agreement or any of the other agreements, documents
or instruments delivered under the Aircast Asset Purchase Agreement or in
connection with the transactions contemplated thereby.


 


ARTICLE VI

CONDITIONS TO CLOSING


 


6.1                                 Conditions
to the Obligation of the Purchaser. 
The obligation of the Purchaser to consummate the transactions contemplated
by this Agreement in connection with the Closing shall be subject to the
satisfaction or waiver by the Purchaser on or prior to the Closing Date of each
of the following conditions:


 


(a)                                  The
representations and warranties of the Sellers contained in Article II
shall be true and correct in all respects (if qualified by materiality or
Material Adverse Effect) and shall be true and correct in all material respects
(if not qualified by materiality or Material Adverse Effect), on the date made
and as if made at and as of the Closing (except with respect to those
representations and warranties that are made as of a specific date, only as of
such date), with only such exceptions as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.


 


(b)                                 No
disclosure made by the Sellers pursuant to Section 5.7 with respect to
changes, developments, conditions, events or circumstances occurring after the
date of this Agreement shall have caused the representations and warranties of
the Sellers set forth in Article II to which such disclosure
pertains to not be true and correct in all respects (if qualified by
materiality or Material Adverse Effect) or true and correct in all material
respects (if not qualified by materiality or Material Adverse Effect) as if
made at and as of the Closing (except with respect to those representations and
warranties that are made as of a specific date, only as of such date).


 


(c)                                  The
representations and warranties of each Seller contained in Article III
shall be true and correct in all respects (if qualified by materiality or
Material Adverse Effect) and shall be true and correct in all material respects
(if not qualified by materiality or Material Adverse Effect), as if made at and
as of the Closing (except with respect to those representations and warranties
that are made as of a specific date, only as of such date).


 


(d)                                 The
Sellers shall have each duly performed and complied in all material respects
with all covenants and agreements contained herein required to be performed or
complied with by such Seller at or before the Closing.


 


48

















 


(e)                                  The
Stockholder Representative shall have delivered to the Purchaser a certificate,
dated as of the Closing Date and executed by a duly authorized representative
of the Stockholder Representative, as to the fulfillment of the conditions set
forth in Section 6.1(a) and (b).


 


(f)                                    Each
Seller shall have delivered to the Purchaser a certificate, dated as of the Closing
Date and executed by a duly authorized representative of such Seller, as to the
fulfillment of the conditions set forth in Sections 6.1(c) and (d),
with respect to such Seller.


 


(g)                                 The
waiting period applicable to the consummation of the Stock Purchase under the
HSR Act and under any similar applicable foreign antitrust or competition Laws
shall have expired or been terminated and each of the Required Consents set
forth on Schedule B hereto shall have been received or, with respect to
any such Required Consent from a Governmental Authority, reasonably
satisfactory written or oral notification shall have been received from the
applicable Governmental Authority that its approval of, consent to or
authorization of the Closing is not required.


 


(h)                                 There
shall not be in effect any litigation by or among the Sellers, whether pending
or threatened in writing, that seeks to enjoin, delay, restrain, prohibit or
impair the consummation of the transactions contemplated by this Agreement, or
any injunction or other Order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement, and there shall be no litigation pending in which any
Governmental Entity is seeking to enjoin, restrain or prohibit the consummation
of the transactions contemplated by this Agreement or impose any penalty which
would have a Purchaser Material Adverse Effect.


 


(i)                                     The
Company shall have delivered to the Purchaser a certification (in such form as
may be reasonably requested by counsel to the Purchaser) conforming to the
requirements of Treasury Regulations §1.1445-2(c)(3) and §1.897-2(h) and
certifying that stock in the Company does not constitute a U.S. real property
interest within the meaning of Code Section 897(c).


 


(j)                                     The
Sellers shall have delivered to the Purchaser, with respect to each Leased Real
Property and Owned Real Property located in New Jersey, one of the ISRA non-applicability
determination, letter, approval or exception contemplated by clauses (i)
through (v) of Section 5.13.


 


(k)                                  The
Sellers shall have delivered to Purchaser an opinion, dated the Closing Date,
of Kelley Drye & Warren LLP substantially in the form of Exhibit C
hereto.


 


(l)                                     The
Sellers shall have delivered to the Purchaser evidence reasonably satisfactory
to the Purchaser of the release of any Liens on the assets and properties of
the Company and the Company Subsidiaries, other than Permitted Liens, of the
release of any Liens securing the Funded Debt and of the release of any Liens
on the Shares.


 


(m)                               There
shall not have occurred since December 31, 2005, any change, development,
condition, event or circumstance that, individually or in the aggregate, has
had, or would reasonably be expected to have, a Material Adverse Effect; provided, however, that for purposes of this Section
6.1(m), no matter disclosed on the Seller Disclosure Schedule shall be
deemed to have had, or reasonably be expected to have, a Material Adverse
Effect except to the extent that any change, development, condition, event or
circumstance occurring or arising after the date of this Agreement, with
respect to such matter, considered separately from the facts or


 


49

















 


circumstances existing on the date hereof,
has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.


 


(n)                                 All
obligations of the Company and the Company Subsidiaries to pay any
consideration, reimbursement or fee to the Sellers, the general partners of the
respective Sellers or the Affiliates of the Tailwind Stockholders (other than
the Company and the Company Subsidiaries) shall have been terminated, and any
and all such consideration, reimbursements and fees to the Sellers, the general
partners of the respective Sellers or the Affiliates of the Tailwind
Stockholders (other than the Company and the Company Subsidiaries) from the
Company and the Company Subsidiaries which are due and payable or accrued
through the Closing shall have been paid, except for obligations to pay
consideration, reimbursement or fees expressly provided in this Agreement, the
Indemnity and Earnout Escrow Agreement, the Retention Program Escrow Agreement
or any other document entered into by the Sellers, on the one hand, and the Purchaser,
the Company or any of the Company Subsidiaries, on the other hand, after the
execution and delivery of this Agreement.


 


6.2                                 Conditions
to the Obligation of the Sellers. 
The respective obligations of the Sellers to consummate the transactions
contemplated by this Agreement in connection with the Closing shall be subject
to the satisfaction or waiver by the Stockholder Representative on or prior to
the Closing Date of each of the following conditions:


 


(a)                                  The
representations and warranties of the Purchaser contained in Article IV
shall be true and correct in all respects (if qualified by materiality or
material adverse effect) and shall be true and correct in all material respects
(if not qualified by materiality or material adverse effect), as if made at and
as of the Closing (except with respect to those representations and warranties
that are made as of a specific date, only as of such date).


 


(b)                                 The
Purchaser shall have duly performed and complied in all material respects with
all covenants and agreements contained herein required to be performed or
complied with by the Purchaser at or before the Closing.


 


(c)                                  The
Purchaser shall have delivered to the Sellers a certificate, dated as of the
Closing Date and signed by an officer of the Purchaser, as to the fulfillment
of the conditions set forth in Sections 6.2(a) and (b).


 


(d)                                 The
waiting period applicable to the consummation of the Stock Purchase under the
HSR Act and under any similar applicable foreign antitrust or competition Laws
shall have expired or been terminated and each of the Required Consents set
forth on Schedule C hereto shall have been received or, with
respect to any such Required Consent from a Governmental Authority, reasonably
satisfactory written or oral notification shall have been received from the
applicable Governmental Authority that its approval of, consent to or
authorization of the Closing is not required.


 


(e)                                  There
shall not be in effect any injunction or other order issued by a court of
competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated by this Agreement.


 


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ARTICLE VII

INDEMNIFICATION


 


7.1                                 Survival
of Representations and Warranties and Covenants and Agreements.


 


(a)                                  Each
of the representations and warranties of the Purchaser and the Sellers
contained in this Agreement shall survive until the later of (A) June 30, 2007
or (B) if the closing occurs after June 30, 2006, the first anniversary of the
Closing, and shall thereafter expire, except that: (i) each Seller’s respective
representations and warranties set forth in Section 3.1(b) and (c)
(Authority; Enforceability) and Section 3.4 (Title to Shares)
(collectively, the “Special Representations and Warranties”) shall survive
the Closing indefinitely; and (ii) the Purchaser’s representations and
warranties set forth in Section 4.1(b) and (c) (Authority;
Enforceability) shall survive the Closing indefinitely.  Each of the covenants and agreements
contained in this Agreement: (i) to be performed on or prior to the Closing
shall expire upon the Closing; (ii) to be performed after the Closing that
specifies a time period for survival shall survive for such time period; and
(iii) to be performed after the Closing that does not specify a time period for
survival shall survive indefinitely.


 


(b)                                 Notwithstanding
anything to the contrary in Section 7.1(a), if a Notice of Claim has
been provided by an Indemnified Party to an Indemnifying Party concerning the
breach of a representation and warranty or covenant and agreement set forth in
this Agreement prior to the end of the survival period that would otherwise
apply to such representation and warranty or covenant and agreement, the right
to indemnification with respect to the breach of the representation and
warranty or covenant and agreement set forth in such Notice of Claim shall
survive until such later date as such claim has been fully and finally resolved
in accordance with this Article VII.


 


7.2                                 Indemnification
Obligations.


 


(a)                                  Subject
to the other provisions of this Article VII, from and after the
Closing, the Sellers shall jointly and severally indemnify the Purchaser and
each of its Affiliates (which, following the Closing, shall include the Company
and the Company Subsidiaries) and its and their respective directors, officers,
employees, stockholders, partners, members, managers, agents and
representatives (each, a “Purchaser Indemnified Party”) for any Losses
actually incurred by such Purchaser Indemnified Party as a result of the breach
of:  (i) any representation and warranty
of the Sellers set forth in Article II which is surviving (as set
forth in Section 7.1) on the date on which a Notice of Claim is
delivered to the Stockholder Representative relating thereto; or (ii) any covenant
or agreement contained in this Agreement in which the Sellers agree to cause
the Company or any of the Company Subsidiaries to take or not take some action,
to the extent a Notice of Claim is delivered to the Stockholder Representative
relating thereto prior to the expiration of the Indemnity and Earnout Escrow
Period.


 


(b)                                 Subject
to the other provisions of this Article VII, from and after the
Closing, each Seller shall, severally and not jointly, indemnify each of the
Purchaser Indemnified Parties for any Losses actually incurred by such
Purchaser Indemnified Party as a result of the breach of:  (i) any representation and warranty of such
Seller set forth in Article III which is surviving (as set forth in
Section 7.1) on the date on which a Notice of Claim is delivered to the
Stockholder Representative relating thereto; or (ii) any covenant or agreement
contained in this Agreement in which an individual Seller (or Sellers) has
agreed to take or not take some action, to the extent a


 


51

















 


Notice of Claim is delivered to the Stockholder Representative relating
thereto on or before (x) the expiration of the Indemnity and Escrow
Earnout Period, with respect to any covenant or agreement that by its terms is
to be performed in full on or prior to the Closing Date and (y) the
expiration of the statute of limitations applicable thereto, for each other
covenant or agreement.


 


(c)                                  Subject
to the other provisions of this Article VII, from and after the
Closing, the Purchaser shall indemnify the Sellers and each of their respective
Affiliates, directors, officers, employees, stockholders, partners, members,
managers, agents and representatives (each, a “Seller Indemnified Party”)
for any Losses actually incurred by such Seller Indemnified Party as a result
of the breach of:  (i) any representation
and warranty of the Purchaser set forth in Article IV which is
surviving (as set forth in Section 7.1) on the date on which a Notice of
Claim is delivered to the Purchaser relating thereto; or (ii) any covenant or
agreement of the Purchaser contained in this Agreement to the extent a Notice
of Claim is delivered to the Purchaser relating thereto on or before the
expiration of the statute of limitations applicable thereto, or if to be
performed on or prior to the Closing Date, by the end of the Indemnity and
Earnout Escrow Period.


 


7.3                                 Limitations
on Indemnification Amounts. 
Notwithstanding anything to the contrary in this Article VII:
(a) in no event shall the Sellers be required to provide indemnification under
this Article VII unless and until the Purchaser Indemnified Parties
shall have incurred aggregate Losses of at least $1,000,000 (the “Indemnification
Deductible”) resulting from otherwise indemnifiable breaches of representations
and warranties and covenants and agreements by the Sellers, after which point
the Sellers shall only be required to provide indemnification with respect to
indemnifiable Losses in excess of the Indemnification Deductible; and (b) in no
event other than as expressly contemplated by Section 7.12(b) shall any
Seller be required to provide indemnification under this Article VII
for aggregate indemnifiable Losses under this Article VII in excess
of the amount of such Seller’s allocable portion of the then-available
Indemnity and Earnout Escrow Funds (the “Indemnification Cap”);
notwithstanding the foregoing, with respect to Losses resulting from (A) any
willful breach of this Agreement by a Seller (or Sellers), (B) any fraud of
such Seller (or Sellers) related to the transactions contemplated hereby, (C)
any breach by such Seller (or Sellers) of its Special Representations and
Warranties, (D) any breach by such Seller (or Sellers) of its covenants and
agreements under Section 1.6(e) or Section 1.6(f) or (E) any
breach by the Sellers of the representations and warranties set forth in Section
2.3, the Indemnification Deductible shall not apply and, with respect to
preceding clauses (A) through (E), as to such Seller (or Sellers)
the Indemnification Cap shall not apply; provided,
however, that in no event shall any Seller be required to provide
indemnification under this Article VII (I) for aggregate indemnifiable
Losses under this Article VII in excess of such Seller’s pro rata portion of the Purchase Price and (II) with respect
to any indemnifiable Losses under this Article VII resulting from
the matters referred to in the preceding clause (E) that exceed the then
available Indemnity and Earnout Escrow Funds, in excess of such Seller’s pro rata portion of such excess indemnifiable Losses
(measured by reference to the number of Shares owned by such Seller immediately
prior to the Closing in relation to the Shares held by all the Sellers
immediately prior to the Closing).


 


7.4                                 Indemnification
Claim Procedure.


 


(a)                                  Promptly
after obtaining actual knowledge of any matter that a Purchaser Indemnified
Party or Seller Indemnified Party, as applicable (the “Indemnified Party”),
acting in good faith, reasonably believes will entitle the Indemnified Party to
indemnification from any other party (the “Indemnifying Party”)
under this Article VII, the Indemnified Party shall promptly


 


52

















 


provide to the Indemnifying Party notice
describing the matter in reasonable detail, including the nature of the claim,
the basis for the indemnification obligation and the Losses resulting therefrom
(a “Notice of Claim”); provided,
however, that the failure to timely provide a Notice of Claim
hereunder shall not relieve an Indemnifying Party of its obligation to
indemnify an Indemnified Party except to the extent that the Indemnified Party’s
failure to provide or delay in providing a Notice of Claim prejudices the
Indemnifying Party’s ability to defend against or contest such matter.  (If the Indemnifying Party is a Seller or the
Sellers, delivery by an Indemnified Party of a Notice of Claim to the
Stockholder Representative shall be deemed to be effective delivery of notice
to the Indemnifying Party.)


 


(b)                                 For
claims for indemnification under this Article VII other than those
relating to Third Party Claims and as otherwise provided in Section 7.6,
the Indemnifying Party shall have thirty (30) Business Days after its receipt
of the Notice of Claim to respond to the claim(s) described therein.  Such response shall set forth, in reasonable
detail, the Indemnifying Party’s objection(s) to the claim(s) and its bases for
such objection(s).  If the Indemnifying
Party fails to provide such a response with such time period, the Indemnifying
Party will be deemed to have conceded the claim(s) set forth in the Notice of
Claim.  If the Indemnifying Party
provides its response within such time period, the Indemnified Party and the
Indemnifying Party shall negotiate the resolution of the claim(s) for a period of
not less than thirty (30) Business Days after such response is provided.  If the Indemnifying Party and the Indemnified
Party are unable to resolve any such claim(s) within such time period, the
Indemnifying Party or the Indemnified Party may thereafter pursue any legal
remedies available to it with respect solely to the unresolved claim(s),
subject, to the extent applicable, to the Indemnification Deductible, the
Indemnification Cap and the other provisions of this Article VII or
Article X.


 


7.5                                 Third
Party Claims.


 


(a)                                  Without
limiting the provisions of Section 7.4(a), the Indemnifying Party shall
not be required to provide indemnification under this Article VII
with respect to a claim or Proceeding by a third party (a “Third Party Claim”)
to the extent that the Indemnified Party’s failure to provide or delay in
providing a Notice of Claim prejudices the Indemnifying Party’s ability to
contest or resolve the matters underlying such Third Party Claim.  Any Third Party Claim that is also a Multiple
Source of Recovery Matter shall be treated as a Third Party Claim, except to
the extent expressly provided in Section 7.5(b).


 


(b)                                 The
Indemnifying Party shall have the right to assume and pursue the defense of any
Third Party Claim, at its sole cost and expense and with counsel reasonably
selected by it, upon notification thereof to the Indemnified Party within ten
(10) Business Days after the Notice of Claim has been delivered to the
Indemnifying Party or, with respect to any Multiple Source of Recovery Matter that
is a Third Party Claim, within ten (10) Business Days after a Purchaser
Indemnified Party notifies the Sellers that the Old Aircast Sellers have
declined to defend or failed to defend such claim as a “Third Party Claim”
under Article IX of the Aircast Asset Purchase Agreement, it being agreed
and understood that the Indemnifying Party’s election to assume the defense of
any Third Party Claim shall not constitute an admission that any Losses
resulting therefrom are indemnifiable Losses under this Article VII
or in any way prejudice or limit the Indemnifying Party’s ability to dispute
any determination of whether or not any such Losses are indemnifiable Losses
under this Article VII.  If
the Indemnified Party does not receive such notification from the Indemnifying
Party within such time period that it will assume the defense of a


 


53

















 


Third Party Claim or, at any time after the
Indemnifying Party has assumed the defense of a Third Party Claim if the
Indemnifying Party is determined by a court to have failed to adequately
perform or unreasonably delayed in performing its obligations to assume or
pursue the defense of any such Third Party Claim, the Indemnified Party shall
fully assume, commence and pursue its defense of such Third Party Claim on a
timely and prudent basis and thereafter promptly inform the Indemnifying Party
of all material developments related thereto. 
If the Indemnifying Party disputes that it is responsible for a Third
Party Claim, it shall give notice to that effect to the Indemnified Party,
which response shall set forth, in reasonable detail, the Indemnifying Party’s
objection(s) to the claim(s) and its bases for such objection(s), and
thereafter the Indemnified Party and the Indemnifying Party shall negotiate the
resolution of the claim(s) for a period of not less than thirty (30) Business
Days after such response is provided.  If
the Indemnifying Party and the Indemnified Party are unable to resolve any such
claim(s) within such time period, either the Indemnified Party or the
Indemnifying Party may thereafter pursue any legal remedies available to it
with respect solely to the unresolved claim(s), subject, to the extent
applicable, to the Indemnification Deductible, the Indemnification Cap and the
other provisions of this Article VII or Article X.


 


(c)                                  If
the Indemnifying Party assumes the defense of a Third Party Claim, it shall
thereafter promptly inform the Indemnified Party of all material developments
related thereto.  With respect to any
Third Party Claim for which the Indemnifying Party has assumed the defense, the
Indemnified Party shall have the right, but not the obligation, to participate,
at its own cost and expense, in the defense of such Third Party Claim through
legal counsel reasonably selected by it, but shall not assert or pursue,
directly or through its counsel, any contrary or inconsistent defenses without
the prior consent of the Indemnifying Party, and provided,
that if in the written opinion of counsel to the Indemnified Party an
irreconcilable conflict of interest arises out of the representation of the
interests of the Indemnified Party by counsel selected by the Indemnifying
Party, then the Indemnified Party shall be indemnified for the reasonable fees
and expenses of its counsel (limited to one firm and, if applicable, local
counsel).  As long as the Indemnifying
Party is performing its obligations under this Section 7.5, the
Indemnified Party shall, and shall cause its Affiliates to, during normal
business hours, upon reasonable notice, cooperate in all reasonable ways with,
make its and their relevant files and records reasonably available for
inspection and copying by, make its and their employees reasonably available
to, and otherwise render reasonable assistance to, the Indemnifying Party.


 


(d)                                 If
the Indemnifying Party (having assumed the defense of a Third Party Claim) or
the Indemnified Party (having proceeded with its own defense of a Third Party
Claim in accordance with this Section 7.5) proposes to settle or
compromise such Third Party Claim, the Indemnifying Party or the Indemnified
Party (as applicable) shall provide notice to that effect (together with a
statement in reasonable detail of the terms and conditions of such settlement
or compromise) to the Indemnified Party or the Indemnifying Party (as
applicable), which shall be provided a reasonable time prior to the proposed
time for effecting such settlement or compromise, and may not effect any such
settlement or compromise without the prior consent of the Indemnified Party or
the Indemnifying Party (as applicable), which consent shall not be unreasonably
withheld, delayed or conditioned.  If:
(i) the Indemnifying Party provides any such notice; (ii) the related settlement
or compromise offer provides for the full release of the Indemnified Party and
its Affiliates from any and all liability in respect of such Third Party Claim
and does not purport to limit or restrict the business or operations of the
Indemnified Party in any material manner or require future payments by the
Indemnified Party arising from the conduct of the Indemnified Party’s business;
and (iii) the Indemnified Party fails to provide, in a reasonably timely
manner, its


 


54

















 


consent to such settlement or compromise,
then notwithstanding anything to the contrary in this Article VII,
the Indemnifying Party’s indemnification obligation under this Article VII
with respect to such Third Party Claim will not exceed the amount of such
settlement or compromise offer and the Indemnified Party will be required to
pay the excess of the amount necessary to settle or compromise the Third Party
Claim over the amount of such settlement or compromise offer.


 


(e)                                  With
respect to any Third Party Claim which is also a Multiple Source of Recovery
Matter, the Purchaser Indemnified Parties will take such actions in their
capacities as indemnified Persons with respect to indemnification for “Third
Party Claims” under Article IX of the Aircast Asset Purchase Agreement as
the Sellers may reasonably request.


 


7.6                                 Requirement
to First Pursue Remedies from Certain Parties.


 


(a)                                  The
Purchaser agrees and acknowledges that the Purchaser Indemnified Parties are
only entitled to receive indemnification from the Sellers under this Article VII
for Losses incurred by the Purchaser Indemnified Parties resulting from any
breach of the Sellers’ representations and warranties set forth in Article II
after the Purchaser Indemnified Parties have diligently and in good faith
pursued and exhausted all available remedies under applicable Law, under the
Aircast Asset Purchase Agreement and under any Contract executed in connection
with the Aircast Asset Purchase Agreement against the Old Aircast Sellers for
all Losses incurred by the Purchaser Indemnified Parties resulting from the
matter(s) constituting such breach of the Sellers’ representations and
warranties set forth in Article II. 
Without limiting the generality of the foregoing sentence, the Purchaser
agrees and acknowledges that by indirectly acquiring Aircast US Opco (one of
the Company Subsidiaries), the Purchaser will obtain indirectly the right to
receive indemnification from the Old Aircast Sellers under the Aircast Asset
Purchase Agreement, and the Purchaser Indemnified Parties shall be required to
diligently and in good faith pursue and exhaust any available remedies under
the Aircast Asset Purchase Agreement against the Old Aircast Sellers for any
and all Losses incurred by the Purchaser Indemnified Parties resulting from the
matter(s) constituting such breach of the Sellers’ representations and
warranties set forth in Article II before being entitled to receive
any indemnification payment from the Sellers under this Article VII
with respect to such breach of the Sellers’ representations and warranties set
forth in Article II.


 


(b)                                 For
any matter that constitutes both: (i) a matter for which any of the Purchaser
Indemnified Parties have available remedies under applicable Law, under the
Aircast Asset Purchase Agreement or under any Contract executed in connection
with the Aircast Asset Purchase Agreement; and (ii) a breach of any of the
Sellers’ representations and warranties set forth in Article II for
which any of the Purchaser Indemnified Parties is, but for the exhaustion of
remedies under Section 7.6(a), entitled to be indemnified by the Sellers
under the terms and conditions of this Article VII (each, a “Multiple
Source of Recovery Matter”), the Purchaser Indemnified Parties will be
required to seek recovery for their Losses related to such Multiple Source of
Recovery Matter from the Old Aircast Sellers prior to seeking recovery for such
Losses from the Sellers under this Article VII; provided, however, that, with respect to any Losses related to a Multiple Source
of Recovery Matter which are reasonably attributable to the operation of the
Business on or after December 7, 2004 (i.e., the
“Closing Date” under the Aircast Asset Purchase Agreement) (“Post-December 7th
Losses”), the Purchaser Indemnified Parties may seek indemnification for
such Post-December 7th Losses from the Sellers under this Article VII
prior to or concurrently with seeking recovery from the Old Aircast Sellers for
any such Losses related to such Multiple Source of Recovery Matter reasonably
attributable to the operation of the Business 


 


55

















 


prior to December 7, 2004 (“Pre-December
7th Losses”).  To the
extent the Pre-December 7th Losses are not recoverable at the time
the claim is made against the Old Aircast Sellers due to the application of the
threshold in Section 9.4(a) of the Aircast Asset Purchase Agreement, the
Purchaser Indemnified Parties shall be deemed to have fully exhausted its
remedies and the Sellers shall indemnify the Purchaser Indemnified Parties for
such Pre-December 7th Loss (or the Indemnification Deductible shall
be deemed satisfied in part by such Pre-December 7th Loss), subject
to any defenses the Sellers may have as to the appropriateness of the Purchaser
Indemnified Parties’ claim for indemnification under this Agreement.  With respect to any Multiple Source of Recovery
Matter, the Sellers may, but shall not be obligated to, assume control over any
claim or Proceeding which the Purchaser Indemnified Parties have commenced or
have the right to commence for Losses against the Old Aircast Sellers, and if
the Sellers assume control over such claim or Proceeding then the Purchaser
Indemnified Parties shall be deemed to have satisfied their obligation to
pursue recovery from the Old Aircast Sellers pursuant to Section 7.6(a)
(but, except as contemplated by Section 7.6(d), such remedy shall
not be deemed to have been exhausted until the final resolution of the claim or
Proceeding controlled by the Sellers).


 


(c)           With
respect to any Multiple Source of Recovery Matter for which a Purchaser
Indemnified Party has incurred Pre-December 7th Losses, the Notice
of Claim pursuant to Section 7.4(a) with respect to such Multiple
Source of Recovery Matter shall identify the estimated amount attributable to
the Pre-December 7th Losses (each, an “Initial MSRM Notice of
Claim”) and the Purchaser’s legal and expense budget for pursuing such
claim.  Receipt by the Sellers of an
Initial MSRM Notice of Claim shall solely have the effect of: (i) preserving
such Purchaser Indemnified Party’s right to pursue indemnification from the
Sellers under this Agreement with respect to the Pre-December 7th
Losses referred to therein until such time as such Purchaser Indemnified Party
has fully exhausted its rights against the Old Aircast Sellers with respect to
the underlying Multiple Source of Recovery Matter in accordance with this Section
7.6; and (ii) causing there to be reserved from any available Indemnity and
Earnout Escrow Funds (as of the date of the Initial MSRM Notice of Claim), in
accordance with the terms and conditions of this Agreement and the Indemnity
and Earnout Escrow Agreement, an amount equal to the amount of Losses with
respect to the underlying Multiple Source of Recovery Matter that are claimed
by such Purchaser Indemnified Party (including the Purchaser’s legal and
expense budget for pursuing its remedies), in each case subject to Section
7.6(d).


 


(d)           At
any time after receipt by the Stockholder Representative of an Initial MSRM
Notice of Claim and before its receipt of the corresponding Second MSRM Notice
of Claim pursuant to Section 7.6(f), the Stockholder Representative may
object to the reservation of some or all of the Indemnity and Earnout Escrow
Funds in response to such Initial MSRM Notice of Claim by providing notice
thereof to the Purchaser Indemnified Party who delivered such Initial MSRM
Notice of Claim, which notice shall set forth, in reasonable detail, the
Stockholder Representative’s objection(s) to the reservation of Indemnity and
Earnout Escrow Funds and its bases for such objection(s) (each, a “Reservation
Objection Notice”).  Such Purchaser
Indemnified Party shall have ten (10) Business Days to respond to such
Reservation Objection Notice.  If such
Purchaser Indemnified Party fails to provide such a response within such ten
(10) Business Day period, such Purchaser Indemnified Party shall be deemed to
have conceded the release from reservation of the applicable Indemnity and
Earnout Escrow Funds as provided in the Reservation Objection Notice, and such
Indemnity and Earnout Escrow Funds shall then be released (i) from reservation
under the Indemnity and Earnout Escrow Agreement, if such instructions are
delivered during the Indemnity and Earnout Escrow Period, or (ii) to the
Sellers, if such instructions are delivered after the end of


 


56

















 


the Indemnity and Earnout Escrow Period.  If such Purchaser Indemnified Party provides
its response within such time period and disputes the matters described in the
Reservation Objection Notice, such Purchaser Indemnified Party and the Stockholder
Representative shall negotiate the resolution of such dispute for a period of
not less than twenty (20) Business Days after such response is provided.  If such Purchaser Indemnified Party and the
Stockholder Representative are unable to resolve any such claim(s) within such
time period, the Stockholder Representative may thereafter pursue any legal
remedies available to it (on behalf of the Sellers) against such Purchaser
Indemnified Party, subject to the other provisions of this Article VII
or Article X, with respect to the Sellers’ obligations or
liabilities to such Purchaser Indemnified Party with respect to the matters
underlying the Initial MSRM Notice of Claim (and if the Stockholder
Representative commences any litigation with respect to such obligations or
liabilities, such Purchaser Indemnified Party may seek resolution in such
Proceeding of the Sellers’ obligations and liabilities without regard to the
provisions of Section 7.6(a) and receive payment of any Losses to
which it is determined to be entitled in such Proceeding).  If and to the extent that upon resolution of
such dispute it is determined that such Purchaser Indemnified Party is entitled
to indemnification under this Article VII, then (A) such Purchaser
Indemnified Party shall be paid for its indemnifiable Losses under this Article VII
without having exhausted its remedies against the Old Aircast Sellers, and (B)
the Sellers shall be subrogated to the rights of the Purchaser Indemnified
Parties against the Old Aircast Sellers with respect to such Losses.  If and to the extent that upon resolution of
such dispute it is determined that the Purchaser Indemnified Parties are not
entitled to indemnification under this Article VII, then (I) the
Purchaser Indemnified Parties shall have no further rights against the Sellers
with respect to such Multiple Source of Recovery Matter and (II) any Indemnity
and Earnout Escrow Funds reserved with respect to such Multiple Source of
Recovery Matter shall be released (x) from reservation under the Indemnity and
Earnout Escrow Agreement, if such instructions are delivered during the
Indemnity and Earnout Escrow Period, or (y) to the Sellers, if such
instructions are delivered after the end of the Indemnity and Earnout Escrow
Period.


 


(e)           With
respect to any claim or Proceeding after the Closing against the Old Aircast
Sellers related to a Multiple Source of Recovery Claim (other than with respect
to a claim or Proceeding for which the Sellers have assumed the defense
pursuant to Section 7.5 or the right to control against the Old Aircast
Sellers pursuant to Section 7.6(b)): (i) the Purchaser Indemnified
Parties shall promptly inform the Stockholder Representative of all material
developments related thereto (including any refusal or failure by the Old Aircast
Sellers to assume, pursuant the terms of the Aircast Asset Purchase Agreement
or otherwise, the defense of any Third Party Claim which is also a Multiple
Source of Recovery Matter); (ii) the Stockholder Representative shall have the
right, but not the obligation, to participate, at the cost and expense of the
Sellers, in the indemnification proceedings with respect to such Pre-December 7th
Losses, including through legal counsel reasonably selected by it; and (iii)
the Purchaser Indemnified Parties shall not settle or compromise a claim
against the Old Aircast Sellers or consent to a settlement claim with a third
party proposed by the Old Aircast Sellers (as indemnifying parties under the
Aircast Asset Purchase Agreement) or by the Company, a Company Subsidiary or a
Purchaser Indemnified Party in their capacities as indemnified parties under
the Aircast Asset Purchase Agreement without the prior written consent of the
Stockholder Representative, which consent will not be unreasonably withheld,
conditioned or delayed.  If the Sellers
have assumed the defense of a Multiple Source of Recovery Claim pursuant to Section
7.5, are controlling a claim or Proceeding against the Old Aircast Sellers
pursuant to Section 7.6(b) or are prosecuting such a claim or Proceeding
pursuant to the subrogation rights provided by Section 7.9:  (i) the Purchaser Indemnified Parties shall
take such actions as the Sellers may reasonably request in connection
therewith; (ii) the Purchaser Indemnified Parties shall, during


 


57

















 


normal business hours, upon reasonable
notice, cooperate in all reasonable ways with, make its and their relevant
files and records reasonably available for inspection and copying by, make its
and their employees reasonably available to, and otherwise render reasonable
assistance to, the Stockholder Representative related to the evaluation and
prosecution of the Pre-December 7th Losses; (iii) the Purchaser
Indemnified Parties shall not settle or compromise a claim against the Old
Aircast Sellers or consent to a settlement claim with a third party proposed by
the Old Aircast Sellers (as indemnifying parties under the Aircast Asset
Purchase Agreement) or by the Company, a Company Subsidiary or a Purchaser
Indemnified Party in their capacities as indemnified parties under the Aircast
Asset Purchase Agreement without the prior written consent of the Stockholder
Representative, which consent shall not be unreasonably withheld, delayed or
conditioned; and (iv) the Sellers shall not settle or compromise such
claim against the Old Aircast Sellers or consent to a settlement claim with a
third party proposed by the Old Aircast Sellers (as indemnifying parties under
the Aircast Asset Purchase Agreement) without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld, delayed or
conditioned, provided that the consent of the Purchaser shall not be required
for any settlement that does not purport to limit or restrict the business or
operations of the Purchaser Indemnified Parties in any material manner or
require future payments by any Purchaser Indemnified Party arising from the
conduct of the Purchaser Indemnified Parties’ business (except that any such
settlement by the Sellers of a Third Party Claim shall be made only in
accordance with Section 7.5(d)). 
Any reasonable third party expenses incurred by the Purchaser
Indemnified Parties in performing their obligations under the preceding
sentence shall be Losses arising out of the related Multiple Source of Recovery
Matter.


 


(f)            If,
after having fully exhausted their indemnification rights against the Old
Aircast Sellers in accordance with this Section 7.6: (i) the Purchaser
Indemnified Parties have not recovered from the Old Aircast Sellers an amount
equal to their aggregate indemnifiable Losses with respect to the underlying
Multiple Source of Recovery Matter, then the Purchaser Indemnified Parties may
provide another Notice of Claim pursuant to Section 7.4(a)
concerning such Multiple Source of Recovery Matter (a “Second MSRM Notice of
Claim”), which shall specify the amount of unrecovered indemnifiable Losses
and the other information required under Section 7.4(a), and the
procedures set forth in this Article VII shall thereafter apply
with respect to such indemnification claim (with any Indemnity and Earnout
Escrow Funds amount reserved in response to the corresponding Initial MSRM
Notice of Claim and not released from reservation pursuant to the following
provisions of this Section 7.6(f) available for recovery by the
Purchaser Indemnified Parties with respect to the Second MSRM Notice of Claim);
and (ii) if applicable, the Purchaser Indemnified Parties have recovered from
the Old Aircast Sellers any amount more than zero with respect to the underlying
Multiple Source of Recovery Matter, then concurrently with delivery of the
Second MSRM Notice of Claim the Purchaser Indemnified Parties shall deliver
written instructions directing the Escrow Agent to release (A) from reservation
under the Indemnity and Earnout Escrow Agreement, if such instructions are
delivered during the Indemnity and Earnout Escrow Period, or (B) to the
Sellers, if such instructions are delivered after the end of the Indemnity and
Earnout Escrow Period, that portion of the Indemnity and Earnout Escrow Funds
reserved in response to the corresponding Initial MSRM Notice of Claim
recovered from the Old Aircast Sellers, together with any interest and income
thereon (to the extent such interest and income is not applied to the fees and
expenses of the Escrow Agent as provided in the Indemnity and Earnout Escrow
Agreement).  If the Stockholder
Representative believes that any Purchaser Indemnified Party has failed to
provide a Second MSRM Notice of Claim within thirty (30) days after it has
fully exhausted its rights against the Old Aircast Sellers, the Stockholder
Representative may at any time thereafter, but prior to the receipt of a Second
MSRM Notice of Claim, deliver a notice to the


 


58

















 


Purchaser stating that the Purchaser
Indemnified Parties have failed to deliver a Second MSRM Notice of Claim and
identify the Multiple Source of Recovery Matter to which such failure
relates.  If the Purchaser Indemnified
Parties fail to deliver a Second MSRM Notice of Claim within twenty (20)
Business Days after such notice from the Stockholder Representative, the
Stockholder Representative may thereafter instruct the Escrow Agent to release
the Indemnity and Earnout Escrow Funds reserved in response to the
corresponding Initial MSRM Notice of Claim (I) from reservation under the
Indemnity and Earnout Escrow Agreement, if such instructions are delivered
during the Indemnity and Earnout Escrow Period, or (II) to the Sellers, if such
instructions are delivered after the end of the Indemnity and Earnout Escrow
Period.


 


(g)           To
the extent that, after having received from the Sellers under this Article VII
recovery (whether from the Indemnity and Earnout Escrow Funds or otherwise) of
any amount with respect to an Multiple Source of Recovery Matter, any Purchaser
Indemnified Party subsequently receives any recovery from the Old Aircast
Sellers with respect to such Multiple Source of Recovery Matter (including as a
result of aggregate claims against the Old Aircast Sellers exceeding the
thresholds set forth in Section 9.4(b) of the Aircast Asset Purchase
Agreement), such Purchaser Indemnified Party shall promptly remit to the
Sellers (or to the Escrow Agent to be held pursuant to the Indemnity and
Earnout Escrow Agreement, if such recovery occurs prior to the end of the
Indemnity and Earnout Escrow Period) the amount by which the aggregate amount
recovered by the Purchaser Indemnified Parties from the Old Aircast Sellers and
the Sellers with respect to such Multiple Source of Recovery Matter exceeds the
Losses incurred by the Purchaser Indemnified Parties with respect to such
Multiple Source of Recovery Matter (up to the amount previously received from
the Sellers).


 


7.7           Insurance
Proceeds.  The Purchaser agrees to,
and to cause its Affiliates (including the Company and the Company
Subsidiaries, following the Closing) to: (a) in good faith, diligently seek
recovery, at its or their own expense (which shall be a Loss), of all insurance
proceeds from insurers with respect to all Losses with respect to which any
Purchaser Indemnified Party makes a claim for indemnification under this Article VII;
and (b) keep the Stockholder Representative informed of all material matters
related thereto.  To the extent that the
Purchaser or any of its Affiliates (including the Company and the Company
Subsidiaries, following the Closing) receives any amount under insurance
coverage with respect to a matter for which it has previously obtained payment
in indemnification under this Article VII, the Purchaser shall, as
soon as reasonably practicable after receipt of such insurance proceeds, pay
and reimburse to the Escrow Agent (if such reimbursement is to be delivered
during the Indemnity and Earnout Escrow Period) or to the Sellers (if such
reimbursement is to be delivered after the end of the Indemnity and Earnout
Escrow Period), for any prior indemnification payment (up to the amount of the
insurance proceeds, less any premium increases directly attributable thereto).  Any amount paid to the Sellers pursuant to
this Section 7.7 shall be paid to each Seller in the proportion that the
number of Shares owned by such Seller immediately prior to the Closing bears to
the aggregate number of Shares owned by all the Sellers immediately prior to the
Closing.


 


7.8           Mitigation
of Damages.  Each Indemnified Party
shall be required to use commercially reasonable efforts to mitigate, to the
fullest extent reasonably practicable, the amount of any Losses for which a
claim for indemnification is made under this Article VII and,
notwithstanding anything to the contrary in this Article VII, the
Indemnifying Party shall not be required hereunder to provide indemnification
with respect to any Losses resulting from failure of any Indemnified Party to
use such commercially reasonable efforts.


 


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7.9           Subrogation.  Upon making any payment for Losses of an
Indemnified Party under this Article VII, the Indemnifying Party
will, to the extent of such payment, be subrogated to all rights of the
Indemnified Party against any third party with respect to the Loss to which the
payment relates; provided, however, with respect
to the Sellers such subrogation shall not apply to (a) rights against any
Significant Customer or Significant Supplier or (b) rights against any
insurance provider except pursuant to occurrence-based policies or tail
coverage for claims-made policies issued to the Company or any of the Company
Subsidiaries prior to the Closing.  In
addition to any other obligation under this Agreement, the Indemnified Party
agrees to duly execute and deliver, upon request of the Indemnifying Party, all
instruments reasonably necessary to evidence and perfect any subrogation rights
granted pursuant to this Section 7.9.


 


7.10         Limitations.  Notwithstanding anything to the contrary in
this Article VII, in no event will any Indemnified Party be
entitled to receive indemnification under this Article VII for
Losses relating to any matter for any consequential or punitive damages other
than to the extent that an Indemnified Party is seeking to obtain through
indemnification reimbursement of Losses resulting from a consequential or
punitive damage award against it in a Third Party Claim.


 


7.11         Tax
Treatment of Seller Indemnification Payments.  Any indemnification payments made by the
Sellers pursuant to this Article VII (including by release from the
Indemnity and Earnout Escrow Funds) shall be treated for all Tax purposes as
reductions to the Purchase Price paid for the Shares.


 


7.12         Exclusive
Remedy.


 


(a)           Notwithstanding
anything to the contrary in this Agreement or otherwise, but subject to Section
7.12(b), following the Closing, except for claims arising out of the
matters described in clauses (A) through (D) of Section 7.3
(for which the Purchaser may seek any remedy available to it in law or in
equity, but subject to the limitations set forth in Sections 7.1, 7.3,
7.7, 7.8, 7.9 and 7.10 and Article X),
and subject to the Purchaser’s right to specifically enforce the provisions of Sections
1.1, 1.3 and 1.6 and each agreement and covenant in Article V
or Article X that by its terms is to be performed in whole or in
part after the Closing, (i) the Sellers shall have no liability of any kind to
the Purchaser or any other Purchaser Indemnified Party, subject only to the
Purchaser’s right to bring indemnification claims pursuant to this Article VII
solely against the Indemnity and Earnout Escrow Funds in accordance with Section
1.4 and the Indemnity and Earnout Escrow Agreement (but with respect to the
matters described in clause (E) of Section 7.3, subject to the
additional indemnification rights expressly set forth in Section 7.3),
which shall be the sole and exclusive remedy of the Purchaser Indemnified
Parties for breach of any representations and warranties or covenants and
agreements contained in this Agreement; and (ii) the Purchaser, on behalf of
itself and all other Purchaser Indemnified Parties, hereby irrevocably waives
any right to any other remedy for any breach of any representations and
warranties and covenants and agreements contained in this Agreement.  After the Closing, except for matters for
which specific performance is an appropriate remedy, the Sellers’ sole and
exclusive remedy with respect to any breach of this Agreement by Purchaser or
its Subsidiaries shall be the indemnification provided by this Article VII.  Without limiting the generality of the preceding
two sentences of this Section 7.12(a), the rights and claims waived by
the Purchaser and the Purchaser Indemnified Parties, on the one hand, and the
Sellers, on the other hand, under this Section 7.12(a) include claims
for contribution or other rights of recovery arising out of or relating to any
Environmental Law


 


60

















 


(whether
now or hereinafter in effect), claims for breach of contract,
breach of representations and warranties, negligent misrepresentation and all
other claims for breach of duty.


 


(b)           Notwithstanding
anything to the contrary in Section 7.12(a), if and to the extent that,
during the Indemnity and Earnout Escrow Period, it is determined that the
Purchaser is entitled to a payment under this Article VII and,
solely as a result of payment from the Indemnity and Earnout Escrow Funds
either with respect to a breach of the representations and warranties set forth
in Section 2.3 or pursuant to Section 1.6, there are not
then sufficient Indemnity and Earnout Escrow Funds to satisfy the full amount
of such payment, the Sellers shall each be required to pay to the Purchaser in
full satisfaction of such payment obligation, by wire transfer of immediately
available funds or interbank transfer to the Purchaser’s account, their
respective pro rata portions of
an amount equal to the lesser of: (i) the sum of the Sellers’ Share and the
amount of any Losses subject to prior payments from the Indemnity and Earnout
Escrow Funds with respect to a breach of the representations and warranties set
forth in Section 2.3; or (ii) the amount by which the Indemnity and
Earnout Escrow Funds were insufficient to satisfy the full amount of such
payment.


 


7.13         Conflict
of Interest.  The Purchaser waives
and will not assert, and agrees to cause the Company and the Company
Subsidiaries to waive and to not assert after the Closing, any conflict of
interest arising out of the representation, after the Closing (the “Post-Closing
Representation”), of any Seller or the Stockholder Representative, or any
officer, director, principal or managing member of a general partner or
managing member of a Seller or the Stockholder Representative (any such Person,
a “Designated Person”) in any matter involving this Agreement and
the transactions contemplated hereby, by Kelley Drye & Warren LLP
(the “Current Representation”). 
Notwithstanding the foregoing, if after the Closing Purchaser discovers
facts materially different from those made available to Purchaser regarding
services performed by counsel to Sellers on behalf of the Company (and in
particular, if such counsel was involved in matters that are the basis of a
Third Party Claim against the Company or a Company Subsidiary), then Purchaser
may assert a conflict of interest arising from such newly discovered facts with
respect to the matters in question.


 


ARTICLE
VIII

TERMINATION


 


8.1           Termination.  This Agreement may be terminated at any time
prior to the Closing Date:


 


(a)           By
the written agreement of the Purchaser and the Stockholder Representative;


 


(b)           By
either the Purchaser or the Stockholder Representative, if the Closing shall
not have occurred on or before November 15, 2006 (or such other date to which
the Purchaser and the Stockholder Representative may agree in writing) (the “End
Date”); provided, however,
that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose breach of any provision of this
Agreement shall have caused, or resulted in, the failure of the Closing Date to
occur on or before the End Date;


 


(c)           By the Purchaser if
there shall be in effect any litigation commenced by a Governmental Entity that
would be reasonably likely to have a Purchaser Material Adverse Effect


 


61

















 


or that would enjoin, restrain or prohibit
the consummation of the transactions contemplated by this Agreement; provided, however, that such litigation shall not have been
dismissed, settled or otherwise cured within fifteen (15) days after written
notice has been provided by Purchaser to the Stockholder Representative of its
intent to terminate this Agreement;


 


(d)           By
the Purchaser, upon a breach of any representation and warranty, covenant or
agreement of a Seller or the Sellers set forth in this Agreement or if any
representation and warranty of a Seller or the Sellers set forth in this
Agreement shall become untrue, in either case such that the conditions set
forth in Sections 6.1(a), (b), (c) or (d) (as
applicable) would not be satisfied as of the time of such breach or as of the
time such representation and warranty shall have become untrue; provided, however, that if such breach or
untruth is curable by such Seller or the Sellers, as applicable, prior to the
End Date through the exercise of commercially reasonable efforts, then the
Purchaser may not terminate this Agreement under this Section 8.1(d)
prior to thirty (30) days following written notice having been provided by the
Purchaser to such Seller or the Sellers, as applicable, of such breach (and
then only if such breach or untruth has not been cured); or


 


(e)           By
the Stockholder Representative, upon a breach of any representation and
warranty, covenant or agreement of the Purchaser set forth in this Agreement or
if any representation and warranty of the Purchaser set forth in this Agreement
shall become untrue, in either case such that the conditions set forth in Sections 6.2(a)
or (b) (as applicable) would not be satisfied as of the time of such
breach or as of the time such representation and warranty shall have become
untrue; provided, however, that
if such breach or untruth is curable by the Purchaser prior to the End Date
through the exercise of commercially reasonable efforts, then the Stockholder
Representative may not terminate this Agreement under this Section 8.1(e)
prior to thirty (30) days following written notice having been provided by the
Stockholder Representative to the Purchaser of such breach (and then only if
such breach or untruth has not been cured).


 


A termination made in accordance with Section
8.1(b), (c), (d) or (e) shall be effective upon
delivery of a notice of termination by the terminating party to each other
party (subject to the cure periods in Sections 8.1(c), (d) and (e),
which notice shall refer to the provision of this Section 8.1 pursuant
to which such termination is made.


 


8.2           Effect
of Termination.  In the event of the
termination of this Agreement pursuant to the provisions of Section 8.1,
this Agreement shall become void and have no effect, without any liability to
any party or any of its directors, officers, representatives, stockholders or
Affiliates in respect hereof; provided, however,
that (x) any such termination shall not affect the parties’ respective rights
and obligations under Section 5.8 (regarding publicity), Article X,
the Confidentiality Agreement and this Section 8.2 and (y) if such
termination results from the (i) willful failure of a party to perform a
covenant or agreement set forth in this Agreement or (ii) willful breach by a
party of any of its representations and warranties set forth in this Agreement,
such party shall be fully liable for any and all Losses incurred or suffered by
the other parties as a result of such willful failure or willful breach.  The provisions of this Section 8.2
shall survive any termination of this Agreement.  If this Agreement is terminated as provided
herein:


 


(a)           the
Purchaser shall return to the Stockholder Representative all documents and
other materials received from the Sellers, the Company, any Company Subsidiary
or any of their respective Affiliates, agents and representatives (including
all copies of or materials developed from any such documents or other
materials) relating to the transactions contemplated hereby,


 


62

















 


whether obtained before or after the
execution hereof, or shall destroy the same and deliver an officers certificate
signed by the Purchaser’s chief financial officer confirming the destruction
thereof;


 


(b)           each
Seller shall, and the Sellers shall cause the Company and the Company
Subsidiaries to, return to the Purchaser all documents and other materials
received from the Purchaser or any of its Affiliates, agents and
representatives (including all copies of or materials developed from any such
documents or other materials) relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, or shall destroy the
same and deliver a certificate signed by an authorized representative of such
Seller, the Company or the Company Subsidiaries, as applicable, confirming the
destruction thereof;


 


(c)           all
confidential information received by the Purchaser with respect to the Sellers,
the Company and the Company Subsidiaries and their respective Affiliates shall
be treated in accordance with the Confidentiality Agreement, which shall remain
in full force and effect notwithstanding the termination of this Agreement; and


 


(d)           all
confidential information received by the Sellers, the Company and the Company
Subsidiaries with respect to the Purchaser and its Affiliates shall be treated
in the same manner as Purchaser Information under Section 5.5(c).


 


ARTICLE IX

DEFINITIONS


 


9.1           Definition
of Certain Terms.  The terms defined
in this Article IX, whenever used in this Agreement (including in
the Seller Disclosure Schedule and the Purchaser Disclosure Schedule), shall
have the respective meanings indicated below for all purposes of this
Agreement.


 


“280G Consent” has the meaning set
forth in Section 5.4(f).


 


“Adjustment Date Conversion Ratios”
has the meaning set forth in Section 1.3(b).


 


“Affiliate” means, with respect to any
Person, a Person that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
such Person, with “control” (including the terms “controlled by” and “under
common control with”) meaning the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.


 


“Aggregate Balance Amount” has the
meaning set forth in Section 1.3(b).


 


“Agreement” means this Stock Purchase
Agreement, including the Exhibits and Schedules hereto, as amended,
supplemented and modified from time to time in accordance with its provisions.


 


“Aircast Asset Purchase Agreement” means
the Asset Purchase Agreement, dated as of October 31, 2004, among Old Aircast
Inc., Old Aircast LLC and Aircast US Opco, as the same is in effect on the date
hereof.


 


63

















 


“Aircast Intermediate Holdco” means
Aircast Holding Company LLC, a Delaware limited liability company (formerly AI
Holding Company LLC).


 


“Aircast US Opco” means Aircast LLC, a
Delaware limited liability company (formerly AI Asset Acquisition Company LLC).


 


“Alternative Transaction” has the
meaning set forth in Section 5.6.


 


“Applicable Laws” has the meaning set
forth in Section 2.15.


 


“Audited Financial Statements” has the
meaning set forth in Section 2.5.


 


“Business” means the
business of the Company and the Company Subsidiaries distributing and selling
medical devices for the functional management of joint injuries, fractures and
edema, as conducted by the Company and the Company Subsidiaries as of the date
of this Agreement.


 


“Business Day” means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York, New York or San Diego County, California, are
authorized or obligated by law or executive order to close.


 


“Business Intellectual Property” has
the meaning set forth in Section 2.11.


 


“Capped Employment Taxes” means Employment Taxes for which there
is a maximum taxable wage base.


 


“CERCLA” has the meaning set forth in Section 2.16(d).


 


“Closing” has the meaning set forth in
Section 1.2(a).


 


“Closing Date” has the meaning set
forth in Section 1.2(a).


 


“Closing Memorandum” means the
memorandum delivered by the Stockholder Representative pursuant to Section 1.2(b)
which shall set forth, to the extent reasonably available to the Stockholder
Representative:  (a) the name of each
Person to receive a payment under Section 1.2(b) at the Closing and
of the members of management and employees to whom payments will be made
pursuant to Section 1.2(b)(v), (b) the amount payable to each such
Person and (c) the payment instructions for each such Person and the amount of
the Retention Program Escrow Deposit; and to which shall be appended (I) pay
off letters for the Funded Debt referred to in Section 1.2(b)(i), (II)
invoices of the advisors, legal counsel, accountants and other professionals
for the fees and expenses to be paid at the Closing pursuant to Sections 1.2(b)(iii)
(A) and (B) and Sections 1.2(b)(iv)(A) and (B),
respectively, (III) a schedule of the amounts referred to in Section
1.2(b)(v), on a per person basis and (IV) a statement of the relative
participation of each Seller in amounts paid to the Sellers as the Purchase
Price.


 


“Code” means the Internal Revenue Code
of 1986, as amended.


 


“Common Stock” has the meaning set
forth in Recital A.


 


64

















 


“Company” has the meaning set forth in
Recital A.


 


“Company Permits” has the meaning set
forth in Section 2.18.


 


“Company Subsidiaries” means all
Subsidiaries of the Company, and includes their respective successors and
assigns.


 


“Confidentiality Agreement” has the
meaning set forth in Section 5.5(a).


 


“Contract” means any written
agreement, contract, commitment, instrument, undertaking or arrangement that is
binding, in whole or in part, upon the parties thereto.


 


“Credit Agreements” means: (a) the
First Lien Credit Agreement, dated as of December 7, 2004, among Aircast
Intermediate Holdco, Aircast US Opco, the “Lenders” thereunder (the “First
Lien Lenders”) and Credit Suisse First Boston, as “Administrative Agent”
and “Collateral Agent” for the First Lien Lenders, and all agreements,
instruments and other documents delivered thereunder or in connection
therewith; and (b) the Second Lien Credit Agreement, dated as of December 7,
2004, among Aircast Intermediate Holdco, Aircast US Opco, the “Lenders” thereunder
(the “Second Lien Lenders”) and Credit Suisse First Boston, as “Administrative
Agent” and “Collateral Agent” for the Second Lien Lenders, and all agreements,
instruments and other documents delivered thereunder or in connection
therewith.


 


“Credit Opportunities Stockholder” has
the meaning set forth in the preamble.


 


“Current Representation” has the
meaning set forth in Section 7.13.


 


“Delaware Courts” has the meaning set
forth in Section 10.12(a).


 


“Designated Person” has the meaning
set forth in Section 7.13.


 


“DLJ” has the meaning set forth in the
preamble.


 


“DLJ Stockholders” has the meaning set
forth in the preamble.


 


“DOJ” has the meaning set forth in Section
5.4(c).


 


“Earnout Obligations” has the meaning
set forth in Section 1.6(a).


 


“Earnout Obligors” has the meaning set
forth in Section 1.6(a).


 


“Earnout-Related Costs” has the
meaning set forth in Section 1.2(b)(ii).


 


“Employee” and “Employees” have
the meaning set forth in Section 5.9(a).


 


“Employee Plan” has the meaning set
forth in Section 2.14(a).


 


“Employees’ Withholding Taxes” has the
meaning set forth in Section 1.2(b)(v).


 


65

















 


“Employment Taxes” means federal
Social Security, Medicare and Unemployment (FUTA) Taxes and similar Taxes under
foreign, state and local Law.


 


“End Date” has the meaning set forth
in Section 8.1(b).


 


“Enforcement Action” means any fines,
injunctions, civil or criminal penalties, recalls, seizures, detentions or
suspensions.


 


“Environmental Claim” means any
Proceeding, demand, claim, notice of violation or potential responsibility,
cause of action or complaint alleged or asserted by any Person arising out of
or relating to: (a) any actual or alleged violation of any Environmental Law;
(b) any Hazardous Substance, from any abatement, disposal, Release, threatened
Release, removal, remedial, corrective, or other response action in connection
with a Hazardous Substance, Environmental Law, or from any actual or alleged
damage, injury, threat, or harm to health, safety, natural resources, or the
environment, regardless of whether such matter is now known or unknown, or how
or when such matter occurred or is discovered; or (c) any Person’s incurrence
of costs, expenses, losses or damages of any kind whatsoever in connection with
the presence or Release of Hazardous Substances.


 


“Environmental Law” means any U.S.
federal, state, county, regional, foreign or local law, statute, rule,
regulation, code, ordinance, order, decree or judgment relating to:  (a) the manufacture, transport, use,
treatment, storage, disposal of Hazardous Substances, Release or threat of
Release; (b) pollution or the protection of human health, safety or the
environment as they relate to Hazardous Substances or the environment
(including natural resources, air, and surface or subsurface land or waters);
or (c) natural resources, including laws relating to Releases or threats of
Releases or otherwise relating to the manufacture, processing, distribution,
use, presence, production, treatment, storage, disposal, transport, or handling
of Hazardous Substances, including the Federal Water Pollution Control Act (33
U.S.C. §1251 et seq.), RCRA, the Safe Drinking Water Act (42 U.S.C. §3000(f) et
seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Clean
Air Act (42 U.S.C. §7401 et seq.), CERCLA, and other similar state and local
statutes, and any regulations promulgated thereto.


 


“Environmental Permits” has the
meaning set forth in Section 2.16 (b).


 


“EPA” has the meaning set forth in Section
2.16(c).


 


“Equitable Exceptions” means any limitations on the enforceability of
obligations resulting from: (a) bankruptcy, insolvency, reorganization,
moratorium or other requirements of Laws, Orders or equitable principles now or
hereafter in effect relating to or affecting the enforcement of creditors’
rights or debtors’ obligations generally; and (b) as to the remedy of specific
performance and injunctive and other forms of equitable relief, the imposition
of equitable defenses and the discretion of the Judicial Authority before which
any Proceeding therefor may be brought.


 


“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.


 


66

















 


“ERISA Affiliate” means any trade or
business (whether or not incorporated) which, together with the Company or any
Company Subsidiary (or their respective successors), is or would have been at
any date of determination occurring since the formation of the Company and the
Company Subsidiaries, treated as a single employer under Section 414 of
the Code.


 


“Escrow Agent” has the meaning set
forth in Section 1.2(b)(vi).


 


“FDA” has the meaning set forth in Section
2.21(a).


 


“Financial Statement Parties” has the
meaning set forth in Section 2.5.


 


“Financial Statements” has the meaning
set forth in Section 2.5.


 


“Foreign Plan” has the meaning set
forth in Section 2.14(d).


 


“Former Real Property” has the meaning
set forth in Section 2.16(a).


 


“FTC” has the meaning set forth in Section
5.4(c).


 


“Funded Debt” means: (a) all Indebtedness
of the Company and the Company Subsidiaries under the Credit Agreement and the
Subordinated Notes; and (b) any other Indebtedness for borrowed money of the
Company or any Company Subsidiary (including obligations under the related
Interest Rate Swap Agreements and the Interest Rate Cap Agreement between
Aircast Intermediate Holdco and Wachovia Bank, N.A., and Credit Suisse First
Boston International, as counterparties).


 


“GAAP” means United States generally
accepted accounting principles in effect as of the date of this Agreement.


 


“Governmental Authority” means any:
(a) federal, state, regional, county, city, municipal or local government,
whether foreign or domestic; (b) governmental or quasi-governmental authority
of any nature, including any regulatory or administrative agency, commission,
department, board, bureau, court, tribunal, arbitrator, arbitral body, agency,
branch, official entity or other administrative or regulatory body obtaining
authority from any of the foregoing, including courts, public utilities, sewer
authorities and any supra-national organization, state, county, city or other
political subdivision; or (c) other Person exercising or entitled to exercise
any administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.


 


“Hazardous Substance” means any
hazardous substance as defined in 42 U.S.C. § 9601(14), any hazardous
waste as defined by 42 U.S.C. §6903(5), any pollutant or contaminant as defined
by 42 U.S.C. §9601(33), any toxic substance, oil or hazardous material or other
chemical or substance (including, without limitation, any petroleum product or
by-product, asbestos in any form, polychlorinated biphenyls, urea formaldehyde
or perchlorate) regulated by or forming the basis of liability under any
applicable Environmental Laws, or any other material or substance that is
listed or classified as hazardous pursuant to any applicable Environmental Law.


 


67

















 


“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.


 


“Indebtedness” means, as to any
Person, (a) all indebtedness to any other Person for borrowed money; (b) all
obligations evidenced by bonds, debentures, notes or other instruments; (c) all
obligations upon which interest charges are customarily paid or owed (other
than trade payables incurred in the ordinary course of business); (d)
capitalized lease obligations, synthetic lease obligations, sale leaseback
obligations and other similar indebtedness obligations, whether secured or
unsecured; and (e) all such indebtedness of any other Person which is directly
or indirectly guaranteed by such Person or which such Person has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured against loss, but not including, for the
purposes of each of the foregoing clauses (a) through and including (e),
any inter-company payables or other obligations solely among such Person and
any direct or indirect Subsidiary or Subsidiaries of such Person.


 


“Indemnification Cap” has the meaning
set forth in Section 7.3.


 


“Indemnification Deductible” has the
meaning set forth in Section 7.3.


 


“Indemnified Officers or Directors”
has the meaning set forth in Section 5.11(a).


 


“Indemnified Party” has the meaning
set forth in Section 7.4(a).


 


“Indemnifying Party” has the meaning
set forth in Section 7.4(a).


 


“Indemnity and Earnout Escrow Agreement”
has the meaning set forth in Section 1.4.


 


“Indemnity and Earnout Escrow Deposit”
has the meaning set forth in Section 1.2(b)(vi).


 


“Indemnity and Earnout Escrow Funds”
has the meaning set forth in Section 1.4.


 


“Indemnity and Earnout Escrow Period”
has the meaning set forth in Section 1.4.


 


“Individual Seller’s Knowledge” means:
(a) with respect to the Tailwind Stockholders, except as set forth on Section
9.1(a) of the Seller Disclosure Schedule, the actual knowledge, after
reasonable inquiry, of Douglas Karp, Lawrence Sorrel, Geoffrey Raker or Jeffrey
Calhoun; (b) with respect to the DLJ Stockholders, the actual knowledge of
Edward Johnson; and (c) with respect to the Credit Opportunities Stockholder,
the actual knowledge of Bennett Goodman.


 


“Initial MSRM Notice of Claim” has the
meaning set forth in Section 7.6(c).


 


“Intellectual Property”  means any patents, utility models, industrial
designs, trademarks, service marks, trade names, domain names, copyrights,
trade secrets, know how, technology and inventions and any registrations or
applications for registration of any of the foregoing.


 


68

















 


“IRS” means the Internal Revenue
Service.


 


“ISRA” means the New Jersey Industrial
Site Recovery Act, NJSA §§13:1 K-6, et seq.


 


“Judicial Authority” means any court,
arbitrator, special master, receiver, tribunal or similar body of any kind,
whether foreign or domestic (including any Governmental Authority exercising
judicial powers or functions of any kind).


 


“Knowledge of the Sellers” means the
actual knowledge of Thomas Crowley, Joseph Milano, Fabian McCarthy, Johan de
Ruiter and William Devitt, in each case after inquiry by such individual to his
direct reports with respect to the matter in question, and the actual knowledge
of Douglas Karp, Lawrence Sorrel, Geoffrey Raker and Jeffrey Calhoun.


 


“Knowledge of the Purchaser” means the
actual knowledge, after
reasonable inquiry,
of Leslie H. Cross, Vickie L. Capps, Donald M. Roberts, Luke Faulstick and Lou
Ruggiero.


 


“Law” means any treaty, statute, law,
ordinance, regulation, Order or rule issued, promulgated or entered by or with
any Governmental Authority, or, as to the Purchaser only, any securities
exchange on which the securities of the Purchaser or its parent company are
listed from time to time.


 


“Leased Real Property” has the meaning
set forth in Section 2.12.


 


“Lien” means any mortgage, pledge,
deed of trust, hypothecation, claim, security interest, title defect,
encumbrance, burden, charge or other similar restriction, lease, sublease,
claim, title retention agreement, option, easement, covenant, encroachment or
other adverse claim.


 


“Loss” means any claim, liability,
shortage, damage, diminution in value, settlement, deficiency, expense
(including reasonable attorneys’ and accountants’ fees), assessment, Tax, or
loss of any kind.


 


“Management Members’ Withholding Taxes”
has the meaning specified in Section 1.2(b)(v).


 


“Material Adverse Effect” means a
material adverse effect on the business, operations, properties, Liabilities or
results of operations of the Company and the Company Subsidiaries, taken as a
whole; provided, however, that in
no event shall any change or effect resulting from the occurrence, after the
date of this Agreement, of any of the following be considered a Material
Adverse Effect: (a) any change in general economic or political conditions or
changes affecting the industry generally in which the Company or any Company
Subsidiary operates; (b) any natural disaster, any act of terrorism, sabotage,
military action or war (whether or not declared) or any other social or
political disruption, in each case including any escalation or worsening
thereof, which does not have a disproportionate impact on the Company and the
Company Subsidiaries, taken as a whole, as compared to the industry generally
in which the Company or any Company Subsidiary operates; (c) any adverse
change arising from or relating to any change in accounting requirements
applicable to the Company or any Company Subsidiary; (d) any adverse


 


69

















 


change arising from or relating
to any change in Laws described in Section 9.1(b) of the Seller
Disclosure Schedule; (e) the announcement of this Agreement or the transactions
contemplated by this Agreement, not made in breach of the terms of this
Agreement, or other communication by the Purchaser of its plans or intentions
with respect to the Company or any Company Subsidiary; or (f) any actions
taken by the Purchaser, the Sellers, the Stockholder Representative, the Company
or any Company Subsidiary taken pursuant to (and without breach of) this
Agreement.


 


“Multiple Source of Recovery Matter”
has the meaning set forth in Section 7.6(b).


 


“NJDEP” means New Jersey Department of
Environmental Protection.


 


“Negative Bank Cash Difference Amount”
has the meaning set forth in Section 1.3(b).


 


“Notice of Claim” has the meaning set
forth in Section 7.4(a).


 


“OFAC” has the meaning set forth in Section
2.15.


 


“Old Aircast Inc.” means ANKL, Inc.
(formerly Aircast Incorporated), a New Jersey corporation.


 


“Old Aircast LLC” means ANKL
International Sales, L.L.C. (formerly Aircast International Sales, L.L.C.), a
New Jersey limited liability company.


 


“Old Aircast Parties” has the meaning
set forth in Section 2.16(d).


 


“Old Aircast Sellers” has the meaning
set forth in Section 1.6(a).


 


“Oral
Contract” means any oral agreement, contract, commitment, instrument,
undertaking or arrangement that is binding, in whole or in part, upon the
Company or any of the Company Subsidiaries parties thereto.


 


“Order” means any judgment, writ,
decree, directive, decision, injunction, ruling, award or order (including any
consent decree or cease and desist order) of any kind of any Governmental
Authority or Judicial Authority.


 


“Organizational Documents” of a Person
means: (a) its articles of incorporation, certificate of incorporation,
certificate of formation or similar document(s) filed with a Governmental
Authority, which filing forms or organizes the Person; and (b) its bylaws,
limited liability company operating agreement, partnership agreement, trust
agreement or similar document(s), whether or not filed with a Governmental
Authority, which organize or govern the internal affairs of such Person, in the
case of each of clause (a) and (b) above, as amended to date and in effect at
the time in question.


 


“Owned Real Property” has the meaning
set forth in Section 2.12.


 


“Parachute Payments” has the meaning
set forth in Section 5.4(f).


 


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“PBGC” has the meaning set forth in Section
2.14(b).


 


“Permit” means any permit, license,
authorization, registration, franchise, approval, certificate, variance, waiver
or other authorization, approval, consent, clearance or similar right issued,
granted or obtained by or from any Governmental Authority.


 


“Permitted Disclosure Recipients” has
the meaning set forth in Section 5.5(c).


 


“Permitted Liens” means: (a) Liens
disclosed in Section 9.1(c) of the Seller Disclosure Schedule, (b) Liens
expressly disclosed in the Financial Statements, including the notes thereto;
(c) Liens for Taxes that are being contested in good faith and for which
appropriate reserves have been established on the Financial Statements or that
are not yet due; (d) Liens arising under workers’ compensation, unemployment
insurance, social security, retirement or similar legislation; (e) purchase
money Liens other than those related to Funded Debt; (f) mechanic’s,
materialmen’s, carrier’s, repairer’s and other similar Liens arising or
incurred in the ordinary course of business or that are not yet due and payable
or that are being contested in good faith; (g) easements, rights of way,
encroachments and restrictions, zoning ordinances and other similar
encumbrances affecting the Owned Real Property or the Leased Real Property that
would be shown on, or disclosed by, a current title report or survey, and which
individually or in the aggregate, do not materially interfere with the use or
possession by the Company or any Company Subsidiary of any of the Owned Real Property
or the Leased Real Property; and (h) statutory Liens in favor of lessors
arising in connection with any property leased to the Company or any Company
Subsidiary which, individually or in the aggregate, are not material and do not
materially interfere with the use or possession by the Company or any Company
Subsidiary of any of the Owned Real Property or the Leased Real Property.


 


“Person” means any natural person,
firm, partnership, association, corporation, company, limited liability
company, trust, business trust, Governmental Authority or other entity.


 


“Positive Bank Cash Difference Amount”
has the meaning set forth in Section 1.3(b).


 


“Post-Closing Representation” has the
meaning set forth in Section 7.13(a).


 


“Post-December 7th Losses”
has the meaning set forth in Section 7.6(b).


 


“Pre-Closing Period” has the meaning
set forth in Section 5.1(a).


 


“Pre-December 7th Losses”
has the meaning set forth in Section 7.6(b).


 


“Preferred Stock” has the meaning set
forth in Recital A.


 


“Proceeding”
means any action, suit, arbitration, mediation, litigation or hearing involving
any Governmental Authority or Judicial Authority.


 


“Products”
means the products of the Company and the Company Subsidiaries, which are
listed in Section 9.1(d) of the Seller Disclosure Schedule.


 


71

















 


“Purchase Price” has the meaning set
forth in Section 1.2(b)(viii).


 


“Purchaser” has the meaning set forth
in the preamble.


 


“Purchaser Documents” has the meaning
set forth in Section 4.1(a).


 


“Purchaser Disclosure Schedule” means
the disclosure schedule setting forth exceptions to the representations and
warranties made by the Purchaser in Article IV, captioned in
accordance with Section 9.2, which is incorporated by reference into
this Agreement and thereby made a part hereof.


 


“Purchaser Indemnified Party” has the
meaning set forth in Section 7.2(a).


 


“Purchaser Information” has the
meaning set forth in Section 5.5(c).


 


“Purchaser Material Adverse Effect”
means a material adverse effect on the business, operations, properties,
Liabilities or results of operations of the Purchaser, the Company and the
Company Subsidiaries, taken as a whole and giving effect to the transactions
contemplated hereby.


 


“RCRA” means Resource Conservation and Recovery Act (42 U.S.C.
§6901 et seq).


 


 


 


“Real
Estate Leases” means each Contract under which the Company or any Company
Subsidiary leases any Leased Real Property.


 


“Release” means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, migration, leaching,
placing, discarding, dumping or disposing of any Hazardous Substances into the
environment (including the abandonment of barrels, containers or other closed
receptacles containing any Hazardous Substances).


 


 


 


“Required
Consents” has the meaning set forth in Section 2.2(b).


 


“Reservation Objection Notice” has the
meaning set forth in Section 7.6(d).


 


“Retention Program” has the meaning
set forth in Section 5.9(c).


 


“Retention Program Escrow Agreement”
has the meaning set forth in Section 1.5.


 


“Retention Program Escrow Deposit”
means that portion of $16,390,000 that is allocated to the Retention Program by
the Stockholder Representative prior to the Closing.


 


“Retention Program Escrow Funds” has
the meaning set forth in Section 1.5.


 


“Retention Program Escrow Period” has
the meaning set forth in Section 1.5.


 


“Sale Bonus Program” has the meaning
set forth in Section 5.9(b).


 


“Second MSRM Notice of Claim” has the
meaning set forth in Section 7.6(f).


 


“Securities Act” means the Securities
Act of 1933, as amended.


 


72

















 


“Seller” and “Sellers” have the
meanings set forth in the preamble.


 


“Seller Disclosure Schedule” means the
disclosure schedule setting forth certain information and exceptions to the
representations and warranties made by the Sellers in Article II
and Article III, captioned in accordance with Section 9.2,
and covenants and agreements made by the Sellers set forth elsewhere in this
Agreement, which is incorporated by reference into this Agreement thereby and
made a part hereof.


 


“Seller Documents” has the meaning set
forth in Section 2.2(a).


 


“Seller Indemnified Party” has the
meaning set forth in Section 7.2(c).


 


“Seller Representatives” has the
meaning set forth in Section 5.6.


 


“Sellers’ Share” has the meaning set
forth in Section 1.6(a).


 


“Senior Management” means Thomas
Crowley, Roger Martin, Fabian McCarthy, Johan de Ruiter, Ajey Atre and William
Devitt.


 


“Settlement Agreement” has the meaning
set forth in Section 1.6(e).


 


“Settlement Closing” has the meaning
set forth in Section 1.6(e).


 


“Settlement Payment” has the meaning
set forth in Section 1.6(a).


 


“Shares” has the meaning set forth in Recital
A.


 


“Significant Contracts” has the
meaning set forth in Section 2.10.


 


“Significant Customers” has the
meaning set forth in Section 2.8.


 


“Significant Suppliers” has the
meaning set forth in Section 2.8.


 


“Special Representations and Warranties”
has the meaning set forth in Section 7.1(a).


 


“Stockholder Representative” has the
meaning set forth in the preamble.


 


“Stock Purchase” has the meaning set
forth in Recital B.


 


“Stub Period Audit Expenses” has the
meaning set forth in Section 10.1(a).


 


“Subordinated Notes” means: (a) the
Subordinated Note, dated as of December 7, 2004, in the aggregate original
principal amount of $13,950,128.76,
issued by Aircast Intermediate Holdco to Old Aircast Inc.; and (b) the
Subordinated Note, dated as of December 7, 2004, in the aggregate original
principal amount of $1,799,871.24,
issued by Aircast Intermediate Holdco to Old Aircast LLC, in each case pursuant
to the Aircast Asset Purchase Agreement.


 


73

















 


“Subsidiary” means, with respect to
any Person, any other Person (other than a natural person), whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
is directly or indirectly owned or controlled by the first Person or by one or
more of its respective Subsidiaries.


 


“Subsidiary Asset Purchase Agreements”
means the Subsidiary Asset Purchase Agreements referred to in, and executed
pursuant to, the Aircast Asset Purchase Agreement.


 


“Tailwind Stockholders” has the
meaning set forth in the preamble.


 


“Tax” or “Taxes” means any
federal, state, local or foreign net or gross income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium (including
taxes under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax, governmental fee or
like assessment, together with any interest and penalties, additions to tax or
additional amounts imposed by any Governmental Authority.


 


“Tax Authority” means any Governmental
Authority with responsibility for Taxes.


 


“Tax Return” means all returns,
reports, forms, declarations, statements, estimated returns, claims for refund
and information returns supplied or required to be supplied to a Tax Authority
relating to Taxes.


 


“Third Party Claim” has the meaning
set forth in Section 7.5(a).


 


“Transaction Consideration” has the
meaning set forth in Section 1.2(b).


 


“Transfer Taxes” has the meaning set
forth in Section 5.10.


 


“TWCP” has the meaning set forth in
the preamble.


 


“Twelve Month Calculation” has the meaning set
forth in Section 1.6(f).


 


“Unaudited Financial Statements” has
the meaning set forth in Section 2.5.


 


“WARN Act” means the United States
Worker Adjustment and Retraining Act, 29 U.S.C. §2101, et seq., and the rules and regulations
promulgated thereunder from time to time.


 


“Welfare Plan” has the meaning set
forth in Section 2.14(a).


 


9.2           Disclosure
Schedules.  The parties acknowledge
and agree that any exception to a representation and warranty contained in this
Agreement that is disclosed in any section of the Seller Disclosure Schedule or
the Purchaser Disclosure Schedule under the caption referencing such
representation and warranty shall be deemed to also be an exception to each
other representation and warranty of the Sellers or the Purchaser (as
applicable) contained in this Agreement to the


 


74

















 


extent that it would be readily apparent to the Purchaser or the Seller
(as applicable) that such exception is applicable to such other representation
and warranty.  Certain information set
forth in the Seller Disclosure Schedule and the Purchaser Disclosure Schedule
is included therein solely for informational purposes and may not be required
to be disclosed pursuant to this Agreement, and the disclosure of any
information shall not be deemed to constitute an acknowledgment or admission
that such information is required to be disclosed in connection with the
representations and warranties made by the Sellers or the Purchaser, as the
case may be, in this Agreement or that it is material, nor shall such
information be deemed to establish a standard of materiality.


 


ARTICLE X

GENERAL PROVISIONS


 


10.1         Expenses.


 


(a)           Except
as otherwise specifically provided for in this Agreement: (i) as between the
Purchaser and the Sellers, the Purchaser, on the one hand, and the Sellers, on
the other hand, shall bear their respective expenses, costs and fees (including
attorneys’, auditors’ and financing fees, if any) incurred in connection with the
transactions contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith, whether or not the Closing
is consummated; and (ii) the Sellers shall cause the Company and the Company
Subsidiaries to pay all of their respective expenses, costs and fees (including
attorneys’ and auditors’ fees, if any) incurred prior to the Closing in
connection with the transactions contemplated hereby.  Notwithstanding the foregoing, the parties
agree and acknowledge that within ten (10) Business Days after the execution
and delivery of this Agreement the Purchaser shall pay to the Company the
amount set forth in Section 10.1(a) of the Seller Disclosure Schedule,
as reimbursement of the cost and expenses incurred by the Company and the
Company Subsidiaries in connection with preparation of the Audited Financial
Statements that are not related to work that would in any event be required in
connection with the audit of Aircast Intermediate Holdco and its Subsidiaries
for the full 2005 fiscal year financial statements (the “Stub Period Audit
Expenses”), and, as between the Purchaser and the Sellers, the Stub Period
Audit Expenses shall be the responsibility of the Purchaser and shall not be
the responsibility of the Sellers, the Company or any Company Subsidiary.


 


(b)           If
after the closing the Company or any Company Subsidiary receives an invoice or
demand for payment of fees and expenses from any advisor, legal counsel,
accountant or other professional for services performed to the Company or a
Company Subsidiary prior to the Closing, which amount would have been paid at
the Closing pursuant to Section 1.2(b)(iii)(A) or (B) or (iv)(A)
or (B) had such fees and expenses been identified prior to the Closing,
the Purchaser shall promptly notify the Sellers of such unpaid fees and
expenses, which notice will be accompanied by a copy of such invoice or demand
for payment.  (For purposes of this Section
10.1(b), notice properly given to the Stockholder Representative will be
deemed to also be notice to each Seller.) 
The Sellers shall thereafter assume full responsibility for the payment
of such fees and expenses, and if the Company or any Company Subsidiary is
thereafter compelled to pay any such amount, each of the Sellers shall within five
(5) Business Days after receipt from the Purchaser of notice of such compelled
payment, which notice shall be accompanied by reasonable evidence of the amount
paid and the obligation to make such payment, pay to the Company or a Company
Subsidiary, as directed by the Purchaser, that portion of such fees and
expenses paid by the Company or such Company Subsidiary which corresponds to
the portion of the Shares held by such


 


75

















 


Seller immediately prior to the Closing in
relation to the Shares held by all of the Sellers immediately prior to the
Closing.  The aggregate amount so paid
shall be treated for all Tax purposes as a reduction of the Purchase Price
pursuant to the last sentence of Section 1.2(b).


 


10.2         Further
Actions.  Subject to the terms and
conditions of this Agreement, at any time and from time to time after the
Closing, each of the parties, at its own cost and expense, in good faith and in
a timely manner, shall use its respective commercially reasonable efforts to
take or cause to be taken all appropriate actions, do or cause to be done all
things necessary, proper or advisable, and execute, deliver and acknowledge
such documents and other papers as may be required to carry out the provisions
of this Agreement and to give effect to the consummation of the transactions
contemplated by this Agreement.


 


10.3         Notices.  All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if:
(i) delivered personally; (ii) mailed using certified or registered
mail with postage prepaid; or (iii) sent by next-day or overnight mail or
delivery using a nationally recognized overnight courier service, as follows:


 


(a)           if to the Purchaser:


 


dj
Orthopedics, LLC

2985 Scott Street

Vista, CA 92081

Attention: General Counsel


 


with a copy
(which shall not constitute notice) to:


 


Bingham
McCutchen LLP

355 South Grand Avenue

Los Angeles, CA 90071-3106

Attention:  Roger H. Lustberg, Esq.


 


(b)           if to the Tailwind
Stockholders:


 


Tailwind
Management LP

390 Park Avenue, 17th Floor

New York, NY 10022

Attention:  Douglas M. Karp


 


with a copy (which shall not constitute
notice) to:


 


Kelley Drye & Warren LLP

Two Stamford Plaza

281 Tresser Boulevard

Stamford, CT 06901

Attention: John T. Capetta, Esq.


 


76

















 


(c)           If
to the DLJ Stockholders:


 


c/o Credit Suisse Private Equity

11 Madison Avenue

New York, NY 10010

Attention: Edward A. Johnson


 


(d)           If
to the Credit Opportunities Stockholder:


 


c/o GSO Capital Partners, L.P.

280 Park Avenue

New York, NY 10017

Attention: Bennett Goodman


 


A party may designate a new address to which
communications shall thereafter be transmitted by providing written notice to
that effect to the other party.  Each
communication transmitted in the manner described in this Section 10.3
shall be deemed to have been provided, received and become effective for all
purposes at the time it shall have been: (x) delivered to the addressee as
indicated by the return receipt (if transmitted by mail) or the affidavit or
receipt of the messenger (if transmitted by personal delivery or courier
service); or (y) presented for delivery to the addressee as so addressed during
normal business hours, if such delivery shall have been rejected, denied or
refused for any reason or, in each case, at such other address as may be
specified in writing to the other parties hereto.


 


10.4         Assignment;
Successors.  This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.  Except as provided in the next sentence of
this Section 10.4, neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any party without the prior written
consent of each of the parties.  The
Purchaser shall have the right without the consent of the Sellers but with
prior notice to the Sellers to (a) assign its rights and obligations hereunder
to any Affiliate of the Purchaser and (b) collaterally assign its rights
hereunder to any lender, in each case unless such assignment would delay the
consummation of the transactions contemplated hereby or cause the Purchaser to
have to obtain the consent of any Person to the consummation of the
transactions contemplated hereby (other than the Consents set forth on Section 4.2(b)
of the Purchaser Disclosure Schedule); provided, however,
that no such assignment by the Purchaser shall release the Purchaser from any
of its obligations hereunder.


 


10.5         Amendment.  No
purported amendment or modification to any provision of this Agreement shall be
binding upon the parties to this Agreement unless the Purchaser and the Sellers
have each duly executed and delivered to the other party a written instrument
which states that it constitutes an amendment or modification (as applicable)
to this Agreement and specifies the provision(s) that are being amended or
modified (as applicable).


 


10.6         Waiver.  No
purported waiver of any provision of this Agreement shall be binding upon the
Purchaser, on the one hand, or the Sellers, on the other hand, unless either
the Purchaser (with respect to waivers by the Purchaser) or the Stockholder
Representative (with respect to waivers by the Sellers) has duly executed and
delivered to the Stockholder Representative or the Purchaser (as applicable) a
written instrument which states that it constitutes a waiver of one or


 


77

















 


more provisions of this Agreement and specifies the provision(s) that
are being waived.  Any such waiver shall
be effective only to the extent specifically set forth in such written
instrument.  Neither the exercise (from
time to time and at any time) by a party of, nor the delay or failure (at any
time or for any period of time) to exercise, any right, power or remedy shall
constitute a waiver of the right to exercise, or impair, limit or restrict the
exercise of, such right, power or remedy or any other right, power or remedy at
any time and from time to time thereafter. 
No waiver of any right, power or remedy of a party shall be deemed to be
a waiver of any other right, power or remedy of such party or shall, except to
the extent so waived, impair, limit or restrict the exercise of such right,
power or remedy.


 


10.7         Entire
Agreement.  This Agreement (including
the Exhibits and Schedules referred to herein) and the Confidentiality
Agreement constitute the entire agreement and supersede all of the previous or
contemporaneous contracts, representations, warranties and understandings
(whether oral or written) by or between the parties with respect to the subject
matter hereof, including any letter of intent, exclusivity agreement, term
sheet or memorandum of terms entered into or exchanged by the parties.


 


10.8         Severability.  If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason: (a) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the parties as
expressed in, and the benefits to such parties provided by, such provision or
(b) if such provision cannot be so reformed, such provision shall be severed
from this Agreement and an equitable adjustment shall be made to this Agreement
(including addition of necessary further provisions to this Agreement) so as to
give effect to the intent as so expressed and the benefits so provided.  Such holding shall not affect or impair the
validity, enforceability or legality of such provision in any other
jurisdiction or under any other circumstances. 
Neither such holding nor such reformation or severance shall affect or
impair the legality, validity or enforceability of any other provision of this
Agreement.


 


10.9         Headings.  The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.


 


10.10       Counterparts.  This Agreement may be signed in any number of
counterparts, each of which (when executed and delivered) shall constitute an
original instrument, but all of which together shall constitute one and the
same instrument, respectively.  This
Agreement shall become effective and be deemed to have been executed and
delivered by each of the parties at such time as counterparts hereto shall have
been executed and delivered by all of parties, regardless of whether all of the
parties have executed the same counterpart. 
Counterparts may be delivered via facsimile or other electronic
transmission and any counterpart so delivered shall be deemed to have been duly
and validly delivered and be valid and effective for all purposes.


 


10.11       Governing
Law.  THIS AGREEMENT SHALL BE
CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION
(WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE.


 


78

















 


10.12       Consent
to Jurisdiction, etc.


 


(a)           EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE DELAWARE CHANCERY
COURT AND ANY APPELLATE COURT THEREFROM OR THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF DELAWARE AND ANY APPELLATE COURT THEREFROM (THE “DELAWARE
COURTS”), IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT RELATING THERETO, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH PROCEEDING
MAY BE HEARD AND DETERMINED IN THE DELAWARE COURTS.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW.


 


(b)           EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY OF
THE DELAWARE COURTS.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH PROCEEDING IN ANY
OF THE DELAWARE COURTS.


 


(c)           EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.3.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.


 


10.13       Waiver
of Punitive and Other Damages and Jury Trial.


 


(a)           THE
PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO, EXCEPT TO THE EXTENT
OTHERWISE EXPRESSLY PERMITTED BY SECTION 7.10, ANY RIGHT TO RECOVER
PUNITIVE, EXEMPLARY, LOST PROFITS, CONSEQUENTIAL OR SIMILAR DAMAGES IN ANY
PROCEEDING ARISING OUT OF OR RESULTING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.


 


(b)           EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY PROCEEDING ARISING UNDER OR RELATING TO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN


 


79

















 


RESPECT OF ANY PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


 


(c)           EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING ARISING UNDER OR
RELATING TO THIS AGREEMENT, SEEK TO ENFORCE EITHER OF THE FOREGOING WAIVERS, (ii) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT
MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.13.


 


10.14       Remedies.


 


(a)           Except
as otherwise expressly set forth in Article VII, each of the
parties shall have and retain all rights and remedies, at law or in equity,
including rights to specific performance and injunctive or other equitable
relief, arising out of or relating to a breach or threatened breach of this
Agreement.  Without limiting the
generality of the foregoing, each of the parties acknowledges that money
damages would not be a sufficient remedy for any breach or threatened breach of
this Agreement and that irreparable harm would result if this Agreement were
not specifically enforced.  Therefore,
the rights and obligations of the parties shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith, without the necessity of posting a bond or other security or proving
actual damages and without regard to the adequacy of any remedy at law.  A party’s right to specific performance or
injunctive relief shall be in addition to all other legal or equitable remedies
available to such party.


 


(b)           In
any dispute between the Sellers and the Purchaser that results in litigation,
the prevailing party (being the Sellers and the Seller Indemnified Parties, on
the one hand, and the Purchaser and the Purchaser Indemnified Parties, on the
other hand), shall be entitled to reimbursement of the fees and expenses
incurred by the prevailing party in connection with such litigation; and if
none of the parties prevail fully on the merits in such litigation, then each
party shall bear its own fees and expenses in connection with such litigation
unless the Delaware Court designates otherwise in a final non-appealable Order.  If the Indemnified Party is the prevailing
party in any such litigation, or is otherwise awarded fees and expenses by the
Delaware Court in a final non-appealable Order, such fees and expense to which
the Indemnified Party is entitled under the preceding sentence shall be Losses
(but shall not otherwise be Losses for purposes of Article VII).  If the Indemnifying Party is the prevailing
party in any such litigation, or is otherwise awarded fees and expenses by the
Delaware Court in a final non-appealable Order, the Purchaser (if the
Indemnified Party is the Purchaser or a Purchaser Indemnified Party) or the
Sellers (if the Indemnified Party is the Seller or a Seller Indemnified Party)
shall pay such fees and expenses of the prevailing party within ten (10)
Business Days after the Order designating such party as the prevailing party or
awarding fees and expenses to such party becomes final.


 


10.15       Third
Party Beneficiaries.  No Person other
than the Purchaser and the Sellers is, is intended to be, or shall be a
beneficiary of this Agreement, other than the Purchaser Indemnified


 


80

















 


Parties, the Seller Indemnified Parties, as provided in Section 5.11(c),
and any permitted successors and assigns of the parties under Section 10.4.


 


10.16       Interpretation.  The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction shall be applied against any party.  Unless otherwise expressly specified in this
Agreement:


 


(a)           the
words “hereof”, “hereby” and “hereunder,” and correlative
words, refer to this Agreement as a whole and not any particular provision;


 


(b)           the
words “include”, “includes” and “including”, and
correlative words, are deemed to be followed by the phrase “without limitation”;


 


(c)           the
word “or” is not exclusive and is deemed to have the meaning “and/or”;


 


(d)           references
in this Agreement to a “party” means the Purchaser, the Stockholder
Representative or any of the Sellers and to the “parties” means the
Purchaser, the Stockholder Representative and the Sellers;


 


(e)           the
masculine, feminine or neuter form of a word includes the other forms of such
word and the singular form of a word includes the plural form of such word;


 


(f)            references
to a Person shall include the successors and assigns thereof;


 


(g)           references
made in this Agreement to an Article, Section, Schedule or Exhibit mean an
Article or Section of, or a Schedule or Exhibit to, this Agreement;


 


(h)           references
to any Contract are to that Contract as amended, modified or supplemented from
time to time in accordance with the terms thereof; and


 


(i)            any
capitalized term used but not defined in a Schedule or Exhibit to this
Agreement shall have the meaning set forth in this Agreement.


 


 


[remainder of this page intentionally left blank; signature page(s)
follow]


 


81

















 


IN WITNESS WHEREOF, the parties have entered
into Agreement as of the date written above.


 


	
   

  	
  THE PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  DJ ORTHOPEDICS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Vickie L. Capps

  
	
   

  	
  Name:  Vickie L. Capps

  
	
   

  	
  Title:  SVP, CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  THE STOCKHOLDER REPRESENTATIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
  TAILWIND MANAGEMENT LP

  
	
   

  	
  By: Tailwind Capital Group
  LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Douglas M. Karp

  
	
   

  	
  Name:  Douglas M. Karp

  
	
   

  	
  Title:  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  THE SELLERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE TAILWIND STOCKHOLDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  TWCP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  TWCP CEO
  Founders’ Circle (QP), L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  TWCP CEO
  Founders Circle (AI), L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  TWCP-GP LLC,
  as General Partner of each of the limited

  partnerships named above

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  TWCP
  HOLDINGS LLC, as Managing Member of

  TWCP-GP LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Douglas M. Karp

  
	
   

  	
  Name:
  Douglas M. Karp

  
	
   

  	
  Title:

  	
   Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  THOMAS
  WEISEL CAPITAL MANAGEMENT LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jack Helfand

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
								



 


82

















 


	
   

  	
  THOMAS
  WEISEL CAPITAL PARTNERS

  
	
   

  	
  EMPLOYEE
  FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By: TWCP
  LLC, as General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Douglas M. Karp

  
	
   

  	
  Name:  Douglas M. Karp

  
	
   

  	
  Title:  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE DLJ STOCKHOLDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  DLJ GROWTH
  CAPITAL PARTNERS, L.P.

  
	
   

  	
   By: DLJ Growth Capital, Inc.

  
	
   

  	
   Its: Managing General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Edward A. Johnson

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  GCP PLAN
  INVESTORS, L.P.

  
	
   

  	
   By: DLJ LBO Plans Management Corporation

  
	
   

  	
   Its: Managing General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Edward A. Johnson

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE CREDIT OPPORTUNITIES STOCKHOLDER:

  
	
   

  	
   

  	
   

  
	
   

  	
  GSO CREDIT
  OPPORTUNITIES FUND (HELIOS), L.P.

  
	
   

  	
   By: GSO Associates LLC

  
	
   

  	
   Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ George Fan

  
	
   

  	
  Name: George
  Fan

  
	
   

  	
  Title:
  Authorized Signatory

  
							



 


83

















 


SCHEDULE A:


 


Sellers


 


	
  Name of Seller

  	
   

  	
  Shares of

  Common Stock

  	
   

  	
  Shares of

  Preferred Stock

  	
   

  
	
  Tailwind
  Stockholders:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TWCP, L.P.

  	
   

  	
  5,026,890

  	
   

  	
  4,524,200

  	
   

  
	
  TWCP CEO
  Founders’ Circle (QP), L.P.

  	
   

  	
  442,453

  	
   

  	
  398,208

  	
   

  
	
  TWCP CEO
  Founders Circle (AI), L.P.

  	
   

  	
  122,753

  	
   

  	
  110,478

  	
   

  
	
  Thomas
  Weisel Capital Management LLC

  	
   

  	
  192,510

  	
   

  	
  173,259

  	
   

  
	
  Thomas
  Weisel Capital Partners Employee Fund, L.P.

  	
   

  	
  40,394

  	
   

  	
  36,355

  	
   

  
	
  DLJ
  Stockholders:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ Growth
  Capital Partners, L.P.

  	
   

  	
  1,616,162

  	
   

  	
  1,454,546

  	
   

  
	
  GCP Plan
  Investors, L.P.

  	
   

  	
  383,838

  	
   

  	
  345,454

  	
   

  
	
  Credit
  Opportunities Stockholder:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSO Credit
  Opportunities Fund (Helios), L.P.

  	
   

  	
  500,000

  	
   

  	
  450,000