Exhibit 10.1





Exhibit
10.1




MEMBERSHIP INTEREST PURCHASE AGREEMENT




DATED AS OF MAY 1, 2009




AMONG




AMBASSADORS INTERNATIONAL, INC.,




a Delaware corporation,




AMBASSADORS MARINE GROUP, LLC,




a Delaware limited liability company,




AND




BELLWETHER FINANCIAL GROUP, INC.




a California corporation









 


 









 










Table of Contents




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






 


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Table of Contents





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






 


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Table of Contents





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






 


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Table of Contents





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






 


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






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







 


v









 







MEMBERSHIP INTEREST PURCHASE AGREEMENT




This Membership Interest Purchase Agreement (“Agreement”) is entered into as of May 1,
2009, by and among AMBASSADORS INTERNATIONAL, INC., a Delaware corporation (“Seller”),
AMBASSADORS MARINE GROUP, LLC, a Delaware limited liability company and wholly-owned subsidiary of
Seller (“AMG”), and BELLWETHER FINANCIAL GROUP, INC. a California corporation
(“Buyer”). Seller, AMG and Buyer are referred to herein individually as a “Party”
and collectively as the “Parties.”



WHEREAS, Seller owns one hundred percent (100%) of the issued and outstanding limited
liability company interest (the “Interest”) of AMG; and



WHEREAS, this Agreement contemplates a transaction in which Buyer will purchase from Seller,
and Seller will sell to Buyer, the Interest in return for the consideration described in this
Agreement.



NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the Parties agree
as follows.



ARTICLE I




DEFINITIONS




The following terms, when used in this Agreement, shall have the following meanings. Any of
these terms may, unless the context otherwise requires, be used in the singular or plural depending
on the reference.




“AAA” has the meaning set forth in Section 9.15 below.




“Accounts Receivable” has the meaning set forth in Section 4.10 below.



“Acquired Company” means any of AMG or its Subsidiaries, and “Acquired
Companies” means AMG and its Subsidiaries, collectively.




“Acquired Company Affiliates” has the meaning set forth in Section 4.24(a) below.



“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act.




“Agreement” has the meaning set forth in the preface above.




“Alternate Discussions” has the meaning set forth in Section 7.4.



“Alternate Solicitation Activities” has the meaning set forth in Section 7.4.




“Alternate Transaction” has the meaning set forth in Section 7.4.


 


 









 






“AMG” has the meaning set forth in the preface above.



“Bank Indebtedness” means all indebtedness (including without limitation, principal,
interest, fees, expenses, and other charges and amounts) owed by the Acquired Companies to any bank
or other financial institution for borrowed money, letters of credit, overdrafts or pursuant to any
credit facilities (including without limitation, lines of credit, revolving facilities or term loan
facilities.)



“Bankruptcy or Insolvency Proceeding” means any bankruptcy, civil rehabilitation,
corporate reorganization or special liquidation proceeding.



“Basis” means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that
forms or could form the basis for any specified consequence.



“Business Day” means any day that is not a Saturday or Sunday or a legal holiday on
which banks are authorized or required by law to be closed in Los Angeles, California.




“Buyer” has the meaning set forth in the preface above.




“Buyer Acceptance Notice” has the meaning set forth in Section 7.5(b) below.




“Buyer Indemnitees” has the meaning set forth in Section 8.2 below.



“Cash Balance” means the cash in bank accounts maintained by the Acquired Companies
less the sum of all outstanding checks, debits and bank fees.




“Cap” has the meaning set forth in Section 8.8 below.




“Closing Payment” has the meaning set forth in Section 2.2 below.




“Closing” has the meaning set forth in Section 3.1 below.




“Closing Date” has the meaning set forth in Section 3.1 below.



“Closing Intercompany Balances Certificate” means a written certificate executed by an
executive officer of Seller certifying as to the respective Intercompany Balances on the Closing
Date but immediately prior to the Closing, which respective Intercompany Balances set forth thereon
shall equal the Preliminary Intercompany Balances.




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




“Competing Offer” has the meaning set forth in Section 7.4 below.




“Competing Offer Notice” has the meaning set forth in Section 7.5(a) below.



“Competing Offeror” has the meaning set forth in Section 7.4 below.




“Contracts” has the meaning set forth in Section 4.18 below.


 


2









 






“Damages” has the meaning set forth in Section 8.2 below.




“Disclosure Letter” has the meaning set forth in Article IV below.




“Dispute” has the meaning set forth in Section 9.15 below.




“Employees” has the meaning set forth in Section 4.21(b) below.



“Employee Plan” means each “employee benefit plan” as defined in Section 3(3) of
ERISA, and any other plan, policy, program, practice, agreement, understanding or arrangement
(whether written or oral) providing compensation or other benefits to any current or former
director, officer, employee, contractor or consultant (or to any dependent or beneficiary thereof)
of Seller or any Acquired Company, which are now, or were within the past three (3) years,
maintained, sponsored or contributed to by any Acquired Company, or with respect to which any
Acquired Company has incurred or may incur any obligation or Liability, including, without
limitation, all incentive, bonus, retirement, deferred compensation, vacation, holiday, cafeteria,
medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted
stock or other stock-based compensation plans, policies, programs, practices or arrangements.



“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, mortgage, option, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.



“Environment” means soil, land surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwaters,
drinking water supply, stream sediment, ambient air (including indoor air), plant and animal life,
and any other environmental medium or natural resource.



“Environmental Action” means any notice, claim, act, cause of action, order, decree or
investigation by any third party (including, without limitation, any Governmental Authority)
alleging potential liability (including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damage, damage to flora or fauna caused by
Environmental Conditions, real property damage, personal injuries or penalties) arising out of,
based on or resulting from the Release of or exposure of any individual to any Hazardous Materials.



“Environmental Conditions” means the presence in the environment, including the soil,
groundwater, surface water or ambient air, of any Hazardous Materials at any level which exceeds
any applicable standard or threshold under any Environmental, Health and Safety Law or otherwise
requires investigation or remediation (including, without limitation, investigation, study, health
or risk assessment, monitoring, removal, treatment or transport) under any applicable
Environmental, Health and Safety Law.


 


3









 





“Environmental, Health, and Safety Laws” means any and all applicable international,
federal, state, or local laws, statutes, ordinances, regulations, policies, guidance, rules,
judgments, orders, court decisions or rule of common law, permits, restrictions and licenses, which
(i) regulate or relate to the protection or clean up of the environment; the use, treatment,
storage, transportation, handling, disposal or release of Hazardous Materials, the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural
resources; or the health and safety of persons or property, including without limitation protection
of the health and safety of employees; or (ii) impose liability or responsibility with respect to
any of the foregoing, including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the
Occupational Safety and Health Act of 1970, each as amended.




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



“ERISA Affiliate”, with respect to any entity, shall mean any entity which is (or at
any relevant time was) a member of a “controlled group of corporations” with, under “common
control” with, or a member of an “affiliated service group” with, the identified entity, as defined
in Section 414(b), (c), (m) or (o) of the Code, or under “common control” with the identified
entity, within the meaning of Section 4001(b)(1) of ERISA.



“Extremely Hazardous Substance” has the meaning set forth in Section 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended.



“Facility” means real property, leaseholds, or other interests currently or formerly
owned or operated by any Acquired Company and any buildings, plants, structures or equipment
(including motor vehicles, tank cars, and rolling stock) currently or formerly owned or operated by
any Acquired Company.




“Financial Statements” has the meaning set forth in Section 4.6(a) below.



“GAAP” means United States generally accepted accounting principles as in effect from
time to time.



“Governmental Authority” means any United States or any non-United States, foreign,
international, federal, state, local or municipal government, court, legislature, governmental
agency or governmental commission, judicial or quasi-judicial authority, regulatory authority,
agency, department, body or instrumentality of any government.



“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, release, storage, transfer,
transportation, treatment, or use (including any withdrawal or other use or groundwater) of
Hazardous Materials in, on, under, about or from the Facilities or any part thereof into the
Environment, that poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired Companies.


 


4









 





“Hazardous Materials” means any pollutant, chemical, or substance and any toxic,
infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, or chemical
compound, or hazardous substance, material or waste, whether solid, liquid or gas, that is subject
to regulation, control or remediation under any Environmental, Health and Safety Laws, including
without limitation, any quantity of asbestos in any form, urea, formaldehyde, PCBs, radon gas,
crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products or
derivatives.




“Indemnified Party” has the meaning set forth in Section 8.5(a) below.




“Indemnifying Party” has the meaning set forth in Section 8.5(a) below.




“Indemnity Claim” has the meaning set forth in Section 8.5(a) below.



“Intellectual Property” means (a) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations, and renewals in
connection therewith, (e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and production processes
and techniques, technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all internet domain names, (h) all other
proprietary rights, and (i) all copies and tangible embodiments thereof (in whatever form or
medium).



“Intercompany Balance” means (i) with respect to the Acquired Companies, the aggregate
amount of indebtedness or other amounts owed by any of the Acquired Companies to Seller or any of
its Affiliates (other than the Acquired Companies) and (ii) with respect to Seller and its
Affiliates (other than the Acquired Companies), the sum of the aggregate amount of indebtedness or
other amounts owed by Seller or any of its Affiliates (other than the Acquired Companies) to any of
the Acquired Companies.




“Interest” has the meaning set forth in the preface above.




“Interim Financial Statements” has the meaning set forth in Section 4.6(a) below.




“Interim Financial Statements Date” has the meaning set forth in Section 4.6(a) below.


 


5









 





“Knowledge” or “Known” means (i) with respect to the Acquired Companies,
actual knowledge after reasonable investigation of the following officers: Paul Chapman
 — Bellingham Marine Industries, Inc. Vice President Finance, Tina M. DeVries — Bellingham
Marine Industries, Inc. Vice President of Administration, J. Everett Babbitt — Bellingham Marine
Industries, Inc. President, Phillip Greenman — Bellingham Marine Industries, Inc. Executive Vice
President, and Errol Redman — Bellingham Marine Industries, Inc. Chief Financial Officer (New
Zealand, Australia, Malaysia) and Jesse Salem — Vice President of Shipyard Operations — Bellport
Group, or (ii) with respect to Seller, actual knowledge after reasonable investigation of Joseph
McCarthy. With respect to Section 4.20 (Environmental, Health and Safety Matters), “Knowledge”
means (i) with respect to the Acquired Companies, actual knowledge without further investigation of
the following officers: Paul Chapman — Bellingham Marine Industries, Inc. Vice President Finance,
Tina M. DeVries — Bellingham Marine Industries, Inc. Vice President of Administration, J. Everett
Babbitt — Bellingham Marine Industries, Inc. President, Phillip Greenman — Bellingham Marine
Industries, Inc. Executive Vice President, and Errol Redman — Bellingham Marine Industries, Inc.
Chief Financial Officer (New Zealand, Australia, Malaysia) and Jesse Salem — Vice President of
Shipyard Operations — Bellport Group, or (ii) with respect to Seller, actual knowledge without
further investigation of Joseph McCarthy.



“Laws” means (a) all applicable domestic, international, foreign, admiralty and
maritime laws, including all statutes, codes, plans, constitutions, treaties, principles of common
law, ordinances, regulations, decrees, rules, municipal by-laws and orders of every Governmental
Authority and (b) any applicable judicial, arbitral, administrative, ministerial, departmental or
regulatory judgment, decision, injunction, decree, charge, ruling, order or other restriction of
any court or Governmental Authority.




“Leased Real Property” has the meaning set forth in Section 4.9(b) below.



“Liability” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for Taxes.



“Licenses and Permits” means any approval, consent, license, permit, franchise,
approval registration, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority or pursuant to any Law, including
without limitation any Environmental, Health and Safety Law, that is held by or otherwise relates
to the business of, or to any of the assets owned or used by, any Acquired Company.



“Material Adverse Change” means any change relating to the business, properties,
assets, condition (financial or otherwise) or results of operation of the Acquired Companies taken
as a whole that has had or would reasonably be expected to have a Material Adverse Effect.



“Material Adverse Effect” means any material adverse effect on the business,
properties, assets, condition (financial or otherwise) or results of operation of the Acquired
Companies taken as a whole.




“NASDAQ” has the meaning set forth in Section 9.1 below.


 


6









 





“Non-Competition and Non-Disclosure Agreement” has the meaning set forth in Section
6.1(f)(ix) below.




“Non-Solicitation Area” has the meaning set forth in Section 7.11 below.




“Non-Solicitation Period” has the meaning set forth in Section 7.11 below.




“Notice” has the meaning set forth in Section 8.5(a) below.




“Objection Notice” has the meaning set forth in Section 8.6(a) below.




“Option Period” has the meaning set forth in Section 7.5(b) below.



“Order” means any award, decision, injunction, judgment, decree, ruling, subpoena,
verdict or order entered, issued, made, or rendered by any court, administrative agency, or other
Governmental Authority or by any arbitrator.



“Ordinary Course of Business” means the ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency); provided, however,
that as to any contract, it shall be deemed to be in the “Ordinary Course of Business” if the
liability of any Acquired Company, in the aggregate, is less than $25,000.



“Organizational Documents” means (a) the articles or certificate of incorporation and
the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) the articles or certificate of organization and the
operating agreement of a limited liability company; (e) any charter or similar document adopted or
filed in connection with the creation, formation or organization of a Person; and (f) any amendment
to any of the foregoing.




“Owned Real Property” has the meaning set forth in Section 4.9(a) below.




“Party” has the meaning set forth in the preface above.



“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political subdivision
thereof).



“Post-Closing Tax Period” means any Tax period beginning on the day after the Closing
Date and that portion of any Straddle Period beginning on the day after the Closing Date.



“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and
the portion of any Straddle Period ending on the Closing Date.


 


7









 






“Preliminary Intercompany Balances” has the meaning set forth in Section 4.6(b) below.



“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation,
or suit (whether civil, criminal, administrative, investigative, or information) commenced,
brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or
arbitrator.



“Properties” means any real property currently owned or under lease by the Acquired
Companies on the Closing Date.




“Purchase Price” has the meaning set forth in Section 2.2 below.



“Release” means any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment,
including, without limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, groundwater, wetlands, land or subsurface strata.




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




“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.




“Seller” has the meaning set forth in the preface above.




“Seller Indemnitees” has the meaning set forth in Section 8.4 below.



“Seller Loan Agreement” means that certain Loan Agreement dated as of September 1,
2006, as amended, among Bank of America, N.A, Seller, AMG and certain Affiliates of Seller.




“Seller Representatives” has the meaning set forth in Section 7.4 below.




“Solicitation Period” has the meaning set forth in Section 7.4 below.



“Straddle Period” means any Tax period beginning before and ending after the Closing
Date.



“Subsidiary” means, with respect to any party, any corporation, limited liability
company or other organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or manager of a limited liability company,
(ii) at least a majority of the securities or other interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar functions with
respect to such corporation, limited liability company or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of
its Subsidiaries, or (iii) such party or any direct or indirect Subsidiary of such party owns
at least fifty percent (50%) of the equity interests or voting interests of such corporation,
limited liability company or other organization.


 


8









 






“Superior Competing Offer” has the meaning set forth in Section 7.5(a).




“Survival Period” has the meaning set forth in Section 8.1 below.



“Tax” means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal
property, intangible property, sales, use, transfer, registration, recording, occupancy, value
added, alternative or add-on minimum, estimated, or other tax, charge, fee, levy, deficiency or
other assessment of any kind whatsoever imposed by a Governmental Authority, including any
Liability therefor as a transferee, successor, member of a consolidated, combined or unitary group,
pursuant to an agreement or otherwise, including any interest, addition to tax, penalty, or
addition thereto, in each case whether disputed or not.



“Tax Return” means any return, declaration, report, claim for refund, or information
return or statement relating to the determination, assessment, collection, payment, reporting or
administration of any Tax, including any schedule or attachment thereto, and including any
amendment thereof, whether on a separate, consolidated, combined, unitary or other basis.




“Third-Party Claim” has the meaning set forth in Section 8.5(b) below.



“Threatened” means, with respect to a claim, Proceeding, dispute, action or other
matter, that any demand or statement has been made (orally or in writing) or any notice has been
given (orally or in writing), or any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken or otherwise pursued in the future.




“Threshold” has the meaning set forth in Section 8.8 below.




“Transfer Taxes” has the meaning set forth in Section 7.11(d) below.




“WARN Act” has the meaning set forth in Section 4.21(e) below.



“Year End Financial Statements” has the meaning set forth in Section 4.6(a) below.


 


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ARTICLE II




SALE AND PURCHASE OF THE INTEREST





Section 2.1 Basic Transaction.



On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from
Seller, and Seller agrees to sell to Buyer, all of Seller’s right, title and interest in the
Interest, free and clear of all liens, pledges, Encumbrances, charges and claims thereon, for the
consideration specified below. Upon consummation of the transaction, Buyer will hold all of the
issued and outstanding Interest, free and clear of any and all liens, pledges, Encumbrances,
charges and claims.




Section 2.2 Closing Payment.



On and subject to the terms and conditions of this Agreement, Buyer agrees to pay Seller the
sum of Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) in cash as such amount may be
adjusted pursuant to Section 2.3 below (the “Cash Consideration”), payable as follows:



(a) Subject to Section 2.3 below, Five Million Dollars ($5,000,000) at Closing (the
“Closing Payment”) by delivery of cash payable by wire transfer or delivery of other
immediately available funds to an account designated by Seller;



(b) One Hundred Thousand Dollars ($100,000) payable on the date one month after the Closing
Date;



(c) One Hundred Thousand Dollars ($100,000) payable on the date two months after the Closing
Date; and




(d) Fifty Thousand Dollars ($50,000) payable on the date three months after the Closing Date.




Section 2.3 Purchase Price Adjustment.



If the total amount of the Bank Indebtedness owed immediately prior to the Closing exceeds the
aggregate Cash Balance of the Acquired Companies immediately prior to the Closing but following the
cancellation and settlement of the Intercompany Balances, the Purchase Price and the Closing
Payment shall be reduced by such amount and the Closing Date shall be extended by one Business Day.
If such Cash Balance exceeds the total amount of such Bank Indebtedness immediately prior to the
Closing, AMG shall distribute such amount to Seller; provided, however, that to the extent that
Seller is entitled to such distribution but AMG is unable to make such distribution in full
for any reason, the Purchase Price and the Closing Payment shall be increased by such amount.


 


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Section 2.4 Cancellation of Intercompany Indebtedness.



Immediately prior to the Closing, Seller, AMG, the Acquired Companies and any of their
respective Affiliates shall execute appropriate documentation to reflect the cancellation and
settlement of the Intercompany Balances.




Section 2.5 Withholding.



Buyer shall be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to Seller such amounts as it is required to deduct and withhold with
respect to such payment under the Code, or any provision of state, local or foreign Tax law. To
the extent that amounts are so withheld by Buyer, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to Seller.




Section 2.6 Purchase Price Allocation.



After a thorough analysis and arm’s length negotiations between the parties, Buyer and Seller
agree that the Purchase Price shall be allocated among the assets deemed for income tax purposes to
be purchased hereunder in the manner set forth on Schedule 2.6. The parties shall be bound
by such allocation for all purposes, shall prepare Tax Returns in accordance with such allocations
and shall not take a position inconsistent with such allocations.



ARTICLE III




CLOSING





Section 3.1 The Closing.



The closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Rutan & Tucker, LLP in Costa Mesa, California, 92626, on the earlier
of (i) two (2) Business Days after the date Seller provides notice to Buyer that it is ready to
close, and (ii) June 1, 2009, as such date set forth in clause (i) or (ii) may be extended in
accordance with Section 2.3 above, provided that all conditions to Closing set forth herein have
been satisfied by such date (the “Closing Date”). The Closing shall be effective as of
11:59 p.m. Pacific Time on the Closing Date.




Section 3.2 Deliveries at the Closing.



At the Closing, the Parties shall make the deliveries as set forth in Sections 6.1(f) and
6.2(e) below.


 


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ARTICLE IV




REPRESENTATIONS AND WARRANTIES

OF SELLER AND AMG




Seller with respect to Section 4.1 below, and each of Seller and AMG with respect to all
sections of this Article IV except Section 4.1, represents and warrants to Buyer that the
statements contained in this Article IV are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then as and as though the
Closing Date were substituted for the date of this Agreement throughout this Article IV) with
respect to themselves and their respective Subsidiaries, except where such representations and
warranties expressly relate to an earlier date (in which case they were correct and complete as of
such earlier date) and except as set forth on the Disclosure Letter delivered by Seller and the
Acquired Companies to Buyer on the date hereof (the “Disclosure Letter”). Nothing in the
Disclosure Letter shall be deemed adequate to disclose an exception to any representation or
warranty made herein, however, unless the Disclosure Letter identifies the exception with
particularity and describes the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made herein (unless the
representation or warranty addresses the existence of the document or other item itself). The
Disclosure Letter is arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Agreement.




Section 4.1 Representations and Warranties Concerning Seller.



(a) Organization and Good Standing. Seller is a corporation duly authorized, validly
existing, and in good standing under the Laws of Delaware. Seller is duly qualified to do business
as a foreign entity and is in good standing in each jurisdiction where the character of its
properties owned or leased or the nature of its activities make such qualification necessary,
except where the failure to so qualify and be in good standing would not have a Material Adverse
Effect.



(b) Authority; No Conflict. Seller has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by Seller and constitutes the valid
and legally binding obligation of Seller,
enforceable in accordance with its terms and conditions, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Any and all corporate acts and
other proceedings necessary for the due and valid authorization, execution, delivery and
performance by Seller of this Agreement and the exhibits and schedules hereto and the consummation
by Seller of the transactions contemplated hereby have been validly and appropriately taken.
Neither the execution and delivery of this Agreement and the exhibits and schedules hereto, nor the
consummation of the transactions contemplated hereby, will violate any Law to which Seller is
subject, or any Licenses and Permits to which Seller is a party.


 


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(c) Interest Ownership. Seller holds of record and owns beneficially all of the
Interest free and clear of any restrictions on transfer (other than any restrictions under any
applicable securities Laws), Taxes, Encumbrances, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. Seller is not a party to any option, warrant, purchase
right or other contract or commitment that would require Seller to sell, transfer, or otherwise
dispose of any of the Interest (other than this Agreement). Seller is not a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of any of the
Interest. Seller has delivered or made available to Buyer copies of all agreements relating to any
of the Interest.



(d) Seller’s Sales Process. On January 9, 2009, Seller’s Board of Directors formed a
special committee to oversee the sale of non-Windstar assets (which includes AMG and the other
Acquired Companies). Joseph J. Ueberroth was not a member of that special committee. On January
30, 2009, Seller engaged Stephens, Inc. as its investment banker to, among other things, sell the
Interest. On February 11, 2009, Seller issued a press release to publicly announce its plans to
sell its non-Windstar assets, including but not limited to the Interest. Since the engagement of
Stephens, Inc., agents and representatives of Seller have contacted 146 strategic and financial
buyers regarding the purchase of the Interest and have received multiple indications of interest
from qualified buyers. After receiving formal bid letters from interested parties, the board of
directors concluded that, subject to the negotiation of definitive agreements and the receipt of a
fairness opinion, accepting the offer from Buyer was in the best interest of Seller’s stockholders.
On April 19, 2009, Seller entered into a non-binding term sheet with Buyer relating to purchase of
the Interest.



(e) Use of Proceeds. Seller has no plan or intention to conceal, gift or otherwise
dispose of any cash consideration Seller receives pursuant to this Agreement in a manner that may
prejudice any rights of any creditor of Seller.



(f) Broker’s Fees. Except as set forth in Section 4.1(f) of the Disclosure Letter,
Seller and its agents have incurred no obligation or Liability, contingent or otherwise, for
brokerage or finders’ fees, or agents’ commissions, or other similar payment in connection with
this Agreement or any of the transactions contemplated herein.



(g) Notices and Consents. Except as set forth on Section 4.1(g) of the Disclosure
Letter, Seller is not, and will not be, required to give any notice to, make any filing with, or
obtain any consent, authorization or approval of, any Person, including any Governmental Authority,
in connection with the execution and delivery of this Agreement and the exhibits and schedules
hereto or the consummation or performance of the transactions contemplated herein.


 


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Section 4.2 Organization and Good Standing.



Section 4.2 of the Disclosure Letter contains a complete and accurate list of each Acquired
Company’s name, jurisdiction of incorporation, other jurisdictions in which it is authorized to do
business, capitalization (including the identity of each shareholder or member and the number of
shares or percentage of membership interest held by each) and managers, directors, and officers.
Each Acquired Company is an entity duly organized, validly existing, and in good standing under the
Laws of its jurisdiction of incorporation or organization, with full power and authority to conduct
its business as it is now being conducted, to own or use the properties and assets that it purports
to own and use, and to perform all its obligations under the Contracts. Except as set forth on
Section 4.2 of the Disclosure Letter, each Acquired Company has all material licenses, permits, and
authorizations necessary to carry on the business in which it is engaged and in which it presently
proposes to engage and to own and use the properties owned and used by it. Each Acquired Company
is duly qualified to do business as a foreign entity and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires such qualification, except where the
failure to so qualify and be in good standing would not have a Material Adverse Effect. The
Acquired Companies have delivered or made available to Buyer correct and complete copies of the
Organizational Documents of each Acquired Company, as amended to date and currently in effect. No
Acquired Company is in default under or in violation of any provision of its Organizational
Documents.




Section 4.3 Authority; No Conflict.



The Acquired Companies have delivered or made available to Buyer an execution copy of all
actions by the Acquired Companies’ boards of directors or other corporate authority performing
similar functions necessary to approve this Agreement and the transactions contemplated herein.
This Agreement and the exhibits and schedules hereto has been duly executed and delivered by AMG
and constitutes the legal, valid and binding obligations of AMG, enforceable against AMG in
accordance with its terms, except where such enforceability may be limited to bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting creditors
generally and by general equity principles. Subject to the requisite consents referenced in
Section 4.4 of the Disclosure Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated herein will, directly or
indirectly (with or without notice or lapse of time):



(a) contravene, conflict with, or result in a violation of (i) any provision of the
Organizational Documents of the Acquired Companies, or (ii) any resolution adopted by the board of
directors (other corporate authority performing similar functions) or stockholders (or other equity
owners) of any Acquired Company;



(b) contravene, conflict with, or result in a violation of, or give any Governmental Authority
or other Person the right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Law or any Order to which any Acquired Company
or any of the assets owned or used by any Acquired Company may be subject;


 


14









 





(c) contravene, conflict with, or result in a violation of any of the terms or requirements
of, or give any Governmental Authority or Other Person the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any License or Permit that is held by any Acquired Company or that
otherwise relates to the business of, or any of the assets owned or used by, any Acquired Company;



(d) contravene, conflict with, or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Contract; or



(e) result in the imposition or creation of any Encumbrance upon or with respect to any of the
assets owned or used by any Acquired Company.




Section 4.4 Notices and Consents.



Except as set forth on Section 4.4 of the Disclosure Letter, no Acquired Company is or will be
required to give any notice to, make any filing with, or obtain any consent, authorization or
approval of, any Person, including any Governmental Authority, in connection with the execution and
delivery of this Agreement and the exhibits and schedules hereto or the consummation or performance
of the transactions contemplated herein.




Section 4.5 Capitalization.



Seller is the sole member of AMG and Seller owns the Interest and the Interest comprises all
of the issued and outstanding limited liability company interests in AMG. Seller is and will be on
the Closing Date the record and beneficial owner and holder of the Interest, free and clear of all
Encumbrances. With the exception of the Interest (which are owned by Seller), all of the
outstanding equity securities and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all Encumbrances. Other
than standard Securities
Act restrictions, no legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued and are fully paid
and nonassessable. There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or commitments that
could require any of the Acquired Companies to issue, sell, transfer or otherwise cause to become
outstanding any equity securities or other securities of any Acquired Company. There are no
outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights
with respect to any of the Acquired Companies. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of securities of the Acquired Companies.
None of the outstanding equity securities or other securities of any Acquired Company was issued in
violation of any Law. No Acquired Company owns, or has any agreement to acquire, any equity
securities or other securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business.


 


15









 






Section 4.6 Financial Statements; Preliminary Intercompany Balance.



(a) Financial Statements. The Acquired Companies have delivered or made available to
Buyer a true and complete copy of the audited balance sheet and statements of operations, change in
stockholders’ equity (including the related notes) and cash flow for each Acquired Company as of
and for the twelve months ended December 31, 2008 (the “Year End Financial Statements”),
and a true and complete copy of the unaudited balance sheet, statement of operations, and change in
stockholders’ equity (including the related notes) for each Acquired Company as of and for the
three months ended March 31, 2009 (the “Interim Financial Statements Date”) (collectively,
the “Interim Financial Statements,” and, along with the Year End Financial Statements, the
“Financial Statements”). The Financial Statements (i) are in accordance with the books and
records of the Acquired Companies, (ii) have been prepared in accordance with GAAP consistently
applied through the periods covered thereby and (iii) fairly and accurately present the assets,
Liabilities (including all reserves) and financial position of the Acquired Companies as of the
respective dates thereof and the results of operations for the period then ended (subject, in the
case of the Interim Financial Statements, to immaterial year-end adjustments and the fact that
there are no notes thereto). Except as set forth in the Financial Statements, no Acquired Company
has any Liabilities of any nature (whether accrued, absolute, contingent or otherwise) required by
GAAP to be set forth or reserved for in the Financial Statements or the notes thereto, which are
not set forth or reserved for in the Financial Statements or the notes thereto. Nothing has come
to the attention of Seller since such respective dates that would indicate that such Financial
Statements are not true and correct in all material respects as of the date hereof. Except as set
forth on Section 4.6(a) of the Disclosure Letter, no Acquired Company is a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other Person.



(b) Preliminary Intercompany Balances. Section 4.6(b) of the Disclosure Letter sets
forth the Intercompany Balances as of the date hereof (the “Preliminary Intercompany
Balances”).




Section 4.7 Books and Records.



Except as set forth on Section 4.7 of the Disclosure Letter, the books of account,
Organizational Documents, stock record books, minutes, and other records of the Acquired Companies,
all of which the Acquired Companies have been made available to Buyer, are, to the Acquired
Companies’ Knowledge, complete and correct and have been maintained in accordance with sound
business practices and the requirements of all applicable Laws. To the Acquired Companies’
Knowledge, the minute books of the Acquired Companies contain accurate and complete records of all
meetings held of, and corporation action taken by, the stockholders or other equity owners, the
boards of directors or other corporate authority performing similar functions, and committees of
the boards of directors of the Acquired Companies, and no meeting of any such stockholders or other
equity owners, boards of directors or other corporate authority performing similar functions, or
committee has been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the possession of the
Acquired Companies.


 


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Section 4.8 Assets.



Except as set forth on Section 4.8 of the Disclosure Letter, the Acquired Companies have good
and marketable title to, or a valid leasehold interest in, the properties and assets used by them
or located on their premises, free and clear of any Encumbrances. Such assets include all assets
necessary for the conduct of the Acquired Companies’ businesses as presently conducted. To the
Knowledge of Seller and the Acquired Companies, all tangible assets and properties of the Acquired
Companies are in good operating condition and repair (subject to normal and customary maintenance
requirements), are usable in the Ordinary Course of Business and conform in all material respects
to all applicable Laws relating to their construction, use and operation, except as set forth on
Section 4.8 of the Disclosure Letter. The assets and properties of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies’ businesses after the Closing in
substantially the same manner as conducted prior to the Closing.




Section 4.9 Real Property.



(a) Section 4.9(a) of the Disclosure Letter sets forth a complete list of all real property
owned by the Acquired Companies (the “Owned Real Property”). The Acquired Companies have
good and marketable title to the Owned Real Property, free and clear of all Encumbrances.



(b) Section 4.9(b) of the Disclosure Letter sets forth a complete list of all real property
leased by the Acquired Companies (the “Leased Real Property”). Except as set forth on
Section 4.9(b) of the Disclosure Letter, the Acquired Companies are not in material default (with
or without notice or lapse of time, or both) under any such leases, and the execution of this
Agreement and the consummation of the transactions contemplated hereby will not constitute a
default under such leases or require the consent of any other party thereto. The Acquired
Companies have not, and to the Knowledge of Seller and the Acquired Companies, the other party to
any such lease has not, commenced any action in respect of, or arising out of such lease or given
any notice to the Acquired Companies for the purpose of terminating or threatening to terminate
such lease.



(c) Except as set forth on Section 4.9(c) of the Disclosure Letter, to the Knowledge of Seller
and the Acquired Companies, the improvements located on the Owned Real Property and the Leased Real
Property used for the Acquired Companies’ material operations are structurally sound, with no
material defects, and all building systems contained therein are in good operating condition and
repair, subject to ordinary wear and tear.


 


17









 






Section 4.10 Notes and Accounts Receivable.



All notes and accounts receivable of the Acquired Companies that are reflected on the
Financial Statements or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the “Accounts Receivable”) represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary Course of Business.
Except as set forth on Section 4.10 of the Disclosure Letter, the Accounts Receivable are current
and collectible net of the respective reserves shown on the Financial Statements. Subject to such
reserves as reflected on the Financial Statements, as adjusted in the Acquired Companies’ books in
the Ordinary Course of Business for the passage of time between the date of the Financial
Statements through the Closing Date, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, in the Ordinary Course of Business. There is no contest,
claim, or right of set-off under any agreement with any obligor of any Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Seller has provided to Buyer a complete and
accurate list of all Accounts Receivable as of the Interim Financial Statements Date, which list
sets forth the aging of such Accounts Receivable.




Section 4.11 Inventory.



All inventory of the Acquired Companies, whether or not reflected on the Financial Statements,
consists of a quality and quantity usable and saleable in the Ordinary Course of Business, except
for obsolete items and items of below-standard quality, which in all material respects have been
written off or written down to net realizable value in the Financial Statements. All inventories
not written off have been priced at the lower of cost or market on a first in, first out basis.
The quantities of each
item of inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Acquired Companies.




Section 4.12 Taxes.



(a) Filing of Tax Returns. Each of the Acquired Companies has duly and timely filed
with the appropriate taxing authorities all material Tax Returns required to be filed. All such
Tax Returns are complete and accurate in all material respects. Except as set forth on Section
4.12(a) of the Disclosure Letter, all material Taxes due and owing by any of the Acquired Companies
(whether or not shown on any Tax Return) have been paid. None of the Acquired Companies currently
is the beneficiary of any extension of time within which to file any Tax Return. No written claim
has ever been made by a Governmental Authority in a jurisdiction where any of the Acquired
Companies does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.


 


18









 





(b) Payment of Taxes. The unpaid Taxes of the Acquired Companies did not, as of the
dates of the Financial Statements, exceed the reserve for Tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax income) set forth on
the face of the balance sheets (rather than in any notes thereto) contained in the Financial
Statements. Since the date of the most recent Financial Statement, none of the Acquired Companies
has incurred any liability for Taxes outside the Ordinary Course of Business or otherwise
inconsistent with past custom and practice.



(c) Audits, Investigations or Claims. No deficiencies for Taxes against any of the
Acquired Companies have been claimed, proposed or assessed by any Governmental Authority in
writing. There are no pending or, to the Knowledge of any of the Acquired Companies, Threatened
audits, assessments or other Proceedings for or relating to any liability in respect of Taxes of
any of the Acquired Companies, and there are no matters under discussion with any Governmental
Authority, or Known to the Seller or the Acquired Companies, with respect to Taxes that are likely
to result in an additional material liability for Taxes with respect to any of the Acquired
Companies. The Acquired Companies have delivered or made available to Buyer complete and accurate
copies of federal, state, local and foreign Tax Returns of each of the Acquired Companies and their
predecessors for all Tax years beginning after December 31, 2005, and complete and accurate copies
of all examination reports and statements of deficiencies assessed against or agreed to by any of
the Acquired Companies or any predecessors, and any correspondence with any Governmental
Authorities regarding liability for Taxes, since December 31, 2005. No statute of limitations in
respect of any Tax (including for assessment of collection of any Tax) of any of the Acquired
Companies has been waived or extended.



(d) Liens. There are no liens for Taxes, other than Taxes not yet due and payable, on
any assets of any of the Acquired Companies.



(e) Tax Elections. None of the Acquired Companies (i) has consented at any time under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2) of the Code (as such
provisions were in effect prior to repeal) apply to any disposition of the assets of any of the
Acquired Companies; (ii) has agreed, or is required, to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise; (iii) has made an election, or is
required, to treat any of its assets as owned by another Person pursuant to the provisions of
Section 168(f) of the Internal Revenue Code of 1954 or as tax-exempt bond financed property or
tax-exempt use property within the meaning of Section 168 of the Code; (iv) has acquired or owns
any assets that directly or indirectly secure any debt the interest on which is tax exempt under
Section 103(a) of the Code; (v) has made or will make a consent dividend election under Section 565
of the Code; (vi) has elected at any time to be treated as an S corporation within the meaning of
Sections 1361 or 1362 of the Code; or (vii) made any of the foregoing elections or is required to
apply any of the foregoing rules under any comparable state, local or foreign Tax provision.



(f) Tax Sharing Agreements. There are no Tax-sharing agreements or similar
arrangements (including indemnity arrangements) with respect to or involving any of the Acquired
Companies, and, after the Closing Date, none of the Acquired Companies shall be bound by any such
Tax-sharing agreements or similar arrangements or have any liability thereunder for amounts due in
respect of periods on or prior to the Closing Date.


 


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(g) Other Entity Liability. None of the Acquired Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a group the common
parent of which is Seller). None of the Acquired Companies has any Liability for the Taxes of any
Person (other than Taxes of the Acquired Companies) (i) under Treasury regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii)
by contract, or (iv) otherwise.



(h) No Withholding. Each of the Acquired Companies has withheld or collected, and
paid and reported all material Taxes required to have been withheld, collected or paid in
connection with amounts paid or owing to, or received from, any employee, independent contractor,
creditor, stockholder or other third party. The transaction contemplated herein is not subject to
the tax withholding provisions of the Code or under any other provision of applicable Law.



(i) Permanent Establishment. Except as set forth on Section 4.12(i) of the Disclosure
Letter, none of the Acquired Companies has or has had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the United States of America
and such foreign country.



(j) Disallowance of Interest Deductions. None of the outstanding indebtedness of any
of the Acquired Companies constitutes indebtedness with respect to which any interest deductions
may be disallowed under Sections 163(i), 163(l), 265 or 279 of the Code or under any other
provision of applicable Law.



(k) Tax Shelters. None of the Acquired Companies has entered into any transaction
identified as a “reportable transaction” for purposes of Code Section 6707A or Treasury Regulations
Sections 1.6011-4(b)(2) or 301.6111-2(b)(2) (or any predecessor provision). If any Acquired
Company has entered into any transaction such that, if the treatment claimed by it were to be
disallowed, the transaction would constitute a substantial understatement of federal income tax
within the meaning of Section 6662 of the Code, then the Acquired Company has either (i)
“substantial authority” (within the meaning of Code Section 6662(d)) for the tax treatment of such
transaction or (ii) in the case of a transaction other than a “tax shelter” (within the meaning of
Code Section 6662(d)(2)(C)(ii)), has “adequately disclosed” (within the meaning of Code Section
6662(d)) on its Tax Return the relevant facts affecting the tax treatment of such transaction.



(l) Disregarded Entity. AMG is and has always been disregarded as an entity separate
from Seller for all income tax purposes.


 


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(m) No Power of Attorney. There is no outstanding power of attorney authorizing
anyone to act on behalf of any of the Acquired Companies in connection with any Tax, Tax Return or
Proceeding relating to any Tax.



(n) No Outstanding Rulings. There is no outstanding closing agreement, ruling
request, request for consent to change a method of accounting, subpoena or request for information
with or by any Governmental Authority relating to any of the Acquired Companies, its income, assets
or business, or any Tax, Tax Return or Proceeding relating to any Tax.



(o) Post-Closing Tax Periods. None of the Acquire Companies will be required to
include any item of income or exclude any item of deduction for any Post-Closing Tax Period as a
result of (a) intercompany transactions or excess loss accounts, (b) installment sale, open
transaction or use of a completed contract method of accounting with respect to any transaction
that occurred on or prior to the Closing Date or (c) prepaid amounts received on or prior to the
Closing Date.



(p) Deemed Ownership. None of the assets of any of the Acquired Companies is required
to be treated as being owned by another Person for income tax purposes.



(q) No Exchanges. During the last two years, none of the Acquired Companies has
engaged in any exchange under which gain realized on the exchange was not recognized under Code
Section 1031 (or any similar provision of applicable state, local or foreign Law).



(r) No Spin Off. None of the Acquired Companies has constituted a “distributing
corporation” or a “controlled corporation” under Code Section 355 (or any similar provision of
applicable state, local or foreign Law) in any distribution in the last two years or pursuant to a
plan or series of related transactions (within the meaning of
Code Section 355(e) or similar Law) with any transaction contemplated by this Agreement.



(s) No Special Status. None of the Acquired Companies is or has ever been a “personal
holding company” (within the meaning of Code Section 542), or a shareholder in a “controlled
foreign corporation” (within the meaning of Code Section 957), a “foreign personal holding company”
(within the meaning of Coe Section 552), or a “passive foreign investment company” (within the
meaning of Code Section 1297).



(t) Section 482. All transactions between an Acquired Company and any other person
that is owned or controlled by the same interests (within the meaning of Code Section 482 and the
regulations thereunder) have been at arm’s length (within the meaning of such provisions).



(u) No Deferred Gain. None of the Acquired Companies will be required to include any
item of income, or exclude any item of deduction, for any taxable period (or portion thereof)
ending after the Closing Date as a result of any: (i) intercompany transaction or excess loss
account described in Treasury regulations under Section 1502 of the Code (or any similar provision
of state, local, or foreign Law), (ii) installment sale, open transaction or use of a completed
contract method of accounting with respect to any transaction that occurred on or prior to the
Closing Date, or (iii) prepaid amount received on or prior to the Closing Date.


 


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Section 4.13 Employee Benefits.



(a) List of Plans; Absence of Certain Arrangements. Section 4.13(a) of the Disclosure
Letter lists each Employee Plan and the Seller or Acquired Company that maintains or sponsors such
Employee Plan. No Employee Plan (i) is or was a “multiemployer plan,” as defined in Section 3(37)
or 4001(a)(3) of ERISA, (ii) is or was subject to Title IV or Part 3 of Title I of ERISA or Section
412 of the Code, and (iii) provides retiree or post-employment benefits (including, without
limitation, medical, disability or life insurance, or other welfare benefits) to any person, except
as required by Applicable Law. Except as set forth in Section 4.13(a) of the Disclosure Letter, no
Employee Plan is or was a “welfare benefit fund,” as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code, and no Acquired Company nor
any ERISA Affiliate of any Acquired Company is required to, or has ever been required to,
contribute to or provide benefits under any such Employee Plan, fund or organization or has any
Liability or obligation under any such Employee Plan, fund or organization. With respect to each
Employee Plan, at the Closing there will be no unrecorded material liabilities with respect to the
establishment, implementation, operation, administration or termination of such Employee Plan, or
the termination of the participation in any such Employee Plan by any Acquired Company or any ERISA
Affiliate of any Acquired Company.



(b) No Commitments; Ability to Amend. Neither any Acquired Company nor any ERISA
Affiliate of any Acquired Company has any announced plan or
legally binding commitment to create any additional Employee Plans which are intended to cover
employees or former employees of any Acquired Company (with respect to their relationship with such
entities) or to amend or modify any existing Employee Plan which covers or has covered employees or
former employees of any Acquired Company (with respect to their relationship with such entities).
Each Employee Plan can be amended, terminated or otherwise discontinued immediately after the
Closing in accordance with its terms, without liability (other than liability for ordinary
administrative expenses typically incurred in a termination event).



(c) No Other Material Liability. Neither Seller nor any Acquired Company is subject
to any material Liability, tax or penalty with respect to any Employee Plan under ERISA, the Code
or any other Applicable Law, and neither Seller nor any Acquired Company has any Knowledge of any
circumstances which reasonably might result in any such material Liability, tax or penalty. No
event has (as to Seller’s representation and warranty only, to Seller’s Knowledge) occurred and no
condition exists that could subject any Acquired Company, by reason of its affiliation with any
ERISA Affiliate of such Acquired Company, to any material Liability, Tax or penalty with respect to
any Employee Plan under ERISA, the Code or other Applicable Law, and neither Seller nor any
Acquired Company has any Knowledge of any circumstances which reasonably might result in any such
material Liability, Tax or penalty.


 


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(d) Tax Qualification; General Compliance. Each Employee Plan which is intended to be
a qualified plan under Section 401(a) of the Code has received a favorable determination letter,
opinion, notification or advisory letter from the IRS, and each trust established in connection
with any Employee Plan which is intended to be exempt from federal income taxation under Section
501(a) of the Code is so exempt. Each Employee Plan has been administered and maintained in
compliance in all material respects in accordance with its terms and with ERISA, the Code and all
other Applicable Laws. All contributions required to be made under the terms of any Employee Plan
as of the date of this Agreement have been timely made in accordance with the terms of such
Employee Plan, ERISA, the Code and all other Applicable Laws, or if not yet due, have been properly
reflected on the Financial Statements.



(e) Fiduciary Duties and Prohibited Transactions. Neither any Acquired Company nor
any plan fiduciary of any Employee Plan which covers or has (as to Seller’s representation and
warranty only, to Seller’s Knowledge) covered employees or former employees of any Acquired Company
or any ERISA Affiliate of any Acquired Company, has engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any “prohibited transaction,” as defined in Section 4975(c)(1) of
the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of
the Code, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B of ERISA. None
of the Acquired Companies have knowingly participated in a violation of Part 4 of Title I, Subtitle
B of ERISA by any plan fiduciary of any Employee Plan (or other employee benefit plan subject to
ERISA). None of the Acquired Companies has (as to Seller’s representation and warranty only, to
Seller’s Knowledge) any Liability under Section 502 of ERISA. Neither any Acquired Company nor any
ERISA Affiliate of any Acquired Company has incurred any excise tax under Chapter 43 of the Code.



(f) No Acceleration; Code Section 280G. No Employee Plan or other contract, agreement
or benefit arrangement covering any current or former employee or independent contractor of any
Acquired Company, individually or collectively, would give rise to the payment of, or permit any
such individual to retain, any amount or benefit which would constitute a “parachute payment” (as
defined in Section 280G of the Code). Except as set forth on Section 4.13(f) of the Disclosure
Letter, neither the execution of this Agreement nor the consummation of any of the transactions
contemplated hereby (whether alone or upon the occurrence of any additional or further acts or
events) will (i) result in any obligation or Liability (with respect to accrued benefits or
otherwise) on the part of any Acquired Company to any Employee Plan, or to any present or former
employee, officer, director, shareholder, contractor or consultant of any Acquired Company or any
of their dependents, or any other person, (ii) be an event under any Employee Plan that will result
in any payment (whether of severance pay or otherwise) becoming due to any such present or former
employee, officer, director, shareholder, contractor, or consultant of any Acquired Company or any
of their dependents, or any other person, or (iii) accelerate the time of payment or vesting, or
increase the amount, of any compensation or benefits theretofore or thereafter due or granted to
any employee, officer, director, shareholder, contractor, or consultant of any Acquired Company or
any of their dependents, or any other person.


 


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(g) COBRA; HIPAA. Each Acquired Company and each ERISA Affiliate is in compliance in
all material respects with (i) the requirements of the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
the regulations (including proposed regulations) thereunder and any similar state law, and (ii) the
applicable requirements of the Health Insurance Portability and Accountability Act of 1996, as
amended, and the regulations (including the proposed regulations) thereunder. No Acquired Company
or any ERISA Affiliate has incurred any material Liability under Section 4980B of the Code.



(h) Litigation. Other than routine claims for benefits under the Employee Plans,
there are no pending or, to the Knowledge of Seller or any Acquired Company, Threatened actions or
proceedings against any Employee Plan, the fiduciaries or administrators of any of the Employee
Plans, or Seller or any Acquired Company with respect to any Employee Plan, with any of the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation, any participant in or
beneficiary of any Employee Plan or any other person whomsoever. Neither Seller nor any Acquired
Company has any Knowledge of any reasonable basis for any such claim, lawsuit, dispute, action or
controversy.



(i) Code Section 409A. Except as set forth in Section 4.13(i) of the Disclosure
Letter, no payment or benefit provided or to be provided under to an Employee Plan to or for the
benefit of a “service provider” (within the meaning of Section 409A of the Code) will or may
provide for the deferral of compensation subject to Section 409A of the Code, whether pursuant to
the execution and delivery of this Agreement or the consummation of the transactions contemplated
hereby (either alone or upon the occurrence of any additional or subsequent events) or otherwise.
Each
Employee Plan that is a nonqualified deferred compensation plan subject to Section 409A of the
Code has been operated and administered in good faith compliance with Section 409A of the Code from
the period beginning January 1, 2007 through the date hereof.



(j) Deductibility of Payments. There is no contract, agreement, plan or arrangement
covering any employee or former employee of any Acquired Company (with respect to its relationship
with such entities) that, individually or collectively, provides for the payment by any Acquired
Company of any amount that is not deductible by such Acquired Company under Section 162(a)(1), 404
or 419 of the Code, whichever is applicable.



(k) Foreign Plans. With respect to each employee benefit plan, program, or other
arrangement providing compensation or benefits to any employee or former employee (or any dependent
thereof) of the Seller, any Acquired Company, or any of their respective Subsidiaries, which is
subject to the laws of any jurisdiction outside of the United States (the “Foreign Plans”):
(i) such Foreign Plan has been maintained in all material respects in accordance with all
applicable requirements and all applicable laws, (ii) if intended to qualify for special tax
treatment, such Foreign Plan meets all requirements for such treatment, (iii) if intended or
required to be funded and/or book-reserved, such Foreign Plan is fully funded and/or book-reserved,
as appropriate, based upon reasonable actuarial assumptions, and (iv) no material Liability exists
or reasonably could be imposed upon the assets of any Acquired Company by reason of such Foreign
Plan.


 


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Section 4.14 Compliance With Legal Requirements.



Each Acquired Company is (as to Seller’s representation and warranty only, to Seller’s
Knowledge) in compliance with all Laws that are applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets, except for such non-compliance which is
not reasonably likely to result in a Material Adverse Effect. No event has occurred or
circumstance exists that (with or without notice or lapse of time) (as to Seller’s representation
and warranty only, to Seller’s Knowledge) may constitute or result in a violation by any Acquired
Company of, or a failure on the part of any Acquired Company to comply with, any Law, except where
such violation or failure would not result in a Material Adverse Effect. No Acquired Company has
received (as to Seller’s representation and warranty only, to Seller’s Knowledge) any notice,
charge, complaint, claim, demand or other communication (whether oral or written) from any
Governmental Authority with respect to any action, suit, Proceeding, hearing or investigation by
such Governmental Authority regarding any actual, alleged, possible or potential material violation
of, or material failure to comply with, any Law, except (a) as has already been resolved with no
fine or penalties, (b) with respect to which all fines and penalties have been paid or otherwise
satisfied in full or are reserved for on the Financial Statements or (c) as is being disputed in
good faith and listed on Section 4.14 of the Disclosure Letter.




Section 4.15 Licenses and Permits.



Section 4.15 of the Disclosure Letter contains a complete and accurate list of all material
Licenses and Permits. Each Acquired Company (as to Seller’s representation and warranty only, to
Seller’s Knowledge) owns or possesses such respective Licenses and Permits free and clear of any
Encumbrances, claims or Liabilities. Such Licenses and Permits (as to Seller’s representation and
warranty only, to Seller’s Knowledge) are in full force and effect and there are no proceedings
pending or Threatened that seek the revocation, cancellation, suspension or adverse modification
thereof. No Acquired Company (as to Seller’s representation and warranty only, to Seller’s
Knowledge) has violated any such Licenses and Permits, and each Acquired Company is in compliance
in all material respects with all such Licenses and Permits. No Acquired Company (as to Seller’s
representation and warranty only, to Seller’s Knowledge) has received any notice to the effect that
(i) such Acquired Company is not in compliance with, or is in a violation of, any such Licenses and
Permits or (ii) any currently existing circumstances are likely to result in a failure of such
Acquired Company to comply with, or in a violation by such Acquired Company of, any such Licenses
and Permits. Such Licenses and Permits included on Section 4.15 of the Disclosure Letter
constitute (as to Seller’s representation and warranty only, to Seller’s Knowledge) all of the
material licenses, approvals, consents, franchises and permits necessary to permit the Acquired
Companies to own, operate, use and maintain their assets in the manner in which they are now
operated and maintained and to conduct the business of the Acquired Companies as currently
conducted. All such Licenses and Permits are (as to Seller’s representation and warranty only, to
Seller’s Knowledge) renewable by their terms in the Ordinary Course of Business without the need to
comply with any special qualification procedures or to pay any amounts other than routine filing
fees, and such Licenses and Permits will not be subject to suspension, modification or revocation
or require any consent to transfer the same in connection with the completion of the transactions
contemplated by this Agreement.


 


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Section 4.16 Legal Proceedings.



Section 4.16 of the Disclosure Letter sets forth a true and complete list of all Proceedings
as of the date hereof, including reasonable detail regarding the current status of such
Proceedings, to which any of the Acquired Companies is, or to the Knowledge of Seller, is
Threatened to be, a party or as to which their property or assets may be bound. Except as set
forth on Section 4.16 of the Disclosure Letter, there is no Proceeding pending or, to the Knowledge
of Seller, Threatened, against or affecting any of the Acquired Companies, nor is there any Order
outstanding against any of the Acquired Companies. To the Knowledge of Seller, no facts or
circumstances exist that could reasonably be expected to result in any Proceedings being brought
against any of the Acquired Companies.




Section 4.17 Absence of Certain Changes and Events.



(a) Except for incurring the expenses, making the payments, or the other transactions
contemplated in or by this Agreement, since the Interim Financial Statements Date, and except as
set forth on Section 4.17(a) of the Disclosure Letter, (as to Seller’s representation and warranty
only, to Seller’s Knowledge) (i) each of the Acquired Companies has conducted its business in the
Ordinary Course of Business and has not incurred any material Liability, except in the Ordinary
Course of Business; (ii) there has not been any change in the business, financial condition,
Liabilities, assets, technology, Intellectual Property rights, employee relations, customer
relations, supplier relations, manufacturer relations or distributor relations, or results of
operations of the Acquired Companies that has had, or would reasonably be expected to have, a
Material Adverse Effect on any such party, (iii) there has not been any declaration, setting aside
or payment of any dividend, other distribution (whether in cash, stock or property), redemption or
repurchase with respect to any shares or membership interests of any of the Acquired Companies;
(iv) there has not been any split, combination or reclassification of any common stock of any of
the Acquired Companies or any issuance or commitment to issue or the authorization of any issuance
of any capital stock or other equity interests of any of the Acquired Companies or other securities
convertible into, in exchange or in substitution for any shares of capital stock or other equity
interests of any of the Acquired Companies; (v) there has not been (A) any granting by any of the
Acquired Companies to any employee of any of the Acquired Companies of any increase in
compensation, other than in the Ordinary Course of Business, (B) any granting by any of the
Acquired Companies to any such employee of any increase in severance or termination pay, (C) any
entry by any of the Acquired Companies into any employment, severance or termination agreement,
policy or arrangement with any employee other than in the Ordinary Course of Business, or (D) any
transaction with Seller, or a director or employee of any of the Acquired Companies, other than in
the Ordinary Course of Business; (vi) there has not been any change in accounting methods,
principles or practices by any of the Acquired Companies affecting its assets, Liabilities or
business, except insofar as may have been required by a change in GAAP, and (vii) the Acquired
Companies have paid all of their liabilities and other obligations on a timely basis.


 


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


 


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Section 4.18 Contracts; No Defaults.



(a) Section 4.18(a) of the Disclosure Letter contains a complete and accurate list of the
following written contracts and agreements, and any amendments, modifications or supplements
thereto as of the date hereof (“Contracts”), to which any Acquired Company is a party:



(i) any contract or agreement that involves performance of services or delivery of goods,
commodities, supplies, products, materials or other personal property by one or more of the
Acquired Companies of an amount or value in excess of $25,000;



(ii) any contract or agreement that involves performance of services or delivery of goods,
commodities, supplies, products, materials or other personal property to one or more of the
Acquired Companies of an amount or value in excess of $25,000;



(iii) any contract or agreement that was not entered into in the Ordinary Course of Business;



(iv) any lease, rental or occupancy agreement, license, installment and conditional sale
agreement, or other contract or agreement affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any real or personal property;



(v) any licensing agreement or other contract with respect to the Intellectual Property,
including agreements with current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property;



(vi) any collective bargaining agreement or other contract to or with any labor union or other
employee representative of a group of employees;



(vii) any contract or agreement for the employment of any individual on a full-time,
part-time, consulting or other basis providing annual compensation in excess of $25,000 or
providing severance benefits in excess of one month’s base salary;



(viii) any contract or agreement between any Acquired Company and Seller or any of its
Affiliates (other than such Acquired Company);



(ix) any joint venture agreement, partnership agreement or similar contract or agreement;



(x) any contract or agreement containing covenants that in any way purport to restrict the
business activity of any Acquired Company or any Affiliate of an Acquired Company or limit the
freedom of any Acquired Company or any Affiliate of an Acquired Company to engage in any line of
business or to compete with any Person;


 


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(xi) any contract or agreement providing for commissions or payments to or by any Person based
on sales, purchases or profits;



(xii) any power of attorney that is currently effective and outstanding;



(xiii) any profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, termination, severance, change of control or other agreement, plan or arrangement for
the benefit of any Acquired Company’s current or former managers, directors, officers and
employees;



(xiv) any contract or agreement under which any Acquired Company has advanced or loaned any
amount to any of its managers, directors, officers or employees;



(xv) any contract or agreement (or group of related contracts or agreements) under which any
Acquired Company has created, incurred, assumed or guaranteed any indebtedness for borrowed money
or other Liability or obligation, or any capitalized lease obligation;



(xvi) any written warranty, guaranty, and/or other similar undertaking with respect to
contractual performance extended by any Acquired Company;



(xvii) any other contract or agreement under which the consummation of the transactions
consummated by this Agreement would constitute a default thereunder (with or without notice or
lapse of time, or both) without the prior consent of another party thereunder; and



(xviii) any other contract or agreement (or group of related contracts or agreements) the
performance of which involves consideration in excess of $25,000.



(b) Except as set forth on Section 4.18(b) of the Disclosure Letter, none of the Acquired
Companies is a party to, or is otherwise bound by, any oral contract or agreement that (i) has any
continuing obligation of such Acquired Company or (ii) is not terminable by such Acquired Company
without notice and without penalty. Any oral contract or agreement to which any Acquired Company
is a party or is otherwise bound by (whether or not such contract is listed on Section 4.18(b) of
the Disclosure Letter) shall be deemed a “Contract” for purposes of Section 4.18, but shall not be
required to be listed on Section 4.18(a) of the Disclosure Letter.


 


29









 





Seller has delivered or made available to Buyer a correct and complete copy of each written
Contract listed in Section 4.18(a) of the Disclosure Letter and a written summary setting forth the
terms and conditions of each oral Contract referred to in Section 4.18(b) of the Disclosure Letter.
With respect to each such Contract (as to Seller’s representation and warranty only, to Seller’s
Knowledge): (i) the Contract is legal, valid, binding, enforceable, and in full force and effect,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium
and similar Laws relating to or affecting creditors generally and by general equity principles
(regardless of whether such enforceability is considered in a proceeding in equity or at law); (ii)
the Contract will continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated by this Agreement;
(iii) no party is in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit termination, modification,
or acceleration under the Contract; and (iv) no party has repudiated any provision of the Contract.
None of the Acquired Companies has received any notice of termination with respect to any
Contract.




Section 4.19 Insurance.



Section 4.19 of the Disclosure Letter contains a complete and accurate list of all policies or
binders of fire, liability, title, property, director and officer, worker’s compensation, product
liability and other forms of insurance (showing as to each policy or binder the carrier, policy
number, coverage limits, deductibles, expiration dates, annual premiums, a general description of
the type of coverage provided, and loss experience history by line of coverage) maintained by any
of the Acquired Companies on their businesses or employees since January 1, 2007. All insurance
coverage applicable to the Acquired Companies (as to Seller’s representation and warranty only, to
Seller’s Knowledge) is in full force and effect, insures the Acquired Companies in reasonably
sufficient amounts, as determined by the Acquired Companies in consultation with their
insurance agents, against the Acquired Companies’ respective risks, provides coverage as may be
required by any and all contracts or agreements that the Acquired Companies are party to and has
been issued by insurers of recognized responsibility. There is no default (as to Seller’s
representation and warranty only, to Seller’s Knowledge) under any such coverage nor has there been
any failure to give notice or present any claim under any such coverage in a due and timely
fashion. As to Seller’s representation and warranty only, to Seller’s Knowledge, there are no
outstanding unpaid premiums except in the Ordinary Course of Business and no notice of cancellation
or nonrenewal of any such coverage has been received. There are no provisions in such insurance
policies (as to Seller’s representation and warranty only, to Seller’s Knowledge) for retroactive
or retrospective premium adjustments.




Section 4.20 Environmental, Health and Safety Matters.



(a) Except as set forth on Section 4.20(a) of the Disclosure Letter and except as has been
fully remediated such that no Acquired Company has any remaining remediation obligations, each
Acquired Company is, and at all times has been, (as to Seller’s representation and warranty only,
to Seller’s Knowledge) in material compliance with, and has not been and is not in material
violation of or liable under, all applicable Environmental, Health and Safety Laws and all
applicable Licenses and Permits related to environmental, health and safety matters.


 


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(b) Except as set forth on Section 4.20(b) of the Disclosure Letter and except where the
failure to do so would not have a Material Adverse Effect, (as to Seller’s representation and
warranty only, to Seller’s Knowledge) neither Seller nor any Acquired Company has any basis to
expect, nor has any of them or any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice, or other communication from (i) any
Governmental Authority or private citizen acting in the public interest, or (ii) the current or
prior owner or operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental, Health or Safety Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Law Liabilities with respect to
any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which
Seller or any Acquired Company has had an interest, or with respect to any property or Facility at
or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used,
or processed by Seller, any Acquired Company, or any other Person for whose conduct they are or may
be held responsible, or from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.



(c) Except as set forth on Section 4.20(c) of the Disclosure Letter, to the Knowledge of
Seller and the Acquired Companies, there are no pending or Threatened claims, Encumbrances, or
other restrictions of any nature, resulting from any Liabilities or arising under or pursuant to
any Environmental, Health and Safety Law,
with respect to or affecting any of the Facilities or any other properties and assets (whether
real, personal, or mixed) in which Seller or any Acquired Company has or had an ownership interest.



(d) Except to the extent that it would not result in a Material Adverse Effect, (as to
Seller’s representation and warranty only, to Seller’s Knowledge) neither Seller nor any Acquired
Company has any basis to expect, nor has any of them or any other Person for whose conduct they are
or may be held responsible, received, any written citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with any Environmental, Health
and Safety Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of
any Environmental, Health, and Safety Law Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which Seller or any Acquired
Company has or had an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or processed by Seller,
any Acquired Company, or any other Person for whose conduct they are or may be held responsible,
have been transported, treated, stored, handled, transferred, disposed, recycled, or received.



(e) Except as set forth on Section 4.20(e) of the Disclosure Letter and except to the extent
that it would not result in a Material Adverse Effect, neither Seller nor any Acquired Company, nor
any other Person for whose conduct they are or may be held responsible, has (as to Seller’s
representation and warranty only, to Seller’s Knowledge) any Environmental, Health, and Safety Law
Liabilities with respect to the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which Seller or any Acquired Company (or any predecessor),
has or had an interest, or at any property adjoining the Facilities or any such other property or
assets.


 


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(f) Except as set forth on Section 4.20(f) of the Disclosure Letter, to the Knowledge of
Seller or any Acquired Company, there are no Hazardous Materials present on or in the Environment
at the Properties, including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land, water, sumps, or any
other part thereof, or incorporated into any structure therein or thereon.



(g) Except as set forth on Section 4.20(g) of the Disclosure Letter, to the Knowledge of
Seller or any Acquired Company, neither Seller nor any Acquired Company, nor any other Person for
whose conduct they are or may be held responsible, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Properties or assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has or had an interest, except in full compliance
with all applicable Environmental, Health and Safety Laws.



(h) Except as set forth on Section 4.20(h) of the Disclosure Letter, to the Knowledge of
Seller or any Acquired Company, there has been no Release or
Threatened Release of any Hazardous Materials at or from the Facilities or from or by any
other properties and assets (whether real, personal, or mixed) in which Seller or any Acquired
Company has or had an interest, or any adjoining property, whether by Seller, an Acquired Company,
or any other Person.



(i) Except as set forth on Section 4.20(i) of the Disclosure Letter, (as to Seller’s
representation and warranty only, to Seller’s Knowledge) neither Seller nor any Acquired Company
has transported or arranged for the transport of Hazardous Materials which to the Knowledge of
Seller or any Acquired Company has or may become the subject of any environmental action under any
Environmental, Health, and Safety Law.



(j) Seller and the Acquired Companies have (as to Seller’s representation and warranty only,
to Seller’s Knowledge) delivered or made available to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller or any
Acquired Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by Sellers, any Acquired Company, or any other Person for
whose conduct they are or may be held responsible, with Environmental, Health and Safety Laws.




Section 4.21 Employees and Labor Matters.



(a) To the Knowledge of Seller and the Acquired Companies, no executive, key employee, or
group of employees has any plans to terminate employment with the Acquired Companies. Except as
disclosed in Section 4.21(a) of the Disclosure Letter, to the Knowledge of Seller and the Acquired
Companies, no employee has any claim, or basis for any claim, against the Acquired Companies that
would reasonably be expected to result in a material Liability of any Acquired Company.


 


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(b) Section 4.21(b) of the Disclosure Letter contains a list of (i) all full, part-time and
hourly employees of the Acquired Companies as of a date not more than ten (10) days prior to the
date of this Agreement (the “Employees”), (ii) all consultants and other independent
contractors to the Acquired Companies who have rendered services material to the business of the
Acquired Companies within the last twelve (12) months, and (iii) the directors, executive officers
and any advisory board members of the Acquired Companies, if any, including an organizational chart
of each. Section 4.21(b) of the Disclosure Letter also sets forth for each Employee the following
information as of a date not more than ten (10) days prior to the date of this Agreement: (v)
title (if manager level or above), (w) base or hourly compensation, (x) accrued and unused vacation
and sick pay (to the extent such vacation and sick pay constitutes an obligation which will be due
and payable upon termination of such employee), (y) any severance obligation of the Acquired
Companies which may result upon consummation of the transactions contemplated by this Agreement,
and (z) bonuses paid or accrued with respect to the current fiscal year in the aggregate for all
Employees. Except as set forth on Section 4.21(b) of the Disclosure Letter, and except as provided
by Law, the
employment of all persons presently employed or retained by each Acquired Company is
terminable at will.



(c) Since January 1, 2007, the Acquired Companies have not experienced any work stoppage,
slow-down, picket, strike, lock-out or other labor disturbance, nor is any such work stoppage,
slow-down, picket, strike, lock-out or other labor disturbance presently occurring or, to the
Knowledge of Seller and the Acquired Companies, Threatened. To the Knowledge of Seller and the
Acquired Companies, (i) there are no organizational efforts presently being made or Threatened by
or on behalf of any labor union with respect to any Employees, and (ii) since January 1, 2007, no
union or other labor organization has attempted to organize any current or former employees of the
Acquired Companies. Neither Seller, the Acquired Companies nor to their Knowledge any of the ERISA
Affiliates are or were a party to any collective bargaining agreement.



(d) Except as disclosed in Section 4.21(d) of the Disclosure letter, there are no claims,
controversies, labor disturbances, investigations, Proceedings or complaints pending or, to
Knowledge of Seller and the Acquired Companies, Threatened, by any Governmental Authority, any
Employees, any party or parties representing any of such Employees, or any former employer of a
current Employee, against the Acquired Companies before any court, arbitrator or other tribunal.
There are no unfair labor practice charges, charges of discrimination, wrongful termination or
other similar complaints pending against the Acquired Companies involving employees now or
previously employed by the Acquired Companies that would have a Material Adverse Effect, nor, to
the Knowledge of Seller and the Acquired Companies, do any facts or circumstances exist that could
provide a reasonable basis for the same.


 


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(e) There has not been with respect to any Acquired Company (i) a “plant closing” (as defined
in the Worker Adjustment and Retraining Notification Act (the “WARN Act”) or any similar
state, local or foreign Law) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility, or (ii) a “mass layoff” (as defined in
the WARN Act, or any similar state, local or foreign Law) affecting any site of employment or
facility. None of the employees of any Acquired Company has suffered an “employment loss” (as
defined in the WARN Act or any similar state, local or foreign Law) during the ninety-day period
prior to the date of this Agreement.




Section 4.22 Intellectual Property.



(a) Each Acquired Company owns or has the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property necessary for or used in the operation of the
business of such Acquired Company as presently conducted. Each item of Intellectual Property owned
or used by each Acquired Company immediately prior to the Closing hereunder will be owned or
available for use by such Acquired Company on identical terms and conditions immediately subsequent
to the
Closing hereunder. Each Acquired Company has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or uses.



(b) Each Acquired Company has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third parties, and none of
Seller and the managers, directors, officers and employees of such Acquired Company has ever
received any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that such Acquired Company must
license or refrain from using any Intellectual Property rights of any third party). To the
Knowledge of Seller and the Acquired Companies, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property rights of any
Acquired Company.



(c) Section 4.22(c) of the Disclosure Letter identifies each patent, if any, and each
registration which has been issued to each Acquired Company with respect to any of its Intellectual
Property, identifies each pending patent application, if any, and each application for registration
which such Acquired Company has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which such Acquired Company has granted to
any third party with respect to any of its Intellectual Property (together with any exceptions).
Seller has delivered or made available to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended to date) and has
made available to Buyer correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section 4.22(c) of the Disclosure
Letter also identifies each trade name or unregistered trademark used by each Acquired Company in
connection with its business. With respect to each item of Intellectual Property required to be
identified in Section 4.22(c) of the Disclosure Letter:



(i) the respective Acquired Company possesses all right, title, and interest in and to the
item, free and clear of any Encumbrance, license, or other restriction;


 


34









 





(ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;



(iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or Threatened which challenges the legality, validity, enforceability, use, or ownership
of the item; and



(iv) the respective Acquired Company has never agreed to indemnify any Person for or against
any interference, infringement, misappropriation, or other conflict with respect to the item.



(d) Section 4.22(d) of the Disclosure Letter identifies each item of Intellectual Property
that any third party owns and that any Acquired Company uses pursuant to license, sublicense,
agreement, or permission. Seller has delivered or made
available to Buyer correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each item of Intellectual Property required
to be identified in Section 4.22(d) of the Disclosure Letter:



(i) the license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;



(ii) the license, sublicense, agreement, or permission will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby;



(iii) no party to the license, sublicense, agreement, or permission is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration thereunder;



(iv) no party to the license, sublicense, agreement, or permission has repudiated any
provision thereof;



(v) with respect to each sublicense, the representations and warranties set forth in
subsections (i) through (iv) above are true and correct with respect to the underlying license;



(vi) the underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;



(vii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or is Threatened which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and



(viii) the respective Acquired Company has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.


 


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(e) To the Knowledge of Seller and each Acquired Company, no Acquired Company will interfere
with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued operation of such Acquired Company’s
business as presently conducted.




Section 4.23 Certain Payments.



No Acquired Company or director, officer, agent or employee of any Acquired Company, or to the
Knowledge of Seller and the Acquired Companies, any other Person associated with or acting for or
on behalf of any Acquired Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property or services (i) to obtain favorable
treatment in securing business, (ii)
to pay for favorable treatment for business secured, (iii) to obtain special concessions, or
for special concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of any Acquired Company, or (iv) in violation of any Law, or (b) established or
maintained any fund or asset that has not been recorded in the books and records of the Acquired
Companies.




Section 4.24 Affiliated Transactions and Certain Other Agreements.



(a) Section 4.24(a) of the Disclosure Letter sets forth a list of those persons and entities
who are “affiliates” of the Acquired Companies within the meaning of Rule 145 promulgated under the
Securities Act or for purposes of Accounting Series Releases 130 and 135 of the SEC (the
“Acquired Company Affiliates”).



(b) Other than as set forth on Section 4.24(b) of the Disclosure Letter with reasonable
detail, including the names of parties involved and a description of the disclosed transaction,
(i) there are no agreements or Liabilities between any Acquired Company, on the one hand, and any
officer, employee, director, stockholder of any Acquired Company or any Acquired Company Affiliate,
on the other hand, (ii) the Acquired Companies do not provide or cause to be provided any assets,
services or facilities to any such officer, employee, director or stockholder of any Acquired
Company or any Acquired Company Affiliate; (iii) no officer, employee, director or stockholder of
any Acquired Company or Acquired Company Affiliate provides or causes to be provided any assets,
services or facilities to the Acquired Companies; and (iv) the Acquired Companies do not
beneficially own, directly or indirectly, any investment assets of any current or former officer,
employee, director or stockholder of any Acquired Company or Acquired Company Affiliate.



(c) Each of the agreements and Liabilities listed in Section 4.24(b) of the Disclosure Letter
were entered into or incurred, as the case may be, on terms no less favorable to the Acquired
Companies than if such agreement or liability was entered into or incurred on an arm’s-length basis
on competitive terms.


 


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Section 4.25 Customer and Supplier Relationships.



(a) Section 4.25(a) of the Disclosure Letter lists the ten (10) largest customers of the
Acquired Companies for the fiscal years ended December 31, 2007 and December 31, 2008 and for the
three months ending March 31, 2009. To the Knowledge of Seller and the Acquired Companies, except
as set forth on Section 4.25(a) of the Disclosure Letter, there are no facts or circumstances
(including the consummation of the transactions contemplated hereby) that are likely to result in
the loss of any one such customer or group of customers of any Acquired Company or a Material
Adverse Change in the relationship of any Acquired Company with such a customer or group of
customers.



(b) Section 4.25(b) of the Disclosure Letter lists the ten (10) largest suppliers of the
Acquired Companies for the fiscal years ended December 31, 2007 and December 31, 2008 and for the
three months ending March 31, 2009. To the Knowledge of Seller and the Acquired Companies, there
are no facts or circumstances (including the consummation of the transactions contemplated hereby)
that are likely to result in the loss of any one such supplier or group of suppliers of any
Acquired Company or a Material Adverse Change in the relationship of any Acquired Company with such
a supplier or group of suppliers.




Section 4.26 Foreign Corrupt Practices Act.



Neither the Acquired Companies nor any officer, director, employee or agent thereof acting on
behalf of any Acquired Company has done any act or authorized, directed or participated in any act
in violation of any provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, applied to such Person.




Section 4.27 Anti-Takeover Statute.



No “business combination,” “fair price,” “moratorium,” “control share acquisition” or other
similar anti-takeover statute, regulation or similar Law applies or purports to apply to the
authorization, execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated herein.




Section 4.28 Brokers or Finders.



The Acquired Companies and their agents have incurred no obligation or Liability, contingent
or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in
connection with this Agreement or any of the transactions contemplated herein.


 


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ARTICLE V




REPRESENTATIONS AND WARRANTIES OF 

BUYER




Buyer represents and warrants to Seller that the statements contained in this Article V are
correct and complete as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V).




Section 5.1 Organization of Buyer.



Buyer is a corporation duly organized, validly existing, and in good standing under the Laws
of the State of California.




Section 5.2 Authorization of Transaction.



Buyer has full power and authority to execute and deliver this Agreement and to perform its
respective obligations hereunder. This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and legally binding obligation of Buyer, enforceable in accordance with its
terms and conditions, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting creditors generally, or
by general equity principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Any and all corporate acts and other proceedings necessary for
the due and valid authorization, execution, delivery and performance by Buyer of this Agreement and
the exhibits and schedules hereto and the consummation by Buyer of the transactions contemplated
hereby have been validly and appropriately taken.




Section 5.3 Noncontravention.



Neither the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any Law to which Buyer is subject or any provision
of its Organizational Documents.




Section 5.4 Brokers’ Fees.



Buyer and its agents have incurred no obligation or Liability, contingent or otherwise, for
brokerage or finders’ fees, or agents’ commissions, or other similar payment in connection with
this Agreement or any of the transactions contemplated herein.


 


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ARTICLE VI




CLOSING CONDITIONS; TERMINATION





Section 6.1 Closing Conditions of Buyer.



The obligations of Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the following conditions,
any one or more of which may be waived (but only in writing) by Buyer:



(a) Representations, Warranties and Covenants of Seller and AMG; No Material Adverse
Effect. (i) All of the representations and warranties made by Seller and AMG in this Agreement
are true and correct in all material respects as of the Closing Date, (ii) Seller shall have
performed and complied with all agreements and covenants required by this Agreement to be performed
by it on or prior to the Closing Date, and (iii) no Material Adverse Effect shall have occurred
since the date of this Agreement.



(b) No Injunction or Proceeding. No action or proceeding shall be pending before any
Governmental Authority (i) to enjoin, restrain or prohibit the consummation of the transactions
contemplated hereby or (ii) which if adversely decided would have a Material Adverse Effect. No
Governmental Authority shall have enacted, issued or promulgated any statute, rule, regulation or
Order that would enjoin, restrain or prohibit the consummation of the transactions contemplated
hereby or which would have a Material Adverse Effect.



(c) Consents and Approvals. All filings, notices, approvals, and consents, or waivers
thereof, required pursuant to this Agreement shall have been obtained in a form reasonably
satisfactory to Buyer.



(d) Release of Liability Under Seller’s Credit Facilities. Seller shall have obtained
releases of liability of the Acquired Companies from Bank of America, N.A. under the Seller Loan
Agreement and any other agreements relating thereto and from any other Person to whom any Acquired
Company is a guarantor or otherwise liable for any Liability or obligation (including indebtedness)
of Seller or any of its Affiliates (other than the Acquired Companies), in each case in form
reasonably satisfactory to Buyer.



(e) Fairness Opinion. Seller shall have received a fairness opinion from an
investment banking firm of regional or national reputation, and Seller shall have delivered to
Buyer a copy of such opinion, on or before the Closing Date.



(f) Seller’s Closing Deliveries. Seller shall deliver, or cause to be delivered, to
Buyer at the Closing the following:



(i) a certificate, executed by an executive officer of Seller, certifying as to the
satisfaction of Section 6.1(a) above at it applies to Seller;



(ii) a certificate, executed by an executive officer of AMG, certifying as to the satisfaction
of Section 6.1(a) above at it applies to AMG;


 


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(iii) the Closing Intercompany Balances Certificate, certified by an executive officer of
Seller;



(iv) copies of all documents evidencing compliance with Section 2.3 above in a form reasonably
acceptable to Buyer;



(v) copies of all filings, notices, approvals, and consents, or waivers thereof, required
pursuant to this Agreement, certified by an officer of Seller;



(vi) written documentation in a form satisfactory to Buyer evidencing that all consents,
approvals and waivers listed in Sections 4.1(g) and 4.4 of the Disclosure Letter have been
obtained;



(vii) an executed copy of the action by Seller’s board of directors, and any actions required
by the Acquired Companies’ respective boards of directors or other corporate authority performing
similar functions, approving this Agreement and the transactions contemplated hereby;



(viii) a duly executed assignment document transferring the Interest from Seller to Buyer in a
form reasonably acceptable to Buyer;



(ix) the Non-Competition and Non-Disclosure Agreement in the form attached hereto as
Exhibit A (the “Non-Competition and Non-Disclosure Agreement”), duly executed by
Seller;



(x) a legal opinion from Seller’s counsel dated as of the Closing Date as to the matters set
forth on Exhibit B attached hereto; and



(xi) a certificate of non-foreign status, in the form set forth in Treasury Regulations
Section 1.1445-2(b)(2), signed under penalties of perjury. Seller understands that such
certificate will be retained by Buyer and made available to Governmental Authorities upon request.




Section 6.2 Closing Conditions of Seller.



The obligations of Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the following conditions,
any one or more of which may be waived (but only in writing) by Seller:



(a) Representations, Warranties and Covenants of Buyer. (i) All of the
representations and warranties made by Buyer in this Agreement are true and correct in all material
respects as of the Closing Date, and (ii) Buyer shall have performed and complied with all
agreements and covenants required by this Agreement to be performed by it on or prior to the
Closing Date.


 


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(b) No Injunction or Proceeding. No action or proceeding shall be pending before any
Governmental Authority (i) to enjoin, restrain or prohibit the consummation of the transactions
contemplated hereby or (ii) which if adversely decided would have a Material Adverse Effect. No
Governmental Authority shall have enacted, issued or promulgated any statute, rule, regulation or
Order that would enjoin, restrain or prohibit the consummation of the transactions contemplated
hereby or which would have a Material Adverse Effect.



(c) Consents and Approvals. All filings, notices, approvals, and consents, or waivers
thereof, required pursuant to this Agreement shall have been obtained in a form reasonably
satisfactory to Buyer.



(d) Fairness Opinion. Seller shall have received a fairness opinion from an
investment banking firm of regional or national reputation on or before the Closing Date.



(e) Buyer’s Closing Deliveries. Buyer shall deliver to Seller at the Closing the
following:



(i) the Closing Payment;



(ii) a certificate, executed by an executive officer of Buyer, certifying as to the
satisfaction of Section 6.2(a) above;



(iii) an execution copy of the action by Buyer’s manager approving this Agreement and the
transactions contemplated herein;



(iv) a legal opinion from Buyer’s counsel dated as of the Closing Date as to the matters set
forth on Exhibit C attached hereto; and



(v) the Non-Competition and Non-Disclosure Agreement, duly executed by Buyer.




Section 6.3 Termination.



(a) Termination of Agreement. This Agreement may be terminated at any time prior to
the Closing:



(i) By mutual consent of Buyer and Seller set forth in writing;



(ii) By and at the option of Buyer if the Closing shall not have occurred by June 5, 2009;
provided that Buyer shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have been the proximate cause of, or resulted in, the failure to
consummate the Closing;



(iii) By and at the option of Seller, by written notice to Buyer, if the Closing shall not
have occurred by June 5, 2009, provided that (A) Seller shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have been the proximate cause
of, or resulted in, the failure to consummate the Closing, and (B) Seller shall have rendered to
Buyer payment in full of the amount specified in Section 6.3(c) below concurrently with delivery of
its notice of termination;


 


41









 





(iv) By and at the option of Seller, by written notice to Buyer, upon Seller and/or AMG
entering into a definitive agreement for a Superior Competing Offer as contemplated by Section
7.4(c) provided that Seller shall have rendered to
Buyer payment in full of the amount specified in Section 6.3(c) below concurrently with
delivery of its notice of termination;



(v) By Buyer, by written notice to Seller, if events occur or conditions exist which would
render impossible or commercially unreasonable the satisfaction of one or more of the conditions to
the obligation of Buyer to consummate the transactions contemplated hereby as set forth in Section
6.1;



(vi) By Seller, by written notice to Buyer, if events occur or conditions exist which would
render impossible or commercially unreasonable the satisfaction of one or more of the conditions to
the obligation of Seller to consummate the transactions contemplated hereby as set forth in Section
6.2 provided that Seller shall have rendered to Buyer payment in full of the amount specified in
Section 6.3(c) below concurrently with delivery of its notice of termination; or



(vii) By either Buyer or Seller, by written notice to the other party, if the other party has
materially breached any representation, warranty, covenant or agreement contained herein and has
not cured such breach within five (5) Business Days or it is unable to be cured.



(b) Effect of Termination. In the event that this Agreement is terminated pursuant to
Section 6.3(a), all further obligations of the Parties under this Agreement shall terminate;
provided that the obligations of the Parties contained in Sections 6.3(c) and (d) below
shall survive any such termination.



(c) Termination Fee. In the event this Agreement is terminated by Seller for any
reason other than pursuant to Section 6.3(a)(vii) hereof, or by Buyer pursuant to Section 6.3(a)
hereof, Seller shall promptly pay (i) Buyer Two Hundred Fifty Thousand Dollars ($250,000), by wire
transfer of same day funds to an account designated by Buyer and (ii) reimburse Buyer for all
reasonable costs and expenses as would otherwise be the obligation of Buyer pursuant to
Section 9.11.



(d) Expenses. Without limiting the rights and remedies of any Party with respect to a
breach of any other Party’s representations, warranties or covenants under this Agreement or any
other document delivered in connection herewith, in the event the transactions contemplated by this
Agreement shall not be consummated, the Parties hereto shall, except as otherwise provided in
Section 6.3(c) above, bear their own respective cost and expenses as provided in Section 9.11.


 


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ARTICLE VII




COVENANTS




The Parties agree as set forth in Sections 7.1 through 7.7 below with respect to the
period prior to and on the Closing Date and as set forth in Sections 7.8 through 7.18 below
with respect to the period after the Closing Date.




Section 7.1 No Inconsistent Action; Reasonable Effort.



The Parties shall not, directly or indirectly, take any action which is materially
inconsistent with their respective obligations under this Agreement and will make a reasonable
effort, subject to the terms and conditions of this Agreement, to consummate the transactions
contemplated hereby. Without limiting the foregoing, Seller shall use commercially reasonable
efforts to obtain, at its cost and expense prior to the Closing Date: (a) all filings, notices,
approvals and consents or waivers necessary for Seller and the Acquired Companies to consummate the
transactions contemplated hereby, (b) the fairness opinion described in Sections 6.1(e) and 6.2(d)
above, and (c) the releases described in Section 6.1(d) above.




Section 7.2 Access to Books and Records and Personnel.



Upon reasonable prior notice during normal business hours, Seller shall make the books,
accounts, inventory, personal property, records (financial and other), technical information,
Contracts and other documents and information relating to the Acquired Companies and their business
available for examination, audit and inspection by Buyer and its officers, employees, financial
advisors, financing sources, consultants, accountants, attorneys and authorized representatives;
provided, that such access is not unreasonably disruptive to Seller or the Acquired Companies,
their employees or their business and is conducted in such a mutually agreed manner so as to
maintain the confidentiality of the discussions and transactions contemplated by this Agreement.
Seller shall furnish or make available to Buyer as promptly as practicable such documents or copies
thereof, and other information concerning the Acquired Companies and their business, including,
without limitation, any financial and operating data or other periodic financial information, as
Buyer shall, from time to time, reasonably request. In addition, Seller shall give Buyer
reasonable access at mutually agreed upon times and places to such officers, managers, key
employees, accountants, advisors and other representatives of Seller and the Acquired Companies as
Buyer shall reasonably request.


 


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Section 7.3 Conduct of Business by Acquired Companies.



Between the date of this Agreement and the Closing Date, Seller shall cause the Acquired
Companies to be operated only in the Ordinary Course of Business and shall pay on a timely basis
all of its liabilities and other obligations. Seller will use its commercially reasonable efforts
to: (i) maintain in effect all Licenses and Permits which are necessary for the operation and
management of the business of the Acquired Companies as presently conducted, (ii) maintain,
preserve and keep the tangible assets and properties of the Acquired Companies in reasonable
condition and repair (ordinary wear and tear excepted) and utilize such assets and properties only
in the Ordinary
Course of Business, and (iii) maintain good business relationships with material suppliers,
customers, licensors, lessors and others having substantial business dealings with the Acquired
Companies. Except as otherwise expressly permitted by this Agreement, or as otherwise consented to
or approved by Buyer in writing, no Acquired Company shall:



(a) amend its Organization Documents, permit any redemption or repurchase of membership
interests or shares, or take any corporate or other action if any such amendment or action would
have an adverse effect on the ability of Seller and/or AMG to consummate the transactions
contemplated by this Agreement;



(b) create or incur any Encumbrance, or fail to take commercially reasonable action to
discharge any involuntary Encumbrance, against or in respect of any material assets of the Acquired
Companies, except as may be created or incurred in the Ordinary Course of Business;



(c) (i) amend, terminate or fail to renew any material Contract, except in the Ordinary Course
of Business where such amendment, termination or failure to renew would not be reasonably expected
to result in a Material Adverse Effect, or (ii) materially default (or take or omit to take any
action that, with or without the giving of notice or passage of time or both, would constitute a
material default) under any material Contract;



(d) enter into any new Contract, or make any proposal or offer to enter into a new Contract,
with a value in excess of $25,000, except in the Ordinary Course of Business;




(e) dispose of or permit to lapse any rights to the use of any material Intellectual Property;



(f) dispose of, dividend or distribute any assets or properties (I) outside of the Ordinary
Course of Business or (II) to Seller or its Affiliates (other than the Acquired Companies), except
in accordance with Section 2.3;




(g) fail to comply with any applicable Laws and Orders;



(h) enter into any settlement agreement in excess of $25,000 that is binding on any of the
Acquired Companies or their assets;



(i) acquire (by merger, consolidation or acquisition of stock) any other Person or all or
substantially all of the assets of any other Person;



(j) incur any indebtedness in excess of $25,000, unless incurred in the Ordinary Course of
Business;


 


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(k) grant, guarantee or endorse, or make any other accommodation or arrangement making one or
more of the Acquired Companies responsible for, or their assets subject to, the Liabilities of (I)
any other Person, other than Seller or its Affiliates
(other than the Acquired Companies), other than in the Ordinary Course of Business or (II)
Seller or its Affiliates (other than the Acquired Companies);




(l) make any change in tax or accounting practices or policies, except as required by GAAP;



(m) allow the presently existing insurance coverage of any Acquired Company to lapse, except
where (i) such coverage is no longer reasonably available, or (ii) substitute coverage is secured;



(n) except in accordance with past practices or pursuant to the terms of employment
agreements, employee benefit plans, programs, arrangements or policies in effect on the date of
this Agreement, grant any material increase in the salary or other compensation of, grant any
material bonus to, or enter into any material transaction of any other nature with, any Employee;



(o) take any action to institute any new severance, change of control or termination pay
practices with respect to any Employees or to materially increase the benefits payable under the
Acquired Companies’ respective severance or termination pay practices;



(p) adopt or amend, in any material respect, except as may be required by applicable Law or
Order, any collective bargaining, profit sharing, stock option, restricted stock, pension,
retirement or deferred compensation plan;



(q) make, permit to exist or commit to make any loans, advances or extensions of credit to or
for the benefit of (I) any Person (other than Seller or its Affiliates (other than the Acquired
Companies)), other than in the Ordinary Course of Business or (II) Seller or its Affiliates (other
than the Acquired Companies);



(r) pay any amount to, or for the benefit of, Seller or its Affiliates (other than the
Acquired Companies) or take, or omit to take, any action that would result in the Intercompany
Balances on the Closing Date differing in any amount from the Intercompany Balances set forth in
the Preliminary Intercompany Balances;



(s) make, amend or revoke any Tax election, amend any Tax Return, or change accounting period
or method of accounting without the prior consent of Buyer; or




(t) authorize any of, or commit or agree to take any of, the foregoing actions.


 


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Section 7.4 Competing Proposals.



Buyer acknowledges and agrees that, during the period beginning on the date of this Agreement
and continuing until 11:59 a.m. Pacific Time on June 1, 2009 (the “Solicitation Period”),
Seller, each of the Acquired Companies, and their respective
officers, directors, managers, employees, investment bankers, attorneys and other advisors and
representatives (collectively, the “Seller Representatives”) are permitted to (i) directly
or indirectly solicit, initiate or encourage the submission of competing proposals (collectively,
“Alternate Solicitation Activities”) from any other Person to acquire the Interest or
otherwise acquire all of the Acquired Companies (an “Alternate Transaction”) and (ii)
directly or indirectly participate in discussions or negotiations regarding, and furnish to any
Person with respect thereto, and take any other action to facilitate any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, an Alternate Transaction
(collectively, “Alternate Discussions”); provided, however, that (A) Seller shall not, nor
shall it authorize or permit any other Seller Representative to, provide or make available to any
other Person any non-public information (other than any immaterial non-public information) with
respect to the Acquired Companies without first entering into a customary confidentiality agreement
with such Person that is not less restrictive than any confidentiality agreement entered into
between or among Seller and/or AMG, on the one hand, and Buyer, on the other hand, at which time
Seller shall notify Buyer that it has entered into a confidentiality agreement with such Person,
and (B) Seller shall promptly provide to Buyer any non-public information concerning any Acquired
Company that is provided or made available to such Person or its representatives which was not
previously provided or made available to Buyer. Unless Seller and/or AMG enters into one or more
written term sheets with Persons other than Buyer (each, a “Competing Offeror”) prior to
the expiration of the Solicitation Period for an Alternate Transaction that does not have a
“financing out” condition to the Competing Offeror’s obligation to consummate the Alternate
Transaction (each, a “Competing Offer”), then from and after the end of the Solicitation
Period and continuing through the date of termination (if any) of this Agreement pursuant to
Section 6.3 above, Seller and the Seller Representatives shall be prohibited from engaging in any
manner, directly or indirectly, in any Alternate Solicitation Activities or Alternate Discussions
and shall immediately terminate any ongoing Alternate Solicitation Activities or Alternate
Discussions.




Section 7.5 Buyer’s Right of First Refusal.



Seller shall require that each Competing Offeror submit its executed written firm and final
term sheet to the Seller’s board of directors on or before the end of the Solicitation Period. The
board of directors of Seller shall review each final term sheet for each Competing Offer and
determine, in its business judgment, which of such Competing Offers provides the highest all cash
purchase price above and beyond this Agreement (such a Competing Offer, if any, that is determined
to be superior to this Agreement, the “Superior Competing Offer”).
In the event the board
of directors of Seller determines that there is a Superior Competing Offer, Seller shall prepare
and send a written notice (the “Competing Offer Notice”) to Buyer no later than 5:00 p.m.
Pacific Time on 5:00 p.m. Pacific Time on May 22, 2009 clearly indicating that such a term sheet
has been entered into and attaching as an exhibit thereto a complete executed copy of such term
sheet.
In the event the board of directors of Seller determines that there is not a Superior
Competing Offer, Seller and the Seller Representatives shall immediately terminate any Alternate
Solicitation Activities or Alternate Discussions, shall not engage, directly or
indirectly, in any further Alternate Solicitation Activities or Alternate Discussions, and
shall completely cease to pursue any Competing Offers, and Seller and Buyer shall work in good
faith to consummate the transactions contemplated by this Agreement.



 


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(a) In the event Seller timely delivers to Buyer a Competing Offer Notice, for four Business
Days after the delivery of the Competing Offer Notice (the “Option Period”, subject to the
potential revised definition thereof set forth in Section 7.5(c) below), Buyer shall have
the right to deliver to Seller a written notice signed by Buyer indicating Buyer’s agreement to
match the terms of the Superior Competing Offer (a “Buyer Acceptance Notice”).



(b) Upon Seller’s receipt of a Buyer Acceptance Notice prior to the expiration of the Option
Period, Seller and the Seller Representatives shall immediately terminate any Alternate
Solicitation Activities or Alternate Discussions and completely cease to pursue any Superior
Competing Offer and Seller and Buyer shall work in good faith to enter into an amendment to this
Agreement as to the purchase price to make this Agreement consistent with the Superior Competing
Offer to which the Buyer Acceptance Notice Relates



(c) If Seller does not receive a Buyer Acceptance Notice with respect to the Competing Offer
Notice prior to the expiration of the Option Period, then Buyer shall conclusively be deemed to
have waived its rights under this Section 7.5 and Seller and/or AMG and the Competing
Offeror (or any Affiliate of the Competing Offeror contemplated by the term sheet for the Superior
Competing Offer) shall be permitted to enter into a definitive agreement for, and consummate, the
Superior Competing Offer; subject to Seller’s delivery of a notice pursuant to Section 6.3(a)(iv)
hereof and Seller’s payment to Buyer of the amount specified in Section 6.3(c) hereof in accordance
with the terms thereof; provided, however, that if there is a material change in the terms of the
Superior Competing Offer as set forth in the definitive agreement therefor as compared to the terms
set forth in the term sheet for such Superior Competing Offer, then the modified terms of the
Superior Competing Offer as set forth in the definitive agreement therefor shall again be subject
to the terms of this Section 7.5.




Section 7.6 Intercompany Balance; Financial Statement.



(a) Intercompany Balance. Seller shall promptly notify Buyer in writing of any change
in the Intercompany Balance from the Intercompany Balance set forth in the Preliminary Intercompany
Balance. In the event of any dispute between Seller and Buyer regarding such change (or the
failure of Seller to notify of a change), Seller and Buyer shall work diligently and in good faith
to resolve any such dispute, with the resolution of such dispute to be set forth in writing (or
through clear and specific email communications between authorized representatives of Seller and
Buyer regarding the resolution of such dispute) between Buyer and Seller.


 


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(b) Financial Statements. Prior to the Closing, Seller also shall deliver to Buyer on
a monthly basis as soon as it is available a true and correct copy of an unaudited balance sheet
and statements of operations, change in stockholders’ equity (including the related notes and cash
flow for each Acquired Company as of and for each calendar month, commencing with April 2009 and
continuing until Closing.




Section 7.7 Other Pre-Closing Actions.



(a) Acquired Company Adjustments. Prior to the Closing, the Acquired Companies shall
make the payments or adjustments to the other Acquired Companies in accordance with Schedule
7.7.



(b) Tax Assets Write-Offs. Upon the request of Buyer, Seller shall cooperate with
Buyer to write off Tax assets to the maximum extent allowable for the short period Tax Return
ending on or prior to the Closing Date in order to be within Code Section 382(h)(3) (B) built-in
loss threshold requirements.




Section 7.8 General.



In case at any time after the Closing any further action is necessary to carry out the
purposes of this Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other Party reasonably may
request. Seller acknowledges and agrees that from and after the Closing, Buyer will be entitled to
possession of all documents, books, records (including Tax records), agreements, and financial data
of any sort relating to each Acquired Company.




Section 7.9 Litigation Support.



In the event and for so long as any Party actively is contesting or defending against any
action, suit, Proceeding, hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving any Acquired Company, the
other Party will cooperate with it and its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to indemnification therefore
under Article VIII below).




Section 7.10 Transition.



Seller will not take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business associate of any Acquired
Company from maintaining the same business relationships with such Acquired Company after the
Closing as it maintained with such Acquired Company prior to the Closing. Seller will refer all
customer inquiries relating to the businesses of each Acquired Company to Buyer from and after the
Closing.


 


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Section 7.11 Solicitation of Seller and Target Employees.



Seller covenants and agrees that beginning on the Closing Date and continuing for a period of
eighteen (18) months thereafter (the “Non-Solicitation Period”), it will not anywhere in
the world (the “Non-Solicitation Area”) (i) solicit or hire any of the employees of any
Acquired Company who were employed by such Acquired Company prior to the Closing, (ii) interfere
with the relationship of any Acquired Company with any such employees, or (iii) personally target
or solicit, or assist another to target or solicit, customers of any Acquired Company for
activities related to the businesses of the Acquired Companies or influence, or attempt to
influence, any of the customers of any Acquired Company not to do business with any Acquired
Company; provided, however, that Seller may engage in general solicitations for employees in the
Ordinary Course of Business which are directed at the public in general and/or found in general
publications for employees. Seller agrees that the restrictions contained in this Section 7.11 are
reasonable as to time and geographic scope because of the nature of the business of the Acquired
Companies and Seller agrees, in particular, that the geographic scope of this restriction is
reasonable because companies engaged in the businesses of the Acquired Companies compete throughout
the Non-Solicitation Area. Seller acknowledges that the Acquired Companies are in direct
competition with all other companies engaged in the businesses of the Acquired Companies throughout
the Non-Solicitation Area, and because of the nature of such businesses, Seller agrees that the
covenants contained in this Section 7.11 cannot reasonably be limited to any smaller geographic
area.




Section 7.12 Tax Matters.



(a) Tax Returns For Tax Periods Ending Prior to the Closing Date. Seller shall
prepare or cause to be prepared and duly and timely file or cause to be filed all Tax Returns for
each of the Acquired Companies that are due for any Tax period ending on or prior to the Closing
Date. Prior to filing, Seller shall permit Buyer to review and comment on each such Tax Return
described in the preceding sentence not filed prior to execution of this Agreement and shall make
such revisions to such Tax Returns as are reasonably requested by Buyer; provided, however, that
comments are provided in a timely manner such that Seller shall have a reasonable period of time to
review such comments and make revisions prior to filing, and such comments are consistent with
positions taken in prior Tax Returns. No position shall be taken in any such Tax Return that
is inconsistent with the past practice of the Acquired Companies without Buyer’s written consent.
No such Tax Return may make, amend or revoke any Tax election or change any accounting period,
method of accounting or accounting procedure without Buyer’s prior written consent, which may be
withheld in its sole discretion.


 


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(b) Tax Returns for Straddle Periods. Buyer shall prepare or cause to be prepared and
duly and timely file or cause to be filed any Tax Returns of each of the Acquired Companies for any
Straddle Period. With respect to each Acquired Company, Seller shall pay to Buyer within seven (7)
days of a request from Buyer, that amount equal to the portion of such Taxes which relates to the
Pre-Closing portion of such Tax Period. To the extent permitted by applicable law, the parties
shall elect (or cause the Acquired Companies) to treat the period that includes the Closing Date
with respect to any Tax as ending at the close of the Closing Date and shall take such steps as may
be necessary therefor. For purposes of this Agreement, any Taxes of an Acquired Company for a
Straddle Period shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax
Period based on an interim closing of the books as of the close of the Closing Date, provided,
however, that any real property or personal property taxes and any annual exemption amounts shall
be allocated based on the relative number of days in the Pre-Closing Tax Period and the
Post-Closing Tax Period. Buyer shall permit Seller to review and comment on each such Tax Return
described in the preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by Seller; provided, however, that comments are provided in a
timely manner such that Buyer shall have a reasonable period of time to review such comments and
make revisions prior to filing, and such comments are consistent with positions taken in prior Tax
Returns. Except to the extent permitted by applicable Law, no position shall be taken in any such
Tax Return which is inconsistent with the past practice of the Acquired Companies without Seller’s
written consent.



(c) Cooperation on Tax Matters. Seller, Buyer and the Acquired Companies shall
cooperate fully, as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Agreement and any audit, litigation or other Proceeding
with respect to Taxes; provided that the Party requesting cooperation shall be responsible for all
out-of-pocket costs incurred by the cooperating Party. Such cooperation shall include the
retention and (upon the other Party’s request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other Proceeding and making employees
available on a mutually convenient basis to provide additional information and explanation of any
material provided hereunder.



(d) Certain Taxes. All transfer, documentary, sales, use, stamp, recording,
registration and other similar Taxes and fees (including any penalties and interest) incurred in
connection with the transactions contemplated by this Agreement (collectively, “Transfer
Taxes”) shall be paid by Seller when due, and Seller will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such Transfer Taxes and, if
required by applicable law, Buyer will join in the execution of any such Tax Returns and other
documentation. Seller shall provide Buyer with (i)
evidence satisfactory to Buyer that such Transfer Taxes have been paid by Seller and (ii) a
clearance certificate or similar document(s) which may be required by any state Governmental
Authority to relieve the Buyer of any obligation to withhold any portion of the payments to Seller
pursuant to this Agreement.



(e) Tax Election. Seller shall not make (or permit any Affiliate to make) any
election under Section 336(e) of the Code (or any similar provision of applicable state, local or
foreign Law) with respect to any of the Acquired Companies or transactions contemplated by this
Agreement.


 


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(f) No Adverse Actions. Seller shall not take or fail to take (or permit the common
parent of its affiliated group under Code Section 1502 or any similar provision of applicable
state, local or foreign Law, to take or fail to take) any action under the U.S. federal
consolidated income tax return regulations, including making an election under Treasury Regulation
Section 1.1502-36 (or any similar provision of applicable state, local or foreign Law) that could
adversely affect any tax attribute of Buyer, any of the Acquired Companies or any of their
Affiliates.



(g) Amended Returns. Except to the extent reasonably necessary to address any audit
or claim or the outcome thereof, or to the extent required by applicable Law, Buyer shall not file,
and shall not permit the Acquired Companies to file, any amended Tax Return with respect to any
Pre-Closing Tax Period without the prior written consent of Seller, which consent shall not
unreasonably be withheld.




Section 7.13 Access to Records.



Following the Closing, Buyer shall permit Seller and its authorized representatives to have
reasonable access and duplicating rights during normal business hours, upon reasonable prior notice
to Buyer, to the books and records of the Acquired Companies for periods prior to the Closing Date,
to the extent that such access may reasonably be required: (i) in connection with the preparation
of Seller’s accounting records or with any audits, (ii) in connection with the preparation of any
Tax Returns or with any tax audits, or (iii) in connection with any suit, claim, action, Proceeding
or investigation relating to the Acquired Companies; provided that Seller shall reimburse Buyer
promptly for all reasonable and necessary out-of-pocket costs and expenses incurred by Buyer in
connection with any such request.




Section 7.14 Use of Proceeds.



Seller will not conceal, gift or otherwise dispose of any cash consideration received by
Seller pursuant to this Agreement in a manner that may prejudice the rights of any creditor of
Seller.




Section 7.15 Further Assurances.



In the case at any time after the Closing that any further action is reasonably necessary to
carry out the purposes of this Agreement, the proper officers of Buyer and Seller shall take any
such reasonably necessary action.



Section 7.16 D&O Insurance. For six years from the Closing Date, Seller shall cause
to be maintained in effect for the benefit of Joseph J. Ueberroth an insurance policy that provides
coverage for any claims regarding breach of any fiduciary duty relating to this Agreement and all
of the transactions contemplated hereby on terms with respect to coverage and in amounts no less
favorable than those maintained by Seller for the benefit of Joseph J. Ueberroth as of the date of
this Agreement.


 


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Section 7.17 Benefit Plans. For a period of sixty (60) days from the Closing (or such
shorter period as may be requested by Buyer), Seller shall continue to maintain the employees of
the Acquired Companies on the Employee Plans and Foreign Plans and provide them with all coverage
and benefits thereunder. Buyer shall reimburse Seller for the direct cost to Seller for
maintaining the employees of the Acquired Companies on the Employee Plans and Foreign Plans within
fourteen (14) days of receipt of an invoice from Seller detailing such costs.



Section 7.18 Insurance Refund. Within thirty (30) days of the Closing, Seller shall
pay to Buyer an amount equal to the portion of the premiums and other amounts paid for all forms of
insurance maintained by Seller on behalf of, or for the benefit of, any of the Acquired Companies
on their business or employees which is attributable to periods commencing immediately after the
Closing Date.



ARTICLE VIII




INDEMNIFICATION





Section 8.1 Survival of Representations and Warranties.



All of the representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and continue in full
force and effect for eighteen (18) months following the Closing, except with respect to
representations and warranties contained in Sections 4.1(c) (Interest Ownership), 4.5
(Capitalization), 4.12 (Taxes), 4.13 (Employee Benefits) and 4.20 (Environmental, Health and Safety
Matters) hereof, which shall survive the
Closing hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and continue in full
force and effect forever thereafter (subject to any applicable statutes of limitations as it may be
waived or extended). By “survival” the Parties do not intend to suggest that any representation or
warranty hereunder is made at any time other than the times specified herein (as of the date of
this Agreement and as of the Closing Date). The covenants and agreements of the Parties contained
herein shall continue in accordance with their respective terms and survive forever thereafter
(subject to any applicable statutes of limitations as it may be waived or extended). The period of
time a representation, warranty, covenant or agreement survives the Closing pursuant to this
Section 8.1 shall be the “Survival Period” with respect to such representation, warranty,
covenant or agreement. So long as an Indemnified Party gives notice of an indemnification claim on
or before the expiration of the applicable Survival Period, such Indemnified Party shall be
entitled to pursue its rights to indemnification under Sections 8.2, 8.3 or 8.4 hereof, as
applicable. No party hereunder shall have any liability under this Article VIII for any
indemnification claim made after the expiration of the applicable Survival Period. In the event
notice of any claim for indemnification under Sections 8.2, 8.3 or 8.4 hereof shall have been given
within the applicable Survival Period and such claim has not been finally resolved by the
expiration of such Survival Period, the representations, warranties, covenants or agreements that
are the subject of such claim shall survive the end of the Survival Period of such representations,
warranties, covenants and agreements until such claim is finally resolved, but such representations
and warranties shall only survive with respect to such asserted claim. Any claim by an Indemnified
Party for indemnification shall not be adversely affected by any investigation by or opportunity to
investigate afforded to such party, nor shall such a claim be adversely affected by such party’s
Knowledge on or before the Closing Date of any breach of the type specified in Section 8.2, 8.3 or
8.4 or of any state of facts that may give rise to such a breach. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance of or compliance
with any covenant or obligation, will not adversely affect the right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants or obligations.


 


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Section 8.2 Indemnification of Buyer.



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


 


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Section 8.3 Indemnification for Taxes.



Seller shall indemnify, save and hold Buyer harmless from and against any and all losses
incurred in connection with, arising out of, resulting from or incident to (a) any Taxes of any of
the Acquired Companies with respect to any Pre-Closing Tax Period, (or any Straddle Period) to the
extent the Tax is allocable (as determined in Section 7.12(b) hereof) to the Pre-Closing Tax
Period), and (b) the unpaid Taxes of any Person (other than any of the Acquired Companies) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract, or otherwise.




Section 8.4 Indemnification of Seller.



Subject to the provisions of this Article VIII, Buyer shall indemnify, defend, save and keep
Seller and its Affiliates (other than the Acquired Companies), and their respective officers,
directors, successors and assigns (collectively, the “Seller Indemnitees”) harmless against
and from all Damages sustained or incurred by Seller Indemnitees to the extent they are a result
of, arise out of or are by virtue of (i) any misrepresentations or breach of any representation or
warranty set forth in this Agreement or any exhibit or schedule hereto, or any written statement or
certificate furnished or to be furnished to Seller pursuant hereto or in any closing document
delivered by Buyer to Seller in connection herewith, (ii) any non-fulfillment of any agreement or
covenant on the part of Buyer, set forth in this Agreement or any exhibit or schedule hereto, or
any written statement or certificate furnished or to be furnished to Seller pursuant hereto or in
any closing document delivered by Buyer to Seller in connection herewith, or (iii) the nonpayment
or nonperformance of any Liabilities or obligations of the Acquired Companies other than
Liabilities for which Seller has any indemnification obligations under this Article VIII. Such
obligations apply regardless of the presence of a Third Party Claim (as defined below). For
purposes of determining the amount of Damages for which indemnification is provided hereunder (but
not for the purpose of determining whether a breach of a representation, warranty or covenant has
occurred), each of the representations, warranties and covenants made by any party in this
Agreement or in any certificate or other instrument delivered pursuant hereto, shall be deemed to
have been made without the inclusion of limitations or qualifications as to materiality such as the
word “material,” if with the inclusion of such limitation or qualification the representation,
warranty or covenant was breached.


 


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Section 8.5 Procedures for Indemnification.



(a) If a claim for Damages (an “Indemnity Claim”), other than Third-Party Claims under
Section 8.5(b) below, is to be made by a Person entitled to indemnification under this Article VIII
(an “Indemnified Party”), such party shall give written notice briefly describing the claim
and the total monetary damages sought (each, a “Notice”) to the Seller or Buyer, as
applicable (each an “Indemnifying Party”) as soon as practicable after such Indemnified
Party becomes aware of any fact, condition or event which gives rise to Damages for which
indemnification may be sought under this Article VIII. Any failure to submit any such notice of
claim to the Indemnifying Party shall not relieve any Indemnifying Party of any liability
hereunder, except to the extent that the Indemnifying Party demonstrates that the Indemnifying
Party was actually prejudiced by such failure. The Indemnifying Party shall be deemed to have
accepted the Notice and the Indemnifying Party shall be deemed to have agreed to pay the Damages at
issue if the Indemnifying Party does not send a notice of disagreement to the Indemnified Party
within thirty (30) calendar days after receiving the Notice. If the Indemnifying Party does not
send a notice of disagreement to the Indemnified Party within thirty (30) calendar days after
receiving the Notice, the Indemnifying Party shall promptly pay to the Indemnified Party the amount
sufficient to pay the Damages.



(b) If an Indemnity Claim is to be made by an Indemnified Party entitled to indemnification
hereunder in respect of, arising out of or involving a claim made by any third party (each, a
“Third-Party Claim”) against the Indemnified Party, the Indemnified Party shall give a
Notice to the Indemnifying Party as soon as practicable after becoming aware of such Third-Party
Claim. The failure of any Indemnified Party to give timely Notice hereunder shall not affect
rights to indemnification hereunder, except to the extent that the Indemnifying Party demonstrates
that the Indemnifying Party was actually prejudiced by such failure. After such Notice, if the
Indemnifying Party acknowledges in writing to an Indemnified Party that the Indemnifying Party is
liable and has indemnity obligations for any Damages resulting from any such Third-Party Claim
(and, in the case Seller is the Indemnifying Party, if Buyer consents, which consent may be
withheld in Buyer’s sole and absolute discretion, and, further, in the case Buyer is the
Indemnifying Party, if Seller consents, which consent may be withheld in Seller’s sole and absolute
discretion), then the Indemnifying Party shall be entitled, if it so elects at its own cost, risk
and expense, (i) to take control of the defense and investigation of such Third-Party Claim, (ii)
to employ and engage attorneys of its own choice (provided that such attorneys are reasonably
acceptable to the Indemnified Party) to handle and defend the same, unless the named parties to
such action or proceeding include the Indemnified Party and the Indemnifying Party, and any such
Indemnified Party has been advised in writing by counsel that there may be one or more legal
defenses available to such Indemnified Party that are different from or additional to those
available to the Indemnifying Party, in which event such Indemnified Party shall be entitled, at
the Indemnifying Parties’ cost, risk and expense, to separate counsel of its own choosing, and
(iii) to compromise or settle such claim, which compromise or settlement shall be made only with
the written consent of the Indemnified Party, such consent not to be unreasonably withheld,
provided that any such compromise or settlement shall provide for the absolute and unconditional
release of the Indemnified Parties from any Liability with respect to such Third-Party Claim. If
the Indemnifying



 


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 Party assumes the defense of a Third-Party Claim (to the extent permitted above),
the Indemnified Party shall cooperate in all reasonable respects with the Indemnifying Party and
its attorneys in the investigation, trial and defense of such Third-Party Claim and any appeal
arising therefrom; provided, however, that the Indemnified Party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom.
The Parties shall cooperate with each other in any notifications to insurers. If the Indemnifying
Party fails to assume the defense of such claim within fifteen (15) calendar days after receipt of
the Notice (whether as a result of its election not to assume such defense or, as applicable, the
refusal of Buyer or Seller to grant a request of the other to assume such defense), the Indemnified
Party against which such claim has been asserted will have the right to undertake, at the
Indemnifying Parties’ cost, risk and expense, the defense, compromise or settlement of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying Parties; provided,
however, that such claim shall not be compromised or settled without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If the Indemnified Party
assumes the defense of the claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement; provided, however, that the
Indemnifying Party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom. The Indemnifying Party shall be liable for any settlement of any
Third-Party Claim effected pursuant to and in accordance with this Section 8.5 and for any final
judgment (subject to any right of appeal), and each Indemnifying Party agrees to indemnify and hold
harmless the Indemnified Party from and against any Damages by reason of such settlement or
judgment.




Section 8.6 Resolution of Conflicts and Claims.



(a) If an Indemnifying Party objects in writing to any Indemnity Claim for indemnification
made by an Indemnified Party in any written Notice (an “Objection Notice”), Seller and
Buyer shall attempt in good faith to agree upon the rights of the respective parties with respect
to each of such claims, and Seller and Buyer shall provide information to the other party (as
reasonably requested) related to the issues set forth in the Objection Notice. If Seller and Buyer
should so agree, a memorandum setting forth such agreement shall be prepared and signed by both
Parties.



(b) If no such agreement is reached after good faith negotiation, either Seller or Buyer may
demand mediation of the dispute, unless the amount of the damage or loss is at issue in a pending
action or proceeding involving a Third-Party Claim, in which event mediation shall not be commenced
until such amount is ascertained or both Parties agree to mediation. In any such mediation, Seller
and Buyer agree to employ a mediator to assist them in reaching resolution of such dispute
according to the Commercial Mediation Rules of the AAA. The mediator shall be a corporate attorney
practicing in Orange County, California, with at least fifteen (15) years experience in mergers and
acquisitions. The fees and expenses of the mediator shall be shared equally by Seller and Buyer.
If, after mediation efforts, Seller and Buyer should agree as to all or a portion of a claim, a
memorandum setting forth such agreement shall be prepared and signed by both Parties. If after
reasonable efforts, and over a period of sixty (60) calendar days, the Parties are unable to reach
agreement on such dispute utilizing the mediator, the Parties shall be permitted to proceed with
any other remedy available to such Party.


 


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Section 8.7 Payment of Damages.



(a) All amounts under this Article VIII shall be paid within five (5) calendar days after such
amount is determined either by mutual agreement of the Parties or pursuant to the mediation
proceeding described in Section 8.6(b) of this Agreement or on the date on which both such amount
and the Indemnifying Party’s obligation to pay such amount have been determined by a final judgment
of a court or administrative body having jurisdiction over such proceeding.



(b) Any claims for Damages asserted by Buyer or any Indemnified Party affiliated with Buyer
shall be satisfied by payment of cash or other immediately
available funds from Seller to Buyer. Any claims for Damages asserted by Seller or any
Indemnified Party affiliated with Seller (but not an Acquired Company) shall be satisfied by
Buyer’s payment of cash or other immediately available funds.




Section 8.8 Limitations on Indemnity.



An Indemnifying Party shall not have any liability for indemnification pursuant to Section
8.2(i) or Section 8.4(i) unless and until the aggregate amount of all Damages which are incurred or
suffered by the Indemnified Party exceeds Fifty Thousand Dollars ($50,000) (the
“Threshold”); provided, however, that (a) in the event the aggregate amount of Damages for
which such Indemnified Party is seeking indemnification exceeds the Threshold, such Indemnified
Party shall be entitled to recover the full amount of such Damages, including the Damages
comprising the Threshold and (b) Buyer shall not be entitled to indemnification pursuant to Section
8.2(i) for any Damages resulting from any breach of, or inaccuracy in, any representation or
warranty, of any Acquired Company or Seller in the event that Seller can prove by a preponderance
of the evidence that Joseph J. Ueberroth, an officer of Buyer, had actual knowledge of the event or
condition constituting such breach or inaccuracy; notwithstanding the foregoing, except with
respect to Section 8.2(i), the knowledge of Joseph J. Ueberroth shall not affect, eliminate, limit
or otherwise modify the rights of Buyer to indemnification or any other remedies under this
Agreement. An Indemnifying Party shall not be liable for any Damages, or be required to make
payments for indemnification pursuant to Section 8.2(i) or Section 8.4(i), in an aggregate amount
in excess of Two Million Six Hundred Twenty-Five Thousand Dollars ($2,625,000) (the “Cap”).
In addition, an Indemnifying Party shall not be liable for any Damages, or be required to make
payments for indemnification, to the extent the subject matter of the claim is covered by insurance
and such insurance proceeds have been actually received by the Indemnified Party (net of any costs
and expenses incurred in obtaining such insurance proceeds). If an Indemnifying Party pays an
Indemnified Party for a claim and subsequently insurance proceeds in respect of such claim are
collected by the Indemnified Party, then the Indemnified Party shall remit the insurance proceeds
(net of any costs and expenses incurred in obtaining such insurance proceeds) to the Indemnifying
Party. An Indemnified Party shall use reasonable efforts to obtain from any applicable insurance
company any insurance proceeds in respect of any claim for which such Indemnified Party seeks
indemnification under this Article VIII. Notwithstanding anything to the contrary herein, if an
Indemnified Party is seeking, or is entitled to seek, indemnification from an Indemnifying Party
for Damages due to the such Indemnifying Party’s fraud or willful misconduct, the limitations in
this Section 8.8 (including the Threshold and the Cap) shall not be applicable to, or otherwise
limit an Indemnified Party’s recovery for, such claim.


 


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Section 8.9 Sole and Exclusive Remedy.



From and after the Closing, the remedies provided for in this Article VIII shall be the sole
and exclusive remedy of any Indemnified Party for any claim arising out of or related to this
Agreement, the exhibits and schedules hereto or the transactions contemplated hereby or thereby
(regardless of the Law or legal theory upon which claim is based), including, but not limited to,
the breach of any representation, warranty or covenant contained in this Agreement, the Disclosure
Letter, any exhibit or schedules to this Agreement, or any other certificate or document delivered
by the Parties hereto pursuant to the terms hereof; provided, however, that (a) nothing contained
in this Agreement shall limit or impair any right that an Indemnified Party may have to sue and
obtain equitable relief, including specific performance and other injunctive relief, or any right
or remedy that the Indemnified Party may have against any Indemnifying Party for any Damages
incurred as a result of claims brought on the basis of fraud or willful misconduct and (b) this
Section 8.9 shall not apply (i) in any Proceeding in which a remedy sought by or on behalf of
Seller is to rescind this Agreement, set aside the sale of the Interest or otherwise unwind the
transaction contemplated hereunder for any reason whatsoever and (ii) if a rescission, set aside of
the sale or other unwinding of such transaction occurs for any reason whatsoever.




Section 8.10 Release by Seller.



Seller, as of the Closing Date, hereby releases and discharges each Acquired Company and its
employees, owners, assets, members, managers, officers and directors from, and agrees and covenants
that in no event will Seller or any of its Affiliates commence any litigation or other legal or
administrative proceeding against such Acquired Company or any of its employees, owners, assets,
members, managers, officers or directors, either in law or equity, relating to any and all claims
and demands, known and unknown, suspected and unsuspected, disclosed and undisclosed, for damages,
actual, consequential, or otherwise, past, present and future, arising out of or in any way
connected with the ownership of the Interest, under any agreement or Contract prior to or at the
Closing Date or the Acquired Companies’ operations. Notwithstanding this Section 8.9, Seller does
not release any Acquired Company under this Section 8.9 from and against any Liability (i) for
which Buyer has asserted an Indemnity Claim and (ii) which is covered by a third-party insurance
policy held by Seller and Seller has been advised by such third-party insurance carrier that the
release of such Liability will result in non-coverage of the Liability represented by the Indemnity
Claim, but in any case only to the extent such Liability is subject to an Indemnification Claim.


 


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ARTICLE IX




MISCELLANEOUS





Section 9.1 Press Releases and Public Announcements.



Neither Party shall issue any press release or make any public announcement or other
disclosure relating to the existence or subject matter of this Agreement without the prior written
consent of the other Party; provided, however, that any Party may make any public announcement or
disclosure concerning its publicly-traded securities it believes in good faith is required by
applicable Law, any listing or trading agreement, or the rules and regulations of the National
Association of Securities Dealers Automated Quotations (“NASDAQ”) (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party prior to making the
disclosure). At or after the execution of this Agreement, Seller and Buyer shall jointly issue a
public announcement and/or press release and/or other disclosure, as shall be mutually agreed, of
the transactions contemplated by this Agreement.




Section 9.2 No Third-Party Beneficiaries.



This Agreement shall not confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.




Section 9.3 Entire Agreement.



This Agreement (including the documents the forms of which are attached as exhibits and
schedules hereto) constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, representations or obligations by or among the Parties, written or
oral, to the extent they related in any way to the subject matter hereof.




Section 9.4 Succession and Assignment.



This Agreement shall be binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written approval of the
other Party; provided, however, that Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).




Section 9.5 Counterparts.



This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.


 


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Section 9.6 Headings.



The section headings contained in this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this Agreement.




Section 9.7 Notices.



All notices, requests, demands, claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given on
the earlier of (a) when actually received, (b) two business days after it is sent by overnight
courier, or (c) two business days after it is sent by registered or certified mail (return receipt
requested, postage prepaid) and addressed to the intended recipient as set forth below:



	 	 	 
	If to Seller:

	 	Ambassadors International, Inc.
	 

	 	1071 Camelback Street 
	 

	 	Newport Beach, CA 92660
	 

	 	Telephone: (949) 759-5900
	 

	 	Facsimile: (949) 759-5901
	 

	 	Attn: Chief Financial Officer
	 
	 	 
	Copy to:

	 	Rutan & Tucker, LLP
	 

	 	Fourteenth Floor
	 

	 	611 Anton Blvd. 
	 

	 	Costa Mesa, CA 92694
	 

	 	Telephone: (714) 641-5100
	 

	 	Facsimile: (714) 546-9035
	 

	 	Attn: Derek Dundas, Esq.
	 
	 	 
	If to Buyer:

	 	Bellwether Financial Group, Inc.
	 

	 	626 Seaward Road 
	 

	 	Corona del Mar, CA 92625
	 

	 	Telephone: (949) 759-3369
	 

	 	Facsimile: (949) 759-3379
	 

	 	Attn: Joseph J. Ueberroth,
	 

	 	          President
	 
	 	 
	Copy to:

	 	Loeb & Loeb LLP
	 

	 	10100 Santa Monica Boulevard 
	 

	 	Suite 2200
	 

	 	Los Angeles, California 90067
	 

	 	Telephone: (310) 282-2121
	 

	 	Facsimile: (310) 919-3970
	 

	 	Attn: Gerald M. Chizever, Esq.






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


 


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Section 9.8 Governing Law.



This Agreement shall be governed by and construed in accordance with the domestic Laws of the
State of Delaware without giving effect to any choice or conflict of Law provision or rule (whether
of the State of Delaware any other jurisdiction) that would cause the application of the Laws of
any jurisdiction other than the State of Delaware.




Section 9.9 Amendments, Modifications and Waivers.



No amendment, modification or waiver of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by Buyer and Seller. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or
not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.




Section 9.10 Severability.



Any term or provision of this Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.




Section 9.11 Expenses.



Except as provided in Section 6.3(c) above, each of the Parties will bear its own costs and
expenses incurred in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, the negotiation, execution and delivery of this Agreement and all
documents related hereto and any expenses related to the due diligence investigation; provided,
however, that (a) Seller shall bear and be responsible for any costs and expenses (including any of
legal, accounting and audit fees and expenses) incurred by the Acquired Companies in connection
with the foregoing, and (b) such obligations of Seller shall be considered direct obligations of
Seller and shall not be taken into account in determining the Intercompany Balances.


 


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Section 9.12 Construction.



Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
The word “including” shall mean including without limitation. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the Party has not breached
shall not detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.




Section 9.13 Incorporation of Exhibits and Schedules.



The exhibits and schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.




Section 9.14 Specific Performance.



Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably
in the event any of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof having jurisdiction
over the Party and the matter (subject to the provisions set forth in Section 9.15 below), in
addition to any other remedy to which they may be entitled, at law or in equity.




Section 9.15 Arbitration.



Except for with respect to disputes, claims or controversies arising under Article VIII, the
Parties shall negotiate in good faith to resolve any dispute, claim, or controversy of any nature
arising out of or relating to this Agreement or the transactions contemplated or consummated
hereunder, including, without limitation, any action or claim based on tort, contract or statute,
or concerning the interpretation, effect, termination, validity, performance and/or breach of this
Agreement (each, a “Dispute”). If no resolution of such Dispute can be reached after good
faith negotiation and prior to 30 days after delivery of notice of such Dispute, any Party may
demand arbitration of the Dispute. In any such arbitration, the Parties agree to employ an
arbitrator from the American Arbitration Association (the “AAA”) to assist them in reaching
resolution of such Dispute according to the Rules of Commercial Arbitration. The arbitrator shall
be a corporate attorney practicing in Orange County, California, with at least fifteen (15) years
experience in acquisitions. In the event that, within 30 days after the submission of any Dispute
to arbitration, the Parties cannot mutually agree on one arbitrator, then, within 15 days after the
end of such 30 day period, each Party shall select one arbitrator. The two arbitrators so selected
shall select a third arbitrator, and rulings of a majority of the three shall be the rulings of the
arbitrators as a panel. If one Party fails to select an arbitrator during this 15 day period, then
the Parties agree that the arbitration will be conducted by one arbitrator selected by the other
Party. The fees and expenses of the arbitrator(s) shall be shared equally by the Parties. The
arbitrator(s) may proceed to an award, notwithstanding the failure of either Party to participate
in the proceedings. The arbitrator(s) shall, within forty-five (45) calendar days after the
conclusion of the arbitration hearing, issue a written award and statement of decision describing
the essential findings and conclusions on which the award is


 


62









 






based, including the calculation of
any damages awarded. The arbitrator(s) shall rule upon motions to compel or limit discovery and
shall have the authority to impose sanctions, including attorneys’ fees and costs, to the same
extent as a competent court of law or equity, should the arbitrator(s) determine that discovery was
refused or objected to without substantial justification. The award of the arbitrator(s) shall be
the sole and exclusive remedy of the Parties. Judgment on the award rendered by the arbitrator(s)
may be enforced in any court having competent jurisdiction thereof, subject only to the revocation
on grounds of fraud or clear bias on the part of the arbitrator(s). Notwithstanding anything
contained in this Section 9.15 to the contrary, each Party shall have the right to institute
judicial proceedings, subject to Section 9.16, against the other Party or anyone acting by, through
or under such other party, in order to enforce the instituting Party’s rights hereunder through
specific performance, injunction or other relief.




Section 9.16 Submission to Jurisdiction.



Subject to Section 9.15 above, each of the Parties submits to the exclusive jurisdiction of
any federal court sitting in the State of California, County of Orange, in any action or Proceeding
arising out of or relating to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such
court. Each Party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of the other Party with respect thereto. Either
Party may make service on the other Party by sending or delivering a copy of the process to the
Party to be served at the address and in the manner provided for the giving of notices in Section
9.7 above. Nothing in this Section 9.16, however, shall affect the right of either Party to serve
legal process in any other manner permitted by law or at equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at equity.




Section 9.17 Waiver of Trial by Jury.



IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE PARTIES HERETO CONSENT TO TRIAL
WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.


 


63









 





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



*****




(Signature Page Follows)




 


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



	 	 	 	 	 	 	 
	 	 	AMBASSADORS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

(Signature)
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

Name Printed
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

Title
	 	 
	 
	 	 	 	 	 	 
	 	 	AMBASSADORS MARINE GROUP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

(Signature)
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

Name Printed
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

Title
	 	 
	 
	 	 	 	 	 	 
	 	 	BELLWETHER FINANCIAL GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Joseph Ueberroth, President
	 	 





 


65









 





Exhibit A — Non-Competition and Non-Disclosure Agreement




 


66









 







Exhibit B — Form of Legal Opinion from Seller’s Counsel





Seller’s counsel shall opine as to the following:



1. Seller is a corporation duly authorized, validly existing, and in good standing under the
Laws of Delaware and has all necessary corporate power and authority to own its properties and
assets and conduct the business presently being conducted by it.



2. Seller has full corporate power and authority to execute and deliver the Agreement and the
Non-Competition and Non-Disclosure Agreement and to perform its obligations thereunder.



3. Any and all corporate acts and other corporate proceedings necessary for the due and valid
authorization, execution, delivery and performance by Seller of the Agreement and the
Non-Competition and Non-Disclosure Agreement and the consummation by Seller of the transactions
contemplated hereby have been validly and appropriately taken.



4. The Agreement and the Non-Competition and Non-Disclosure Agreement have been duly executed
and delivered by Seller. The Agreement constitutes the valid and legally binding obligation of
Seller, enforceable in accordance with its terms and conditions, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). [subject to customary
exceptions and that no opinion will be expressed concerning the validity, binding nature or
enforceability of the Non-Competition and Non-Disclosure Agreement.]



5. To the best knowledge of such counsel, subject to obtaining the consents as set forth in
Section 4.1(g) of the Disclosure Letter, Seller is not, and will not be, required to give any
notice to, make any filing with, or obtain any consent, authorization or approval of, any Person,
including any Governmental Authority, under California or federal law, in connection with the
execution and delivery of this Agreement and the exhibits and schedules hereto or the consummation
or performance of the transactions contemplated herein.


 


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Exhibit C — Form of Legal Opinion from Buyer’s Counsel





Buyer’s counsel shall opine as to the following:



1. Buyer is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to own its properties
and assets and conduct the business presently being conducted by it.



2. Buyer has full corporate power and authority to execute and deliver the Agreement and the
Non-Competition and Non-Disclosure Agreement and to perform its obligations thereunder.



3. Any and all corporate acts and other corporate proceedings necessary for the due and valid
authorization, execution, delivery and performance by Buyer of the Agreement and the
Non-Competition and Non-Disclosure Agreement and the consummation by Buyer of the transactions
contemplated thereby have been validly and appropriately taken. [subject to customary exceptions
and that no opinion will be expressed concerning the validity, binding nature or enforceability of
the Non-Competition and Non-Disclosure Agreement.]



4. The Agreement and the Non-Competition and Non-Disclosure Agreement have been duly executed
and delivered by Buyer. The Agreement constitutes the valid and legally binding obligation of
Buyer, enforceable in accordance with its terms and conditions, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).




 


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Schedule 2.6




Purchase Price Allocation




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







 


69









 







Schedule 7.7




Acquired Companies Adjustment




[To be provided on or before Closing]




[Seller’s signature page to Membership Interest Purchase Agreement]





 


70