AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 1, 2005 AMONG AMBASSADORS INTERNATIONAL, INC.

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

DATED AS OF FEBRUARY 1, 2005

 

AMONG

 

AMBASSADORS INTERNATIONAL, INC.,

a Delaware corporation,

 

BELLPORT ACQUISITION CORP. #1

a Delaware corporation,

 

BELLPORT ACQUISITION CORP. #2

a Delaware corporation,

 

BELLPORT GROUP, INC.,

a Delaware corporation,

 

AND

 

PAUL PENROSE,

as Company Stockholder Representative

TABLE OF CONTENTS

 

 

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EXHIBITS

 

Exhibit A — Escrow Agreement

Exhibit B — FIRPTA Certificate

Exhibit C — Consulting Agreement

Exhibit D — Option Agreement

Exhibit E — Non-Competition and Non-Disclosure Agreement

 

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GLOSSARY OF DEFINED TERMS

 

 

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This AGREEMENT AND PLAN OF MERGER, dated as of February 1, 2005 (this “ Agreement ”), by and among Ambassadors International, Inc., a Delaware corporation (“ Parent ”), Bellport Acquisition Corp. #1, a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub I ”), Bellport Acquisition Corp. #2, a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub II ,” and together with Merger Sub I, the “ Merger Subs ”), BellPort Group, Inc., a Delaware corporation (the “ Company ”), and Paul Penrose, as the company stockholders representative.

 

R E C I T A L S

 

A. The respective Boards of Directors of Parent, Merger Subs and the Company have each determined that the Mergers (as defined below) is in the best interests of their respective stockholders and have approved the Mergers upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding share of common stock, par value $0.01 per share, of the Company (“ Company Common Stock ”) will be converted into the right to receive common stock, par value $0.01 per share, of Parent (“ Parent Common Stock ”), except in the case of the Principal Stockholder (as defined herein), who will receive cash for all of his shares of Company Common Stock;

 

B. In order to effectuate the foregoing, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”), (i) Merger Sub I will merge with and into the Company with the Company as the surviving corporation (“ Merger I ”), and (ii) immediately following the effectiveness of Merger I, the Company will merge with and into Merger Sub II, with Merger Sub II as the surviving corporation (“ Merger II ,” and together with Merger I, the “ Mergers ”);

 

C. Parent, Merger Subs and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Mergers and also to prescribe various conditions to the Mergers; and

 

D. Parent, Merger Subs and the Company intend, by approving resolutions authorizing this Agreement, to adopt this Agreement as a plan of reorganization and that the Mergers qualify as a reorganization within the meaning of Section 368(a) of the Code, and the regulations promulgated thereunder.

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and other valuable consideration, the sufficiency and receipt of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

1.1 Defined Terms . As used in this Agreement, the terms below shall have the following meanings. Any of such terms, unless the context requires otherwise, may be used in the singular or plural, depending upon the reference.

 

(a) “ Board of Directors ” means the Board of Directors of any specified Person and any properly serving and acting committees thereof.

 

(b) “ Certificate ” means a certificate which immediately prior to the Effective Time of Merger I represented outstanding shares of Company Common Stock.

 

(c) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

(d) “ Company Stockholder Representative ” initially means Paul Penrose, as more fully described in Section 3.6 hereof.

 

(e) “ Company Stockholder ” means a holder of Company Common Stock, including the Principal Stockholder, unless otherwise noted.

 

(f) “ Encumbrance ” shall mean any lien, pledge, mortgage, security interest, claim, charge, easement, limitation, commitment, encroachment, restriction (other than a restriction on transferability imposed by federal or state securities laws) or other encumbrance of any kind or nature whatsoever (whether absolute or contingent).

 

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

 

(h) “ IRS ” means the United States Internal Revenue Service or any successor agency.

 

(i) “ Liabilities ” means all indebtedness, obligations and other liabilities of a Person, whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due.

 

(j) “ Material Adverse Effect ” means, with respect to any entity, any change, circumstance, event or effect that, individually or in the aggregate, is or is reasonably likely to be materially adverse to the business, operations, assets, Liabilities, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole, or would prevent such Person from performing its obligations under this Agreement; provided that (i) with respect to Parent, solely a change in the market price of Parent Common Stock shall not be a Material Adverse Effect on Parent; and (ii) with respect to Parent and the Company, any change shall not be a Material Adverse Effect if it is as a result of general economic conditions.

 

(k) “ Organizational Documents ” means, with respect to any entity, the certificate or articles of incorporation, bylaws or other governing documents of such entity.

 

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(l) “ Person ” means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, entity or group (as defined in the Exchange Act).

 

(m) “ Reasonable Best Efforts ” means, with respect to any party, that such party shall use commercially reasonable efforts.

 

(n) “ SEC ” means the United States Securities and Exchange Commission, and any successor thereto.

 

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

 

(p) “ Subsidiary ” when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, (i) of which such party or any other Subsidiary of such party is a general partner (excluding partnerships, where the general partnership interests are held by such party or any Subsidiary of such party and do not constitute a majority of the voting and economic interests in such partnership), or (ii) at least a majority of the securities or other interests of which 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 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.

 

(q) “ Tax ” or “ Taxes ” shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

 

(r) “ Tax Returns ” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

(s) “ Transfer Taxes ” shall have the meaning set forth in Section 6.3(e) of this Agreement.

 

(t) “ Treasury Regulations ” shall mean the United States Treasury regulations promulgated under the Code.

 

ARTICLE II.

 

THE MERGERS

 

2.1 The Mergers . At the Effective Time of Merger I (as defined in Section 2.3), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, Merger Sub I shall be merged with and into the Company, and the separate existence of Merger Sub I shall cease. The Company shall continue as the surviving corporation in Merger I (“ Surviving Entity I ”). Immediately following the Effective Time of Merger I, upon the terms

 

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and subject to the conditions set forth in this Agreement and in accordance with the DGCL, Surviving Entity I will be merged with and into Merger Sub II, and the separate existence of Surviving Entity I shall cease. Merger Sub II shall continue as the surviving entity of Merger II (the “ Surviving Corporation ”).

 

2.2 Closing . The closing of the Mergers (the “ Closing ”) will take place on the date hereof (the “ Closing Date ”), unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of Latham & Watkins LLP, 650 Town Center Drive, Suite 2000, Costa Mesa, California 92626, unless another place is agreed to in writing by the parties hereto. Notwithstanding the foregoing, neither party shall be required consummate the transactions contemplated by this Agreement if any temporary restraining order, preliminary or permanent injunction or other order issued by a court or other Governmental Entity of competent jurisdiction shall be in effect and have the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers.

 

2.3 Effective Time . Upon the Closing, the parties shall file with the Secretary of State of the State of Delaware (the “ Delaware Secretary of State ”) a certificate of merger or other appropriate documents for Merger I (in any such case, the “ First Certificate of Merger ”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings, recordings or publications required under the DGCL in connection with Merger I. Merger I shall become effective at such time as the First Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time as the parties may agree and specify in the First Certificate of Merger (the time Merger I becomes effective being the “ Effective Time of Merger I ”). Subject to the provisions of this Agreement, concurrently with or as soon as practicable following the Effective Time of Merger I, the parties shall duly execute and file with the Delaware Secretary of State a certificate of merger or other appropriate documents for Merger II (in any such case, the “ Second Certificate of Merger ,” and together with the First Certificate of Merger, the “ Certificates of Merger ”) executed in accordance with the relevant provisions of the DGCL, and shall make all other filings, recordings or publications required under the DGCL in connection with Merger II. Merger II shall become effective at such time as the Second Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time as the parties may agree and specify in the Second Certificate of Merger (the time Merger II becomes effective being the “ Effective Time of Merger II ”).

 

2.4 Effects of the Mergers . The Mergers shall have the effects set forth in this Agreement and in applicable provisions of the DGCL.

 

2.5 Articles of Incorporation . At the Effective Time of Merger I, the certificate of incorporation of the Company shall be amended and restated in its entirety to be identical to the certificate of incorporation of Merger Sub I, as in effect immediately prior to the Effective Time of Merger I, until thereafter changed or amended as provided therein or by applicable law. At the Effective Time of Merger II, the certificate of incorporation of Merger Sub II, as in effect immediately prior to the Effective Time of Merger II, shall be the certificate of incorporation of the Surviving Entity, until thereafter changed or amended as provided therein or by applicable law, except that Article I thereof shall be amended to read as follows: “The name of the Corporation is BellPort Group, Inc.”.

 

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2.6 Bylaws . At the Effective Time of Merger I, the bylaws of the Company shall be amended and restated in its entirety to be identical to the bylaws of Merger Sub I, as in effect at the Effective Time of Merger I, until thereafter changed or amended as provided therein or by applicable law. At the Effective Time of Merger II, the bylaws of Merger Sub II, as in effect immediately prior to the Effective Time of Merger II, shall be bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law.

 

2.7 Officers and Directors of the Surviving Corporation . The officers and directors of Merger Sub I immediately prior to the effective time shall be the officers and directors of Surviving Entity I, until the earlier of their resignation or removal or otherwise ceasing to be an officer or director or until their respective successors are duly elected and qualified, as the case may be. The Company shall cause each officer and director of the Company to tender his or her resignation prior to the Effective Time of Merger I, with each such resignation to be effective as of the Effective Time of Merger I. The officers and directors of Merger Sub II immediately prior to the effective time shall be the officers and directors of Surviving Corporation, until the earlier of their resignation or removal or otherwise ceasing to be an officer or director or until their respective successors are duly elected and qualified, as the case may be

 

ARTICLE III.

 

EFFECT OF THE TRANSACTION ON THE CAPITAL STOCK

OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

3.1 Effect on Capital Stock in Merger I . As of the Effective Time of Merger I, by virtue of Merger I and without any action on the part of Parent, the Merger Subs, the Company, the Company Stockholders or any holder of shares of the capital stock of Merger Subs:

 

(a) Capital Stock of Merger Subs . Each issued and outstanding share of capital stock of Merger Sub I shall be converted into and become one (1) fully paid and nonassessable share of common stock, par value $0.001 per share, of Surviving Entity I.

 

(b) Cancellation of Treasury Stock and Parent-Owned Stock . Each share of Company Common Stock that is owned by the Company and each share of Company Common Stock that is owned by Parent, Merger Subs or any other wholly-owned subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no Parent Common Stock or other consideration shall be delivered in exchange therefor.

 

(c) Conversion of Company Common Stock . Except for shares of Company Common Stock held by Richard S. Stevens (the “ Principal Stockholder ”), each share of Company Common Stock, issued and outstanding immediately prior to the Effective Time of Merger I (other than dissenting shares and shares cancelled pursuant to Section 3.1(c)), shall be converted into the right to receive [              ] shares of Parent Common Stock (the “ Exchange Ratio ”). All shares of Company Common Stock held of record by the Principal Stockholder shall be converted into the right to receive $[              ], without interest. As of the Effective Time of Merger I, all shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of any shares of

 

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Company Common Stock shall cease to have any rights with respect thereto, except (i) in the case of all Company Stockholders (excluding the Principal Stockholder), the right to receive upon the surrender of such shares, certificates representing the shares of Parent Common Stock, and cash in lieu of fractional shares of Parent Common Stock upon surrender of such shares in accordance with Section 3.7(c), without interest, and, (ii) in the case of the Principal Stockholder, the right to receive upon the surrender of such shares, the cash payment provided for in this Section 3.1(c). Notwithstanding the foregoing, if between the date of this Agreement and the Effective Time of Merger I, the outstanding shares of Parent Common Stock or Company Common Stock shall have been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, or any similar event shall have occurred, the Exchange Ratio shall be correspondingly adjusted to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such event.

 

3.2 Effect on Capital Stock in Merger II . As of the Effective Time of Merger II, by virtue of Merger II and without any action on the part of Parent, Surviving Entity I, Merger Sub II or the holder of any shares of capital stock of Surviving Entity I, each issued and outstanding share of capital stock of Surviving Entity I shall be converted into and become one (1) fully paid and non-assessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

 

3.3 Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock which are dissenting shares (as defined in the DGCL), if any, shall not be converted into or represent a right to receive any shares of Parent Common Stock, but the holders thereof shall be entitled only to such rights as are granted by the DGCL. Each holder of dissenting shares who becomes entitled to payment therefor pursuant to the DGCL shall receive payment from the Surviving Corporation in accordance with the DGCL; provided, however , that (i) if any such holder of dissenting shares shall have failed to establish his or her entitlement to dissenter’s rights as provided in the DGCL, (ii) if any such holder of dissenting shares shall have effectively withdrawn his or her demand for appraisal thereof or lost his or her right to appraisal and payment therefor under the DGCL, or (iii) if neither any holder of dissenting shares nor the Surviving Corporation shall have filed a petition demanding a determination of the value of all dissenting shares within the time provided in the DGCL, such holder or holders (as the case may be) shall forfeit the right to appraisal of such shares of Company Common Stock and such shares of Company Common Stock shall thereupon be deemed to have been converted, as of the Effective Time of Merger I, into and represent shares of Parent Common Stock and cash (without interest), as applicable, as provided in Section 3.1(c) hereof.

 

3.4 Escrow Fund .

 

(a) Prior to the Effective Time of Merger I, Parent shall appoint a bank or trust company or other entity to act as the escrow agent (the “ Escrow Agent ”), and shall execute and deliver an escrow agreement in substantially the form attached hereto as Exhibit A (the “ Escrow Agreement ”). Pursuant to the Escrow Agreement, ten percent (10%) of the shares of Parent Common Stock to be issued to Company Stockholders (the “ Escrow Shares ”) and ten percent (10%) of the cash to be paid to the Principal Stockholder at the Effective Time of Merger

 

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I (the “ Escrow Cash ,” and together with the Escrow Shares, the “ Escrow Fund ”) pursuant to Section 3.1(c) shall be issued in the name of and paid to the Escrow Agent on behalf of the Company Stockholders and retained in escrow pursuant to this Section 3.4 and the terms of the Escrow Agreement.

 

(b) As soon as practicable after the Closing Date, Parent shall deliver to the Escrow Agent (i) a certificate representing the Escrow Shares and (ii) the Escrow Cash. The Escrow Fund shall be held by the Escrow Agent exclusively for the purpose of securing Parent Indemnity Claims pursuant to Article IX hereof. The Escrow Fund shall be held by the Escrow Agent for a period of twelve (12) months after the Closing Date (the “ Escrow End Date ”) under the Escrow Agreement pursuant to the terms thereof; provided, however , that only so much of the Escrow Fund will be released to the Company Stockholders after the Escrow End Date as have a value (for the Escrow Shares, as determined by Section 9.6(b)) in excess of the amount of the Parent Indemnity Claims that have been made and that have been determined to be valid or not yet determined to be invalid pursuant to Article IX hereof as of the Escrow End Date. Except to the extent of such Parent Indemnity Claims which have been made and have been determined to be valid or not yet determined to be invalid pursuant to Article IX hereof, the Escrow Shares shall be delivered to the Company Stockholders (other than the Principal Stockholder) in the name of such Company Stockholders and the Escrow Cash shall be paid to the Principal Stockholder promptly following the Escrow End Date.

 

3.5 Miscellaneous Provisions Relating to the Escrow.

 

(a) Any shares of Parent Common Stock or other equity equivalents issued or distributed by Parent (“ New Shares ”) in respect of Escrow Shares which have not been released from the Escrow Fund shall be added to, and shall be deemed, Escrow Shares.

 

(b) The adoption of this Agreement and the approval of the Mergers by the Company Stockholders shall constitute approval of the Escrow Agreement and of all arrangements relating thereto, including, without limitation, the placement of the Escrow Fund in escrow and the appointment of the Escrow Agent and the Company Stockholder Representative.

 

3.6 Company Stockholder Representative.

 

(a) Paul Penrose shall be the Company Stockholder Representative and as such shall serve as and have all powers as agent and attorney-in-fact of each Company Stockholder, for and on behalf of such Company Stockholders: (i) to give and receive notices and communications; (ii) to have authority to agree to, negotiate, enter into settlements and compromises of, and demand mediation and arbitration and comply with orders of courts and awards of arbitrators with respect to any disputes involving any Parent Indemnity Claims made by Parent and the retaining of any portion of the Escrow Fund by Parent thereunder; (iii) to litigate, mediate, arbitrate, defend, enforce or to take any other actions and execute any documents that the Company Stockholder Representative deems advisable in connection with enforcing any rights or obligations or defending any claim or action under this Agreement or the Escrow Agreement on behalf of the Company Stockholders or their property or against any person who has caused a loss or damage to the Company Stockholders; (iv) to sign receipts, consents, or other documents to effect the transactions contemplated hereby; (v) to have the

 

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authority to withhold or direct the disposition of the Escrow Fund pursuant to Section 3.6(e); and (vi) to take any and all actions necessary or appropriate in the judgment of the Company Stockholder Representative for the accomplishment of the foregoing. If Paul Penrose ceases to act as Company Stockholder Representative for any reason, such Company Stockholder Representative or his agent shall notify Parent of such Company Stockholder Representative’s intent to resign as Company Stockholder Representative, and the Company Stockholders entitled to receive a majority of the Escrow Shares shall, by written notice to Parent, appoint a successor Company Stockholder Representative within thirty (30) days. Notice or communications to or from any Company Stockholder Representative shall constitute notice to or from each of the Company Stockholders.

 

(b) Subject to Section 3.6(a), in the event of (i) the death or permanent disability of the Company Stockholder Representative, (ii) his, her or its resignation as a Company Stockholder Representative, or (iii) the removal of the Company Stockholder Representative by Company Stockholders entitled to receive a majority of the Escrow Shares, a successor Company Stockholder Representative shall be elected by the Company Stockholders entitled to receive a majority of the Escrow Shares. Each successor Company Stockholder Representative shall have all of the power, authority, rights and privileges conferred by this Agreement upon the original Company Stockholder Representative, and the term “Company Stockholder Representative” as used herein shall be deemed to include successor Company Stockholder Representatives.

 

(c) The Company Stockholder Representative may, in all questions arising under this Agreement and the Escrow Agreement, rely on the advice of counsel, and shall not be liable to the Company Stockholders for any action taken or not taken as a Company Stockholder Representative in the absence of such Company Stockholder Representative’s willful misconduct.

 

(d) A decision, act, consent or instruction of the Company Stockholder Representative shall constitute a decision of all the Company Stockholders, and shall be final, binding and conclusive upon each of the Company Stockholders, and Parent and the Company may rely upon any decision, act, consent or instruction of the Company Stockholder Representative as being the decision, act, consent or instruction of each and all of the Company Stockholders. Parent and the Company are relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction. Although the Company Stockholder Representative shall not be obligated to obtain instructions from the Company Stockholders prior to any decision, act, consent or instruction, if, and to the extent that, the Company Stockholder Representative receives any written instructions from the Company Stockholders entitled to receive a majority of the Escrow Shares held by the Escrow Agent, the Company Stockholder Representative shall comply with such instructions.

 

(e) The Company Stockholders shall share, on a pro rata basis in relation to their holdings of Company Common Stock, the professional fees and expenses of any attorney, accountants or other advisors retained by the Company Stockholder Representative in connection with any action taken or not taken as a Company Stockholder Representative. The Company Stockholder Representative shall be entitled to request in writing and Escrow Agent shall withhold from any escrow payments to the Company Stockholders, upon such request, amounts

 

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payable to attorneys, accountants or other advisors, which amounts shall be paid to such individuals or the Company Stockholder Representative, as set forth in the request submitted by the Company Stockholder Representative.

 

3.7 Exchange of Certificates.

 

(a) Exchange Procedure . Subject to the provisions of Sections 3.1(b) and (c), Section 3.3 and Section 3.4 hereof, (i) each holder of a Certificate, except the Principal Stockholder, shall be entitled to receive in exchange therefor, upon surrender thereof, a certificate or certificates representing the number of whole shares of Parent Common Stock into which such shares of Company Common Stock were converted pursuant to Section 3.1(c) hereof, and a check representing any cash payable in lieu of any fractional share of Parent Common Stock pursuant to Section 3.7(c) hereof, and (ii) the Principal Stockholder shall be entitled to receive in exchange therefor, upon surrender thereof, the cash payment provided for in Section 3.1(c). If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such issuance that the person requesting such issuance shall pay any transfer or other Tax required by reason of the issuance of certificates for such shares of Parent Common Stock in a name other than that of the registered holder of the Certificate surrendered, or shall establish to the satisfaction of Parent or its agent that such Tax has been paid or is not applicable.

 

(b) No Further Ownership Rights in Company Common Stock . All shares of Parent Common Stock issued or cash paid upon the surrender for exchange of Certificates in accordance with the terms of this Article III (including any cash paid pursuant to Section 3.7(c)) shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time of Merger I. If, after the Effective Time of Merger I, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III, except as otherwise provided by law.

 

(c) No Fractional Shares .

 

(i) No certificate representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent.

 

(ii) Each holder of a Certificate issued and outstanding at the Effective Time of Merger I who would otherwise be entitled to receive a fractional share of Parent Common Stock upon surrender of such Certificate for exchange pursuant to this Article III (after taking into account all shares of Company Common Stock then held by such holder) shall receive, in lieu thereof, cash in an amount equal to the value of such fractional share, which shall be equal to the fraction of a share of Parent Common Stock that would otherwise be issued multiplied by an amount equal to average daily volume-weighted trading price of Parent Common Stock, as reported on The NASDAQ National Market (“ NASDAQ ”), over the period beginning on December 10, 2004 and ending on January 31, 2005.

 

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(iii) As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Certificates with respect to any fractional share interests, Parent shall promptly pay such amounts, without interest, to such holders of Certificates subject to and in accordance with this Article III.

 

(d) No Liability . None of Parent, Merger Subs or the Company shall be liable to any Person in respect of any shares of Parent Common Stock (or dividends or distributions with respect thereto), cash to be distributed in lieu of fractional shares or, in the case of the Principal Stockholder, cash for shares of Company Common Stock, delivered or paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

 

(e) Lost Certificates . In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the written agreement of such Person to indemnify Parent against any claim that may be made against it with respect to such Certificate, Parent will issue in exchange for such lost, stolen or destroyed Certificate (i) in the case of a Company Stockholder, other than the Principal Stockholder, Parent Common Stock, and any cash in lieu of fractional shares and any unpaid dividends or distributions with respect to Parent Common Stock, to which they are entitled pursuant hereto, and (ii) in the case of the Principal Stockholder, the cash payment provided for in Section 3.1(c).

 

(f) Withholding Rights . Parent and its agents shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any former holder of shares of Company Common Stock such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law, or any court order. To the extent that amounts are so withheld by Parent or its agents, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Company Stockholders in respect of which such deduction and withholding was made by Parent or its agents.

 

ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Parent and Merger Subs that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will also be correct and complete as of the Closing Date, except as set forth in the disclosure letter delivered by the Company to Parent on the date hereof (the “ Company Disclosure Letter ”). The Company Disclosure Letter is arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Article IV, and the disclosures in any paragraph of the Company Disclosure Letter shall qualify the corresponding paragraph in this Article IV and such other paragraphs only to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other paragraphs.

 

4.1 Organization, Standing and Power . Each of the Company and its Subsidiaries has been duly incorporated and is validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite power and authority to carry on its business as

 

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now being conducted. Each of the Company and its Subsidiaries is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to so qualify could not reasonably be expected to be materially adverse to the Company. The copies of the Organizational Documents of the Company and its Subsidiaries which were previously furnished to Parent are true, complete and correct copies of such documents as in effect on the date of this Agreement. Section 4.1 of the Company Disclosure Letter sets forth a complete and accurate list of each of the Company’s Subsidiaries.

 

4.2 Capital Structure.

 

(a) The authorized capital stock of the Company consists solely of 10,000 shares of Company Common Stock, par value $0.01 per share. There are 5,000 shares of Company Common Stock issued and outstanding. All shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and were not issued in violation of any preemptive rights. Except as set forth in this Section 4.2, there are outstanding (i) no shares of capital stock or other voting securities of the Company (including any capital stock equivalents), (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (iii) no options, preemptive or other rights to acquire from the Company, and no obligation of the Company to issue any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, and (iv) no equity equivalent interest in the ownership or earnings of the Company or other similar rights. If applicable, for each of (i) – (iv) above, Section 4.2(a) of the Company Disclosure Letter sets forth the identity of the person holding such security, the number of securities, the exercise price, if any, the vesting schedule, if any, and other similar information all in reasonable detail. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of the Company’s securities. Except as set forth on Section 4.2 of the Company Disclosure Letter, the Company is not a party to any employment or other agreements and has not made any offers for employment that contemplate or obligate the Company to grant any options or issue any stock or other instruments convertible into stock.

 

(b) All of the issued and outstanding shares of capital stock of each of the Company’s Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and are owned by the Company, free and clear of any liens, claims, Encumbrances, restrictions, preemptive rights or any other claims of any third party (“ Liens ”). There are outstanding no options, preemptive or other rights to acquire from any of the Company’s Subsidiaries, and no obligation of any of the Company’s Subsidiaries to issue any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of such Subsidiary. Except for the capital stock of the Company’s Subsidiaries listed on Section 4.1 of the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any Person.

 

(c) No bonds, debentures, notes or other indebtedness of the Company having the right to vote on any matters on which stockholders may vote (“ Company Voting Debt ”) are issued or outstanding.

 

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(d) Each of the Company Stockholders is the owner, beneficially and of record, of the number of shares of Company Common Stock as set forth on Section 4.2(d) of the Company Disclosure Letter in reasonable detail, and, except as set forth on Section 4.2(d) of the Company Disclosure Letter, there exists no encumbrance of any kind with respect to such shares of each Company Stockholder’s Company Common Stock. Except as set forth on Section 4.2(d) of the Company Disclosure in reasonable detail, no Company Stockholder is a party to any stockholders agreement, voting trust or other voting or similar agreement with respect to Company Common Stock.

 

4.3 Authority; No Conflicts.

 

(a) The Company has all requisite corporate power and corporate authority to enter into this Agreement, subject, in the case of the consummation of the Mergers only, to the adoption of this Agreement and the approval of the Mergers by the requisite vote of the holders of Company Common Stock to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, 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). The Board of Directors of the Company has unanimously (i) determined that Merger I is advisable and fair to, and in the best interests of, the Company and its stockholders, (b) has approved this Agreement, Merger I and the other transactions contemplated by this Agreement and has deemed this Agreement advisable and (c) has determined to recommend adoption of this Agreement and the approval of Merger I by the stockholders of the Company (collectively, the “ Company Board Recommendation ”). The Company Board Recommendation has been neither rescinded nor revoked.

 

(b) The filings of the Certificates of Merger as required by the DGCL, the execution and delivery of this Agreement does not or will not, as the case may be, and the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of consent, termination, amendment, cancellation or acceleration of any material obligation or the loss of any material property, right or benefit under, or the creation of a lien, pledge, security interest, charge or other encumbrance on any assets (any such conflict, violation, default, right of consent, termination, amendment, cancellation or acceleration, loss or creation, a “ Violation ”) pursuant to: (A) any provision of the Organizational Documents of the Company (determined without regard to materiality), or (B) any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit plan or other agreement, obligation, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, or its properties or assets.

 

(c) No consent, approval, order or authorization of, or registration, declaration or filing with, any supranational, national, state, municipal or local government, any instrumentality, subdivision, court, administrative agency or commission or other authority thereof, or any quasi-governmental or private body exercising any regulatory, taxing, or other governmental or quasi-governmental authority (a “ Governmental Entity ”), is required by or with

 

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respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for (x) those required under or in relation to the DGCL with respect to the filing and recordation of Merger I or other documents; and (y) such consents, approvals, orders, authorizations, registrations, declarations and filings, the failure of which to make or obtain would not reasonably be expected to have a Material Adverse Effect on the Company or materially impair or delay the ability of the Company to consummate the transactions contemplated hereby.

 

4.4 Financial Statements . The audited balance sheet of the Company as of December 31, 2004 (the “ Reference Balance Sheet Date ”), and the related audited statements of income and cash flows of the Company, including notes to the financial statements present fairly the financial condition and results of operations of the Company and its Subsidiaries as of such date or for the period covered thereby and were prepared in accordance with generally accepted accounting principles (“ GAAP ”) applied on a consistent basis and consistent with the past accounting practices of the Company (the “ Reference Balance Sheet ”).

 

4.5 No Undisclosed Liabilities . Neither the Company nor any of its Subsidiaries has any Liability, except for (i) Liabilities accrued or reserved against the Reference Balance Sheet; (ii) Liabilities which have arisen after the date of the Reference Balance Sheet in the ordinary course of business consistent with past practice and which are immaterial in amount; and (iii) Liabilities that would not reasonably be expected to have a Material Adverse Effect on the Company.

 

4.6 Compliance with Applicable Laws; Regulatory Matters.

 

(a) To the Company’s knowledge, the Company and its Subsidiaries hold all permits, licenses, certificates, franchises, registrations, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of their businesses (the “ Company Permits ”). The Company and its Subsidiaries are in material compliance with the terms of the Company Permits. To the knowledge of the Company, the businesses of the Company and its Subsidiaries are not being and have not been conducted in violation of any law, ordinance, regulation, judgment, decree, injunction, rule or order of any Governmental Entity, and the Company and its Subsidiaries have not received any written warning, notice, notice of violation or probable violation, notice of revocation, or other written communication from or on behalf of any Governmental Entity, alleging (A) any violation of any Company Permit, or (B) that the Company or any of its Subsidiaries require any Company Permit required for its business that is not currently held by it. No investigation or inquiry by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened.

 

(b) To the Company’s knowledge, the Company and its Subsidiaries possess such certificates, authorizations, licenses, approvals, or permits issued by the appropriate local, state, federal or foreign regulatory agencies or bodies that are material to, or legally required for, the operation of its business. The Company and its Subsidiaries have not received any notice of proceedings relating to, or otherwise have knowledge that any governmental body or agency is considering, limiting, suspending, modifying or revoking any such certificate, authorization, license, approval, or permit.

 

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(c) To the knowledge of the Company, all material reports, documents, claims, notices or approvals required to be filed, obtained, maintained, or furnished to any state or federal governmental agency by the Company and its Subsidiaries have been so filed, obtained, maintained or furnished. All such reports, documents, claims and notices were complete and correct in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing) such that no liability exists with respect to such filing.

 

(d) Neither the Company or its Subsidiaries, nor, to the knowledge of the Company, their respective officers, directors or managing employees, have engaged in any activities which are prohibited under federal or state criminal or civil laws or the regulations promulgated pursuant to such laws, or are cause for civil penalties or mandatory or permissive exclusion from any other state or federal program.

 

4.7 Litigation . Section 4.7 of the Company Disclosure Letter sets forth a true and complete list of all litigation as of the date hereof, including reasonable detail regarding the current status of such litigation, to which either the Company or any of its Subsidiaries is or, to the knowledge of the Company, is threatened to be, a party or as to which their property or assets may be bound. Except as set forth on Section 4.7 of the Company Disclosure Letter, there is no litigation, arbitration, claim, suit, action, investigation, inquiry or proceeding pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its Subsidiaries, nor is there any judgment, award, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries.

 

4.8 Taxes .

 

(a) Filing of Tax Returns . Each of the Company and its Subsidiaries has timely filed with the appropriate taxing authorities all Tax Returns required to be filed through the date hereof. All such Tax Returns are complete and accurate in all material respects. All Taxes due and owing by any of the Company and its Subsidiaries on or before the date hereof (whether or not shown on any Tax Returns) have been paid. Neither the Company nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company or any of its Subsidiaries do not file Tax Returns that they are or may be subject to taxation by that jurisdiction.

 

(b) Payment of Taxes . The unpaid Taxes of each of the Company and its Subsidiaries (i) did not, as of the dates of the Reference Balance Sheet, 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 Reference Balance Sheet, and (ii) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. Since the date of the Reference Balance Sheet, the Company has not incurred any Liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice. For purposes of this representation, Taxes shall be allocated in the manner set forth in the last sentence in Section 6.3(b).

 

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(c) Audits, Investigations or Claims . No deficiencies for Taxes have been claimed, proposed or assessed by any taxing or other governmental authority against the Company or any of its Subsidiaries. There are no pending or, to the knowledge of the Company, threatened audits, assessments or other actions for or relating to any Liability in respect of Taxes of the Company or any of its Subsidiaries, and there are no matters under discussion with any governmental authorities, or known to the Company with respect to Taxes that are likely to result in an additional Liability for Taxes with respect to the Company or any of its Subsidiaries. The Company has delivered or made available to Parent complete and accurate copies of federal, state and local Tax Returns of the Company and its predecessors for the years ended December 31, 2002 and 2003. Neither the Company nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, nor has any request been made in writing for any such extension or waiver. No power of attorney (other than powers of attorney authorizing employees of the Company to act on behalf of the Company) with respect to any Taxes has been executed or filed with any Tax authority.

 

(d) Encumbrances . There are no Encumbrances for Taxes on any assets of the Company or any of its Subsidiaries other than Encumbrances for Taxes not yet due and payable.

 

(e) Tax Elections . All elections with respect to Taxes affecting the Company or any of its Subsidiaries as of the date hereof, to the extent such elections are not shown on or in the Tax Returns that have been delivered or made available to Parent, are set forth on Schedule 4.8 of the Company Disclosure Letter. The Company and its Subsidiaries (i) have not consented at any time under former Section 341(f)(1) of the Code to have the provisions of former Section 341(f)(2) of the Code apply to any disposition of the assets of the Company; (ii) have not agreed, nor are required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (iii) have not made an election, nor are required, to treat any asset of the Company as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iv) have not acquired or do not own any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (v) have not made or will not make a consent dividend election under Section 565 of the Code; (vi) have not elected at any time to be treated as an S corporation within the meaning of Sections 1361 or 1362 of the Code; and (vii) have not made any of the foregoing elections nor are required to apply any of the foregoing rules under any comparable state or local Tax provision.

 

(f) Tax Sharing Agreements . There are no Tax-sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving the Company or any of its Subsidiaries, and, after the Closing Date, neither the Company nor any of its Subsidiaries shall be bound by any such Tax-sharing agreements or similar arrangements or have any Liability thereunder for amounts due in respect of periods prior to the Closing Date.

 

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(g) Other Entity Liability . Neither the Company nor any of its Subsidiaries have been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common Buyer of which is the Company). The Company and its Subsidiaries have no Liability for the Taxes of any Person (other than Taxes of the Company and its Subsidiaries) (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 . Neither the Company nor any Subsidiary have been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The Company and its Subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. The transactions contemplated herein are not subject to the tax withholding provisions of Section 3406 of the Code, or of Merger Subchapter A of Chapter 3 of the Code or of any other provision of law.

 

(i) Parachute and Compensation Payments . Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code or which would result in a disallowed deduction under Section 162(m) of the Code.

 

(j) Partnerships, Single Member LLCs, CFCs, PHCs and PFICs . Neither the Company nor any of its Subsidiaries (i) is a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes, (ii) owns a single member limited liability company which is treated as a disregarded entity other than LLC, (iii) is a stockholder of a “controlled foreign corporation” as defined in Section 957 of the Code (or any similar provision of state, local or foreign law), (iv) is a “personal holding company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign law), or (v) is a stockholder in a “passive foreign investment company” within the meaning of Section 1297 of the Code.

 

(k) Permanent Establishment . Neither the Company nor any of its Subsidiaries have and have not 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.

 

(l) International Boycotts . The Company and its Subsidiaries have never participated in nor are participating in an international boycott within the meaning of Section 999 of the Code.

 

(m) Disallowance of Interest Deductions . None of the outstanding indebtedness of the Company constitutes indebtedness with respect to which any interest deductions may be disallowed under Sections 163(i) or 163(l) or 279 of the Code or under any other provision of applicable law.

 

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(n) Tax Shelters . The Company has not entered into any transaction identified as a “listed transaction” for purposes of Treasury Regulations Sections 1.6011-4(b)(2) or 301.6111-2(b)(2). If the 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 it believes that it has either (x) substantial authority for the tax treatment of such transaction or (y) disclosed on its Tax Return the relevant facts affecting the tax treatment of such transaction.

 

(o) Spin-Offs . The Company has not distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since April 16, 1997, and the stock of the Company has not been distributed in a transaction satisfying the requirements of Section 355 of the Code since April 16, 1997.

 

4.9 Reorganization Treatment.

 

(a) Intention Regarding Treatment of the Mergers . For federal income tax purposes, the Company intends that Merger I and Merger II shall be treated as a single integrated transaction.

 

(b) Assets . At the Effective Time of Merger I, the Company will hold at least 90 percent of the fair market value of Company’s net assets and at least 70 percent of the fair market value of Company’s gross assets held immediately prior to the Effective Time of Merger I. For purposes of this representation, amounts paid by the Company to dissenting Company Stockholders, amounts used by the Company to pay the expenses related to the Mergers, amounts paid by the Company to redeem stock, securities, warrants or options of the Company as part of any overall plan of which the Mergers are a part, and amounts distributed by the Company to Company Stockholders (except for any regular, normal dividends) as part of an overall plan of which the Mergers are a part, in each case will be included as assets of the Company held immediately prior to the Effective Time of Merger I.

 

(c) Business . The Company currently conducts a business. Such business is the Company’s “historic business” within the meaning of Treasury Regulations Section 1.368-1(d), and no assets of the Company have been sold, transferred, or otherwise disposed of that would prevent Parent from continuing the “historic business” of the Company or from using a “significant portion” of the Company’s “historic business assets” in a business following the Mergers, as such terms are used in Treasury Regulations Section 1.368-1(d).

 

(d) Investment Company . The Company is not an investment company, as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.

 

(e) Title 11 . The Company is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

 

(f) Redemptions and Distributions . To the Company’s knowledge, neither the Company nor any person related to the Company within the meaning of Treasury Regulations Sections 1.368-1(e)(3), (e)(4) and (e)(5) has purchased, redeemed or otherwise acquired, or made any distributions with respect to, any of the Company’s stock prior to or in contemplation of the Mergers, or otherwise as part of a plan of which the Mergers is a part.

 

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(g) Continuity of Interest . As of the Effective Time of Merger I, the portion of the Initial Stock Consideration not deposited into escrow pursuant to Section 3.4 of this Agreement shall have a value of not less than fifty percent (50%) of the aggregate value as of such time of such Stock Consideration, the total Cash Consideration payable to all Stockholders, and any indebtedness owed by the Stockholders to the Company that is forgiven as part of an overall plan of which the Mergers are a part.

 

(h) Intercorporate Indebtedness . At the Effective Time of Merger I, there will be no intercorporate indebtedness existing between Parent and the Company or the Merger Subs and the Company that was issued or acquired, or will be settled, at a discount.

 

(i) Liabilities . The liabilities of the Company assumed by Parent and the liabilities to which the transferred assets are subject were incurred by the Company in the ordinary course of its business.

 

(j) Value of Transferred Assets . The fair market value of the assets of the Company transferred to the Surviving Corporation will equal or exceed the sum of the liabilities assumed by the Surviving Corporation, plus the amount of liabilities, if any, to which the transferred assets are subject.

 

(k) Merger Expenses . The Company will pay its expenses, if any, incurred in connection with the Mergers.

 

4.10 Absence of Certain Changes or Events.

 

(a) Except for incurring the expenses, making the payments, or the other transactions contemplated in or by this Agreement, since the date of the Reference Balance Sheet, (i) each of the Company and its Subsidiaries has conducted its businesses in the ordinary course consistent with past practice and has not incurred any material liability, except in the ordinary course of its business consistent with past practice; (ii) there has not been any change in the business, financial condition, Liabilities, assets, technology, Intellectual Property, employee relations, customer relations, supplier relations, manufacturer relations or distributor relations, or results of operations of the Company or its Subsidiaries that has had, or would reasonably be expected to have, a Material Adverse Effect on the Company, (iii) there has not been any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any shares of Company Common Stock; (iv) there has not been any split, combination or reclassification of any Company Common Stock or any issuance or commitment to issue or the authorization of any issuance of any Company Common Stock or other securities convertible into, in exchange or in substitution for any shares of Company Common Stock; (v) there has not been (A) any granting by the Company or any of its Subsidiaries to any employee of the Company or any of its Subsidiaries of any increase in compensation, other than in the ordinary course of business, (B) any granting by the Company or any of its Subsidiaries to any such employee of any increase in severance or termination pay, (C) any entry by the Company or any of its Subsidiaries into any employment, severance or termination agreement, policy or arrangement with any employee; or (D) any transaction with a Company Stockholder, director or employee; (vi) there has not been any material adverse change in the Company’s business relationships with any clients or marina owners (“ Customers ”), and

 

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no event of default (with or without notice or lapse of time, or both) has occurred under any agreement between the Company and its Customers; and (vii) there has not been any change in accounting methods, principles or practices by either the Company or any of its Subsidiaries affecting their assets, Liabilities or business, except insofar as may have been required by a change in GAAP.

 

(b) Except for the transactions contemplated in this Agreement and excluding the disposition of the Company’s interest in BellPort Japan, since the date of the Reference Balance Sheet, neither the Company nor any of its Subsidiaries has (i) sold, transferred, leased, pledged or mortgaged or agreed to sell, transfer, lease, pledge, or mortgage any material assets, property or rights (including Intellectual Property), other than sales or disposition of inventories, in the ordinary course of business consistent with past practice, or cancelled, waived or compromised or agreed to cancel, waive or compromise, any debts, claims or rights, (ii) made any significant change in any method of management, operation or accounting, (iii) made any new or change in any material Tax election, settlement or compromise of any claim, notice, audit report or assessment in respect of Taxes, change in any annual Tax accounting period, adoption or change in any method of Tax accounting, filing of any amended material Tax Return, entrance into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement relating to any mate