ASSET PURCHASE AGREEMENT between FREMONT INVESTMENT & LOAN andiSTAR FINANCIAL INC. dated as of May 21, 2007Asset Purchase Agreement |
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ASSET PURCHASE AGREEMENT, dated as of May 21, 2007, between FREMONT INVESTMENT & LOAN, a California Industrial Bank (" Fremont " or the " Seller "), and i STAR FINANCIAL INC., a Maryland corporation (" iStar " or the " Purchaser "). WHEREAS, Fremont, directly and through its various Affiliates, is engaged in the commercial real estate mortgage lending business at various locations in the United States (the " Business "); and WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, the loans, participation interests, co-lending interests and related assets described in this Agreement, as well as certain other assets owned by the Seller and used in the Business, and in connection therewith the Purchaser is willing to assume certain liabilities of the Seller relating thereto, as particularly set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Seller and the Purchaser hereby agree as follows: Section 1.01 Certain Defined Terms. For purposes of this Agreement: " Accelerated Closing Trigger Date " means the date when each of the conditions set forth in Sections 6.02(a), (b), (c) and (d) have been satisfied. " Acquisition Proposal " means (a) any proposal or offer from any Person other than the Purchaser or any of its Affiliates relating to any direct or indirect acquisition of (i) all or substantially all of the assets of Fremont and its subsidiaries taken as a whole, (ii) all or substantially all of the Purchased Assets taken as a whole or (iii) more than 50% of the outstanding equity securities of Fremont or its Affiliates, (b) any tender offer, exchange offer or agreement that, if consummated, would result in any Person beneficially owning more than 50% of the outstanding equity securities of Fremont or its Affiliates, (c) any merger, consolidation or other business combination with Fremont or its Affiliates or (d) any recapitalization of Fremont or its Affiliates or similar transaction that, if consummated, would result in any Person beneficially owning more than 50% of the outstanding equity securities of Fremont or its Affiliates (the result of which, as to events described in clauses (a)(iii), (b), (c) or (d), would be to prohibit, impede or otherwise adversely affect the ability of the parties to close the transaction contemplated hereby). " Action " means any Claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. " Affiliate " means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. " Agreement " or "this Agreement" means this Asset Purchase Agreement between the parties hereto (including the Exhibits and Schedules hereto and the Disclosure Schedule) and all amendments hereto made in accordance with the provisions of Section 9.07. " Ancillary Agreements " means the Participation Agreement, the Transition Services Agreement, the Sublease Agreements, the Bill of Sale, the Domain Name Agreement and the assignments and assumption agreements to be executed and delivered in connection with this Agreement. 1
" Benefit Plan " means any "Employee Pension Benefit Plan" (as defined in Section 3(2) of ERISA), "Employee Welfare Benefit Plan" (as defined in Section 3(1) of ERISA), "Multi-Employer Plan" (as defined in Sections 3(37) or 4001(a)(3) of ERISA), pension plan, plan of deferred compensation, medical plan, life insurance plan, long-term disability plan, dental plan, "multiple employer welfare arrangement" (as defined in Section 3(40) of ERISA), material personnel policy (including, but not limited to, vacation time, holiday pay, bonus programs, moving expense reimbursement programs and sick leave), excess benefit plan, bonus or incentive plan (including, but not limited to, stock options, restricted stock, stock bonus and deferred bonus plans), severance, change-of-control agreement, employment agreement, consulting agreement or any other material benefit, program or contract, whether or not written or pursuant to a collective bargaining agreement, in any case sponsored, maintained, contributed to or required to be contributed to, or entered into by the Seller or any ERISA Affiliate of the Seller for the benefit of any current or former Business Employee, or with respect to which Seller would reasonably be expected to incur any Liability. " Bill of Sale " means the Bill of Sale, Assignment and Assumption Agreement with respect to the Purchased Assets to be executed by the parties at the Closing, substantially in the form of Exhibit 1.01(a). " Business Day " means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of New York. " Business Employee " means any employee of the Seller whose employment, as of the date hereof, relates primarily to the Purchased Assets. " CERCLA " means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended through the Closing. " Claims " means any and all administrative, regulatory or judicial actions, suits, petitions, appeals, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements. " Class 1 Loans " means those binding and non-binding commitment letters which have been issued by Fremont and which are listed on Schedule 2.10(b)(i) hereto. " Class 2 Loans " means those letters of interest which have been issued by Fremont and "preparing for committee" loans, each as listed on Schedule 2.10(b)(ii) hereto. " Closed Special Loans " means those loan commitments which have been funded and which are listed on Schedule 2.10(a) hereto. " COBRA " means Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code. " Code " means the Internal Revenue Code of 1986, as amended through the date hereof. " Collateral Documents " means (a) with respect to each Loan and each of the Special Loans, each and every collateral document, mortgage, security agreement, assignment of rents, pledge agreement, guaranty, indemnification agreement, assignment of management agreement, assignment of stock or partnership or membership units, UCC financing statements, regulatory agreement, intercreditor agreements, participation agreements, title insurance policies, financing statement search reports, tax and insurance escrows, letters of credit, certificates of deposit or deposits or escrows of any kind, fire and casualty insurance policies, flood hazard insurance policies, and other insurance policies, and each other material document, agreement or instrument under which property is pledged, assigned, granted or otherwise conveyed or provided to or for the benefit of the Seller or any of its Affiliates to secure, support or guaranty a borrower's obligations under such Loan or Special Loan, and (b) with respect to any of the foregoing, together with any amendments or supplements thereto or modifications, renewals, substitutions and/or extensions thereof in effect as of the Closing Date. 2
" control " (including the terms " controlled by " and " under common control with "), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise. " Conveyance Taxes " means all sales, use, bulk sale, value added, transfer, stamp, stock transfer, real property transfer or gains and similar Taxes, including, without limitation, Transfer Taxes. " DFI " means the Department of Financial Institutions of the State of California. " Disclosure Schedule " means the Disclosure Schedule attached hereto, dated as of the date hereof, delivered by the Seller to the Purchaser in connection with this Agreement. " Distribution " means, with respect to each Loan, any payment or other distribution (whether received by setoff or otherwise) of cash (including interest, dividends or fees) under or in respect of the related Loan. " Encumbrance " means any (a) mortgage, pledge, lien, security interest, charge, hypothecation or other encumbrance, security agreement, security arrangement or adverse Claim against title, control or proceeds of any kind; (b) purchase agreement, option agreement, put arrangement or buy-sell arrangement; (c) subordination agreement or arrangement resulting in subordination of any kind; or (d) agreement to create or effect any of the foregoing; provided , however , that with respect to the Loans, nothing expressly set forth in the Loan Documents shall be deemed an Encumbrance hereunder. " Environment " means surface waters, ground waters, soil, subsurface strata and ambient air. " Environmental Laws " means all Laws, now or hereafter in effect and as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the Environment, health, safety, natural resources or Hazardous Materials, including CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. ; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq .; the Clean Water Act, 33 U.S.C. §§ 1251 et seq .; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq .; the Clean Air Act, 42 U.S.C. §§ 7401 et seq .; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq .; the Atomic Energy Act, 42 U.S.C. §§ 2011 et seq .; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq .; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq . " ERISA " means the Employee Retirement Income Security Act of 1974, as amended. " ERISA Affiliate " means any trade or business, whether or not incorporated, that together with the Seller would be deemed a "single employer" within the meaning of section 4001(b) of ERISA. " Excluded Taxes " means (a) all Taxes relating to the Excluded Assets or Excluded Liabilities for any period; (b) all Taxes relating to the Purchased Assets for any period prior to the Closing Date; (c) Conveyance Taxes other than Transfer Taxes and (d) 50% of any Transfer Taxes incurred as a result of the sale contemplated by this Agreement. For purposes of this Agreement, in the case of any Straddle Period, (i) Property Taxes relating to the Purchased Assets shall be determined in accordance with Section 5.13 and (ii) Taxes (other than Property Taxes) relating to the Purchased Assets for the period prior to the Closing Date shall be computed as if such taxable period ended as of the close of business on the Closing Date. " Extension Amendment " means an amendment entered into after March 31, 2007 to a Loan which extends the maturity date thereof other than pursuant to the terms of the original Loan Documents for such Loan. " FDIC " means the Federal Deposit Insurance Corporation. 3
" Federal Funds Rate " means for any date, the rate for such date published by the Board of Governors of the Federal Reserve System. " GAAP " means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved. " Governmental Authority " means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body. " Governmental Order " means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. " Hazardous Materials " means (a) any petroleum or petroleum products, radioactive materials or wastes, asbestos in any form, urea formaldehyde foam insulation and polychlorinated biphenyls; and (b) any other chemical, material, substance or waste that in relevant form or concentration is prohibited, limited or regulated under any Environmental Law. " Impairment " means any Claim, counterclaim, setoff, defense, action, demand, litigation (including administrative proceedings or derivative actions), Encumbrance, right (including expungement, avoidance, reduction, subordination of any kind, including, but not limited to, contractual or equitable subordination or otherwise) or defect, the effect of which is, or would be (in any such case), materially and adversely to affect the Loans in whole or in part. " Indebtedness " means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services; (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases; (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities; (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (h) all Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss; and (i) all Indebtedness of any other Person of the type referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. " Indemnified Party " means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be. " Indemnifying Party " means the Seller pursuant to Section 7.02 or the Purchaser pursuant to Section 7.03, as the case may be. " Initial A Participation Value " means an amount equal to 70% of the Interim Loan Price. 4
" Intellectual Property " means intellectual property, confidential information and proprietary information, in any and all medium, including digital, and in any jurisdiction, including, but not limited to, all (a) patents and patent applications (including all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof) and patent disclosures, inventions and improvements (whether or not patentable and whether or not reduced to practice); (b) trademarks, service marks, trade dress, trade names, Internet domain names, assumed names and corporate names, together with the goodwill of the business associated therewith; (c) copyrightable works of authorship, including all statutory and common law copyrights associated therewith; (d) all registrations, applications, extensions and renewals for any of the items listed in clauses (b) and (c); (e) trade secrets; (f) websites; (g) computer and software programs, including operating systems, applications, routines, interfaces, and algorithms, whether in source code or object code; and (h) manuals, user and technical documentation, data, databases, flowcharts and developers' notes. " Intellectual Property Contracts " means all license and other agreements granting or obtaining any right to use or practice any rights under any Intellectual Property or otherwise relating to the use (both directly or through a third party service), development, maintenance, support, distribution, sale or escrow of Intellectual Property. " Interest Adjustment " means the aggregate amount of all unpaid interest as of the close of business on the Closing Date which is not more than 30 days past due under the terms of the Loan Documents in respect of the Loans (other than Loans with respect to REO Property for which there is no Interest Adjustment). " Interim Amount " means the amount equal to the sum of (i) the Interim Loan Price, (ii) the Non-Loan Purchase Price and (iii) the Interim Interest Adjustment. " Interim Date " means the last Business Day of the month preceding the month in which the Closing occurs. " Interim Interest Adjustment " means the aggregate amount of all unpaid interest as of the close of business on the Interim Date which is not more than 30 days past due under the terms of the Loan Documents in respect of the Loans (other than Loans with respect to REO Property for which there is no Interim Interest Adjustment). " Interim Loan Price " means an amount equal to (i) the aggregate outstanding principal balance of the Loans as of the Reference Date, plus (ii) the aggregate amount of principal advanced subsequent to the Reference Date through and including the Interim Date in respect of the Loans, minus (iii) the aggregate amount of principal paid to Fremont or an Affiliate thereof in respect of the Loans after the Reference Date through and including the Interim Date, minus (iv) $268,942,000. " IP/IT Costs " means any and all costs and fees paid to third parties (not including any Seller or Purchaser legal fees or expenses) that are attributable (i) pursuant to Section 5.04(c), to any consent, approval, authorization or license necessary or desirable to preserve for the Purchaser any right or benefit under any Transferred IP Agreement to which the Seller or any of its Affiliates is a party or to provide the Purchaser with the rights and benefits of such license, contract or other agreement or arrangement; (ii) to or arising under the Separate IT Agreements, except to the extent excluded from IP/IT Costs pursuant to Section 5.16; and (iii) pursuant to the Transition Services Agreement, (a) to any consents, assignments and sublicenses necessary for the Seller to provide services under the Transition Services Agreement and, if applicable, any work-around, substitution or such other arrangement as the Seller deems appropriate to provide such services, and (b) to the migration or conversion of any data from the Seller's Oracle system to the Purchaser's Oracle system. " IRS " means the Internal Revenue Service of the United States. " IT Systems " means all computer systems, programs, networks, software and hardware used to process, store, maintain and operate data, information and functions used in connection with the Business or the Loans. 5
" Law " means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law). " Leased Real Property " means the real property leased by Fremont or any of its Affiliates, as tenant, pursuant to the leases listed on Section 2.02(a)(iii) of the Disclosure Schedule. " Liabilities " means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, known or unknown, matured or unmatured or determined or determinable, including those arising under any Law (including any Environmental Law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking. " Licensed Intellectual Property " means Intellectual Property licensed by Fremont or any of its Affiliates from third parties and used in connection with the Business. " Lien " means any mortgage, lien, pledge, change, assignment for security purposes, security interest, or encumbrance of any kind with respect to a Loan. " Loan Agreement " means, with respect to each Loan identified on Section 2.01(i) of the Disclosure Schedule, each loan agreement related to such Loan. " Loan Documents " means, with respect to each Loan or any of the Special Loans, the Loan Agreement, the Collateral Documents related thereto, any promissory notes related thereto and all other documents, instruments, indemnities, guarantees, and agreements executed and delivered in connection therewith and in effect, any written waivers, amendments, modifications and supplements to any of the foregoing and any other documents, memoranda, consents, approvals, reports, plats of survey, opinions of counsel, records, analysis, approvals, valuations, communications and correspondence maintained by and in the possession of (or reasonably obtainable by) the Seller or any of its Affiliates in the course of the Business as part of the files relating to the Loans and Special Loans or the enforcement, origination, acquisition, servicing or administration thereof. The term Loan Documents also includes, but is not limited to, all intervening or other assignments (or analogous documents) pursuant to which the Seller shall have acquired a Loan or a Special Loan. " Loans " means all loans (excluding the Special Loans) made and partially or fully funded by the Business and outstanding as of Reference Date, which are listed on Section 2.01(i) of the Disclosure Schedule, including (a) loans 100% owned by Fremont and/or any of its Affiliates as of such date, (b) Fremont's and any of its Affiliate's respective participation rights with respect to loans that have been funded as of such date (including, but not limited to, loans as to which the Purchaser and any of its Affiliates owns a participation) and (c) Fremont's and any of its Affiliate's rights with respect to loans that have been funded jointly with one or more third parties as of such date. For the avoidance of doubt, (a) on the Closing Date, Loans shall not include any loans that are purchased by other participants pursuant to rights of first or last refusal prior to the Closing and (b) Loans shall include any loans made and partially or fully funded by the Business and outstanding as of the Reference Date that are foreclosed (i) prior to the date of this Agreement or (ii) if after the date of this Agreement, in accordance with the requirements of Section 5.01(a) hereof on or prior to the Closing Date. Section 2.01(i) of the Disclosure Schedule shall contain at least the following information as of the Reference Date concerning any such loans, participation rights or rights: (i) the gross amount of the commitment with respect to the loan, whether funded or not, (ii) the outstanding principal balance of the loan, (iii) the remaining unfunded commitment of the loan, (iv) if applicable, the outstanding principal amount of any participation rights granted to any third party in such loan, and (v) the outstanding principal amount owed to the Seller or any of its Affiliates under such loan. 6
" Material Adverse Effect " means any circumstance, change or effect on the Purchased Assets or the Seller that, in the aggregate with all other circumstances, changes or effects on the Purchased Assets or the Seller, has had or is reasonably likely to have a material adverse effect on the value of the Purchased Assets taken as a whole; provided , however , that none of the following shall be deemed to constitute or be taken into account in determining whether there has been a "Material Adverse Effect": (a) any circumstances, changes or effects arising from actions taken with the written consent of the Purchaser, (b) any changes in Law or GAAP, (c) any changes in the credit quality of the Loans or the condition (financial or otherwise) of borrowers under any of the Loans unless the same was the direct result of any action taken by the Seller after the date of this Agreement without the Purchaser's consent, or (d) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates. " Net Earnings " for any period prior to the Closing Date shall mean the excess, if any, (and in no event less than zero) of (i) the sum of all interest income, fees (including, without limitation, exit fees and prepayment premiums, but not including non-cash deferred fees on the Seller's books at March 31, 2007 amortized into income) and other income received with respect to the Loans for such period, over (ii) the sum of all interest expense at the Seller's costs of funds allocable to outstanding fundings under the Loans, annual salary and related employee benefit costs in accordance with the Seller's customary and usual practice allocable to such period for Business Employees, rent for Leased Real Property and pursuant to the Excluded Leases reasonably allocable to the Business for such period per month and other miscellaneous expenses at the rate of $900,000 per month, all as determined in accordance with past practice. " Owned Intellectual Property " means Intellectual Property owned by Fremont or its Affiliates and used in connection with the Business. " Parent " means Fremont General Corporation, a Nevada corporation. " Participation Agreement " means the Participation Agreement to be executed by i Star (or its single purpose entity formed to acquire the Loans) and Fremont, substantially in the form attached hereto as Exhibit 1.01(b). " Permitted Encumbrances " means the following, individually and collectively: (i) Encumbrances for Taxes not yet delinquent or being contested in good faith by appropriate proceedings; (ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Encumbrances for construction in progress or otherwise arising in the ordinary course of business securing obligations that are not more than 45 days overdue or that are being contested in good faith by appropriate proceedings, except for Encumbrances attributable to work performed at the direction of the Seller; (iii) any statutory Encumbrance arising in the ordinary course of business or arising by operation of Law with respect to an obligation or liability that is not yet due or delinquent; (iv) easements, rights-of-way, restrictions, minor title defects, covenants, encroachments, variations and other similar Encumbrance with respect to any Purchased Asset that does not diminish the value or interfere with the existing use of such Purchased Asset in any material respect; (v) any interest or title of a lessor under any lease, or any licensor under any license (and any financing statement that may be filed with respect thereto) and covering only the assets so leased or licensed from a non-Affiliate of the Seller entered into in the ordinary course of business that has been disclosed, in writing, to the Purchaser prior to the date of this Agreement; (vi) Encumbrances disclosed in any existing title insurance policy (or in the event the actual title insurance policy has not been issued, a binder, actual "marked-up" title commitment, pro forma policy, or an agreement to provide any of the foregoing pursuant to binding escrow instructions executed by the title company or its authorized agent) a copy or original of which has been delivered or made available to the Purchaser prior to the date of this Agreement (but excluding, for the avoidance of doubt, any of the foregoing delivered to Purchaser pursuant to Section 6.02(f) and further excluding any Encumbrances (other than a mortgage related to a Purchased Asset) in favor of the Seller or any of its Affiliates); and 7
(vii) Encumbrances disclosed in any title insurance policy (or binder, actual "marked-up" title commitment, pro forma policy, or an agreement to provide any of the foregoing pursuant to binding escrow instructions executed by the title company or its authorized agent) delivered to the Purchaser pursuant to Section 6.02(f) and excluding any Encumbrances (other than a mortgage related to a Purchased Asset) in favor of the Seller or any of its Affiliates. " Person " means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. " Property Taxes " means real and personal ad valorem property Taxes and any other Taxes imposed on a periodic basis and measured by the value of any item. " Purchaser Proration Date " means either (a) the last day of the month preceding the month in which a Purchaser Proration Notice is given prior to the 15 th day of such month or (b) the last day of the month in which a Purchaser Proration Notice is given if given after the 15 th day of such month. " Purchaser Proration Notice " means a notice given by the Purchaser advising the Seller that the Purchaser is ready, willing and able to close the transactions contemplated hereby, subject only to the satisfaction of the conditions set forth in Sections 6.02(a), (b), (c) and (d) hereof and performance by the Seller in all material respects of its obligations hereunder, including, without limitation, delivery of the items set forth in Section 2.06 hereof. " Reference Date " means March 31, 2007. " Release " means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and the like into or upon any land or water or air or otherwise entering into the Environment. " Remedial Action " means all action to (a) clean up, remove, treat or handle in any other way Hazardous Materials in the Environment; (b) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or the Environment; or (c) perform remedial investigations, feasibility studies, corrective actions, closures and post-remedial or post-closure studies, investigations, operations, maintenance and monitoring. " REO Property " means the real property described on Section 2.02(a)(i) of the Disclosure Schedule hereto and any other real property acquired prior to the Closing Date in accordance with the terms hereof pursuant to a foreclosure or deed-in-lieu of foreclosure of a Loan, including Repossessions to the extent the same constitute real estate. " Repossessions " means all property, both real and personal, tangible and intangible, acquired pursuant to the exercise of remedies with regard to any Lien securing a Loan (or acquisition in lieu of the exercise of such remedies) in accordance with the terms of the applicable Loan Documents, including all REO Property. " Special Loans " means the Closed Special Loans, the Class 1 Loans and the Class 2 Loans . " Straddle Period " means any taxable period beginning on or prior to and ending after the Closing Date. " Sublease Agreements " means the Sublease Agreements to be executed by Fremont and i Star at the Closing, the terms of which shall be consistent with the terms of this Agreement, but otherwise in form and substance reasonably acceptable to the Purchaser and the Seller, pursuant to which i Star shall sublet from Fremont certain space consisting, with respect to one sublease (the " Santa Monica Sublease ") of a portion of the space identified in Section 2.02(b) of the Disclosure Schedule as located in Santa Monica, California, and another sublease (the " Brea Sublease ") consisting of space located in a portion of the space identified in Section 2.02(b) of the Disclosure Schedule as located in Brea, California, with the location, size and configuration of each subleased premises to be reasonably determined by the parties prior to the Closing Date in accordance with Section 2.11. " Superior Proposal " means any Acquisition Proposal on terms that Fremont determines, in its good faith judgment (after having received advice from its outside legal counsel and its financial advisors), 8
are significantly more favorable to the equity holders of Fremont from a financial point of view than the terms of the transactions set forth in this Agreement; provided that the Seller's Board of Directors shall not so determine that any such proposal is a Superior Proposal prior to the time that is two Business Days after the time at which the Seller has complied in all material respects with Section 5.06(b) with respect to such proposal. " Tax Returns " means any return, declaration, report, election, claim for refund or information return or other statement or form filed or required to be filed with any Tax authority relating to Taxes, including any schedule or attachment thereto or any amendment thereof. " Taxes " means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any taxing authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs duties, tariffs, and similar charges. " Transfer Tax " means any customary transfer, stamp or similar Tax imposed pursuant to applicable Law in connection with the recording of any deed, mortgage or similar instrument conveying or assigning, as applicable, the REO Property or mortgages (or similar instruments). " Transferred IP Agreements " means (a) licenses of Owned Intellectual Property from Fremont or any of its Affiliates to third parties where the Owned Intellectual Property which is the subject to such licenses is used solely in connection with the Business, (b) Intellectual Property Contracts to which Fremont or any of its Affiliates are parties or are otherwise subject, and where the Intellectual Property which is the subject to such Intellectual Property Contracts is used solely in connection with the Business; (c) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of Owned Intellectual Property where such Owned Intellectual Property is used solely in connection with the Business; and (d) the agreement with Oracle Corporation providing for the provision of 130 seat licenses to the Seller. " Transferred Rights " means with respect to each Loan after the Closing Date, to the extent related thereto, the following: (a) the right to repayment of all amounts funded by, or amounts payable to, Fremont or any of its Affiliates under the related Loan Documents and all obligations owed to Fremont or any of its Affiliates in connection with such Loan; (b) all Claims (including "claims" as defined in Bankruptcy Code §101(5)), suits, causes of action, and any other right of Fremont or any of its Affiliates, whether known or unknown against the borrower or any other obligor under the Loan Documents related to such Loan, or any of such borrower's or obligor's Affiliates, agents, representatives, contractors, advisors, or any other Person that in any way is based upon, arises out of or is related to any of the foregoing, including, to the extent permitted under applicable Law, all Claims (including contract claims, tort claims, malpractice claims, and claims under any law governing the purchase and sale of, or indentures for, securities), suits, causes of action, and any other right of Fremont or any of its Affiliates against any attorney, accountant, financial advisor or other Person arising under or in connection with the related Loan Documents; (c) all guarantees and collateral with respect to such Loan and any other security of any kind for or in respect of the foregoing; (d) all cash, securities (whether certificated or uncertificated securities), security entitlements, accounts, chattel paper, general intangibles, instruments, real property or other property, and all setoffs and recoupments, but only to the extent received or effected by or for the account of Fremont or any of its Affiliates under such Loan and other extensions of credit under the related Loan Documents (whether for principal, interest, fees, reimbursement obligations or otherwise), including all distributions obtained by or through redemption, consummation of a plan of reorganization, restructuring, liquidation or otherwise of the related borrower, any related obligor or the related Loan Documents, 9
and all cash, securities, interest, dividends and other property that may be exchanged for, or distributed or collected with respect to, any of the foregoing; and (e) all proceeds of the foregoing. " Transition Services Agreement " means the Transition Services Agreement to be executed by Fremont and i Star at the Closing, substantially in the form attached hereto as Exhibit 5.09, pursuant to which Fremont and its Affiliates shall provide certain transitional services to i Star following the Closing. " Upsize Amendment " means an amendment entered into after March 31, 2007 to a Loan which increases the principal amount thereof. " WARN " means the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2101 et seq., or any comparable state or local Law. Section 1.02 Definitions. The following terms have the meanings set forth in the Sections set forth below:
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Section 1.03 Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires: (a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated; (b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement; (c) whenever the words "include," "includes" or "including" are used in this Agreement, they are deemed to be followed by the words "without limitation"; (d) the words "hereof," "herein" and "hereunder" and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein; (f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws; (h) references to a Person are also to its successors and permitted assigns; (i) the use of "or" is not intended to be exclusive unless expressly indicated otherwise; and (j) the word "knowledge" with respect to any party hereto shall mean the actual knowledge of such party, without any obligation to investigate the matter in question. Section 2.01 Purchase and Sale of Loans. On the Closing Date, the Seller shall sell, assign, transfer, convey and deliver, or cause to be assigned, transferred, conveyed and delivered, to the Purchaser (or such subsidiaries of the Purchaser as the Purchaser shall designate), (A) the Loans, (B) the Transferred Rights with respect to the Loans and (C) all Loan Documents related to the Loans. 11
Section 2.02 Purchase and Sale of Other Assets. (a) Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall purchase from the Seller, the following assets, wherever located, whether tangible or intangible, whether directly or indirectly owned by the Seller and, in any case, belonging to or used in the Business, other than the Excluded Assets (the following assets to be purchased by Purchaser being referred to as the " Purchased Non-Loan Assets " and together with the Loans, referred to herein as the " Purchased Assets "):
(b) Notwithstanding anything in Sections 2.01 or 2.02(a) to the contrary, the Purchased Assets shall exclude (i) any loans or other assets acquired by the Seller or its Affiliates after the date hereof in connection with the Business, other than in accordance with the terms and conditions hereof, (ii) any assets related to any Benefit Plan, (iii) artwork, (iv) the leases identified in Section 2.02(b) of the Disclosure Schedule with respect to certain premises located in Brea, California and Santa Monica, California (such leases, the " Excluded Leases ") and (v) all other assets and properties of the Seller and its Affiliates not used in connection with the Business, that are not specifically referenced in Sections 2.01 and 2.02(a) and the corresponding Schedules thereto (collectively, the " Excluded Assets "). 12
Section 2.03 Assumption and Exclusion of Liabilities. (a) Upon the terms and subject to the conditions of this Agreement, at the Closing, the Purchaser shall assume and shall agree to pay, perform and discharge the following Liabilities of the Seller, except for the Excluded Liabilities (such Liabilities assumed by i Star, the " Assumed Liabilities "):
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Section 2.04 Purchase Price. (a) The purchase price for the Loans (the " Loan Purchase Price ") shall be equal to (i) an amount equal to the aggregate outstanding principal balance of the Loans as of the Reference Date, plus (ii) the aggregate amount of principal advanced subsequent to the Reference Date through and including the Closing Date in respect of the Loans, minus (iii) the aggregate amount of principal paid to Fremont or an Affiliate thereof in respect of the Loans after the Reference Date through and including the Closing Date, minus (iv) $268,942,000. (b) The purchase price for the Purchased Non-Loan Assets (the " Non-Loan Purchase Price ") shall be an amount equal to $50 million. (c) On the Closing Date, (i) i Star shall transfer and convey to Fremont the A Participation Interest and (ii) i Star shall pay to Fremont by wire transfer in immediately available funds to an account designated in writing by Fremont prior to the Closing an amount equal to the Interim Amount minus the Initial A Participation Value. (d) The parties shall treat the transactions contemplated by this Agreement for federal and all other Tax purposes as a sale, on the Closing Date, by the Seller to the Purchaser of the Purchased Assets for an aggregate amount equal to the sum of the Loan Purchase Price and the Non-Loan Purchase Price (both subject to any adjustments pursuant to this Agreement), and shall take no position inconsistent therewith for any Tax purpose, including the filing of Tax Returns. The parties have agreed, in accordance with the requirements of Section 1060 of the Code, to an allocation of the amounts paid pursuant to the preceding sentence among the Purchased Assets as set forth on Exhibit 2.04(d) . Section 2.05 Closing. (a) Subject to the terms and conditions of this Agreement, the sale and purchase of the Purchased Assets shall take place at a closing (the " Closing ") to be held at the offices 14
of Katten Muchin Rosenman LLP, effective as of 11:59 P.M., on the last Business Day of the month during which the Closing Trigger Date occurs, or at such other place or at such other time as the Seller and the Purchaser may mutually agree upon in writing (the " Closing Date "). (b) The " Closing Trigger Date " shall be the date when each of the conditions set forth in Sections 6.01(b) and (e) and Sections 6.02(b), (d), (f) and (g) have been satisfied. Each party shall promptly notify the other upon becoming aware that any of such conditions have been satisfied. Upon the occurrence of the Closing Trigger Date, the parties will schedule the Closing Date for the last Business Day of the month during which the Closing Trigger Date occurs. (c) If at any time on or after the Closing Trigger Date there occurs a material and pervasive disruption in the debt financing markets in the United States, then the Purchaser shall be permitted to deliver to the Seller a written notice (a " Closing Delay Notice ") requesting that the Closing Date be postponed until a date not later than the last Business Day of the following month. The Closing Delay Notice shall contain the Purchaser's waiver of all of the conditions set forth in Section 6.02 (other than Section 6.02(e)) and all of the Purchaser's rights to terminate this Agreement pursuant to Section 8.01, other than such rights arising out of a willful violation of the Seller's covenants hereunder occurring after the date of the Closing Delay Notice. It is understood and agreed that the Purchaser shall not be permitted to deliver a Closing Delay Notice if it has previously delivered a Purchaser Proration Notice. Section 2.06 Closing Deliveries by the Seller. Subject to Section 5.04(b), at the Closing, the Seller shall deliver or cause to be delivered to the Purchaser: (a) a duly executed deed in recordable form and otherwise in the form customarily u2sed in the applicable jurisdiction, together with completed transfer tax declarations or exemptions, assignments of title policies, leases and contracts and bills of sale necessary to convey to the Purchaser's designated Affiliate title to any REO Property; (b) the Bill of Sale and such other instruments, in form and substance reasonably satisfactory to the Purchaser and the Seller, as may be reasonably requested by the Purchaser to transfer the Purchased Assets to the Purchaser or evidence such transfer on the public records; (c) executed counterparts of each other Ancillary Agreement to which the Seller is a party; (d) a certificate of a duly authorized officer of the Seller certifying as to the matters set forth in Section 6.02(a); (e) a certificate, duly executed by the Secretary of the Seller, certifying on behalf of the Seller (i) as to the effectiveness of the Seller's Articles of Incorporation and Bylaws; and (ii) as to the valid adoption of resolutions of the Board of Directors of the Seller evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby; (f) executed assignments and other transfer documents in recordable form necessary to transfer all Loan Documents and Transferred Rights to the Purchaser or as directed by the Purchaser together with UCC-3 financing statements; (g) originals of the Loan Documents for each Loan and Special Loan, including, but not limited to, the following:
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(h) true and complete copies of the Transferred IP Agreements and the Transferred Lease Agreements, and an executed assignment and assumption agreement with respect to the foregoing; (i) written evidence of each Required Consent; (j) Domain Name Agreement and Assignment with respect to CRELearn.com, substantially in the form attached hereto as Exhibit 2.06(j) (the " Domain Name Agreement "); (k) to the extent in Seller's or any of its Affiliate's possession or control or reasonably obtainable by the Seller or its Affiliates, true and complete copies of all leases, contracts and agreements relating to any REO Property; (l) such documents as may be required to transfer to the Purchaser or its designee, as directed by the Purchaser, all accounts maintained by or for the Seller or its Affiliates in connection with the Purchased Assets; (m) all insurance policy certificates and evidence of insurance pertaining to the Purchased Assets; and (n) written notices, as requested by the Purchaser, to obligors, tenants and other Persons as reasonably determined by the Purchaser, notifying such Persons of the sale and transfer of the Purchased Assets; (o) with respect to the Intellectual Property listed in Sections 3.10(b)(i) and 3.10(b)(iii) of the Disclosure Schedule, the Seller shall have delivered to the Purchaser a full and complete copy of such Intellectual Property; and (p) such other documents as the Purchaser or its counsel may reasonably request to transfer to the Purchaser or its designee good title the Purchased Assets, subject to Permitted Encumbrances. Section 2.07 Closing Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver to the Seller: (a) the Interim Amount, by delivery to the Seller of (i) the A Participation Interest and (ii) cash in an amount equal to the difference between (A) the Interim Amount and (B) the Initial A Participation Value; (b) an executed counterpart of the Bill of Sale;
(d) assumption by the Purchaser, in form and substance satisfactory to the Seller, of the agreements, assets and obligations to be transferred to the Purchaser pursuant to clauses (f), (h) and (k) of Section 2.06; and 17
(e) a certificate of a duly authorized officer of the Purchaser certifying as to the matters set forth in Section 6.01(a). Section 2.08 Net Earnings; Prorations. (a) The Purchaser shall be entitled to a reduction in the cash portion of the Loan Purchase Price (the " Cash Loan Purchase Price ") equal to 50% of the Net Earnings for the period commencing July 1, 2007 through and including the Closing Date; provided, however , that if the Closing shall not have occurred on the last day of the month during which the Seller receives a Purchaser Proration Notice solely as a result of the failure of any of the conditions set forth in Sections 6.02(a), 6.02(b), 6.02(c), 6.02(d) or 6.01(e) to be satisfied, the Purchaser shall be entitled to a reduction in the Cash Loan Purchase Price equal to 100% of the Net Earnings for the period commencing on the first day after the Purchaser Proration Date through and including the Closing Date if the Purchaser Proration Date occurs prior to July 1, 2007. It is understood and agreed that a Purchaser Proration Notice shall not be given prior to June 1, 2007. Upon its receipt of a Purchaser Proration Notice, the Seller may elect to hold the Closing on a day that is earlier than the last Business Day of the month in which the Purchaser Proration Notice is received by written notice to the Purchaser (a " Closing Acceleration Notice ") no later than the second Business Day following the later of (i) the Seller's receipt of a Purchaser Proration Notice and (ii) the Accelerated Closing Trigger Date. In the event that the Seller timely delivers the Closing Acceleration Notice, the Closing Date shall be 5 Business Days following the Purchaser's receipt of such notice. Notwithstanding the above, in the event that the Purchaser delivers a Closing Delay Notice, the Purchaser shall not be entitled to a reduction in the Cash Loan Purchase Price for any portion of the Net Earnings from and after the originally scheduled Closing Date through and including the actual Closing Date. (b) All customary and usual prorations with respect to the REO Property and other Purchased Non-Loan Assets and all prorations of amounts with respect to the Loans other than as set forth above shall be made as of the Closing Date. (c) As to the Special Loans and any other loans committed to after the date hereof pursuant to Section 5.01 hereof, subject to compliance by the Purchaser with Section 2.10, all fees and payments of interest and other amounts shall be for the credit of the Purchaser and the Purchaser shall be responsible for all principal or other amounts funded by the Seller thereunder; provided , however , that with respect to any Closed Special Loan, any such payments of interest shall be prorated between the Seller and the Purchaser with respect to the periods from and after the time such Closed Special Loan is participated to i Star pursuant to Section 2.10(a). (d) Notwithstanding anything to the contrary herein, all fees paid by a borrower to the Seller pursuant to an Extension Amendment or an Upsize Amendment, including, without limitation, the Extension Amendments and Upsize Amendments set forth in Section 3.04(b) of the Disclosure Schedule, shall be for the benefit of the Purchaser and such amounts shall be paid to the Purchaser on the Closing Date. (e) From and after the Closing, the Purchaser and the Seller and their respective accountants shall work together to effectuate such adjustments and payments as are necessary to give effect to this Section 2.08. (f) In the event that the Closing Date does not occur on the last Business Day of the month for any reason in accordance with the terms hereof, then all amounts calculated on a monthly basis shall be prorated for such month in a manner consistent with the terms of this Agreement. 18
Section 2.09 Schedules; Adjustments (a) The Seller shall cause to be prepared a schedule setting forth (i) the Interim Loan Price, (ii) the Non-Loan Purchase Price, and (iii) the Interim Interest Adjustment. The Seller shall provide a copy of such schedule to the Purchaser no later than three Business Days prior to the Closing Date and, with the written consent of the Purchaser, such schedule shall serve as the basis for the calculation of the Interim Amount. (b) As promptly as practicable but no later than five Business Days after the Closing Date, the Seller shall cause to be prepared a schedule (the " Initial Adjustment Schedule ") setting forth the Loan Purchase Price and the Interest Adjustment. The Purchaser shall cooperate with the Seller in connection with the preparation of such schedule, and shall give the Seller reasonable access to the books and records of the Business to the extent reasonably necessary to facilitate such preparation, and provide the Seller such other information as it may reasonably request in connection with such preparation. Upon the availability of the Initial Adjustment Schedule, the Seller shall deliver same to the Purchaser, together with a duly completed and executed certificate of a senior officer of the Seller to the effect that, to the best knowledge of such officer, such schedule has been prepared in accordance with the requirements of this Agreement. With the written consent of the Purchaser, such schedule shall serve as the basis for the calculation of the amounts to be paid under Section 2.09(c) below. The Purchaser shall have the right to review the Seller's books and records following the Closing Date for the purpose of confirming the accuracy of the Initial Adjustment Schedule and the Seller shall make such books and records (and knowledgeable personnel) available to the Purchaser in connection with such review during the Seller's regular business hours. (c) If the Interest Adjustment exceeds the Interim Interest Adjustment, then the Purchaser shall promptly pay to the Seller the amount of such excess. If the Loan Purchase Price exceeds the Interim Loan Price, (i) the Purchaser shall promptly pay to the Seller 30% of the amount of such excess and (ii) (A) the amount that the A Participation Interest shall be entitled to receive (before interest) shall be increased retroactively to the Closing Date by an amount equal to 70% of such excess, and (B) interest shall accrue on such increased portion from and after the Closing Date in accordance with the Participation Agreement. If the Interim Interest Adjustment exceeds the Interest Adjustment, the Seller shall promptly pay to the Purchaser the amount of such excess. If the Interim Loan Price exceeds the Loan Purchase Price, (i) the Seller shall promptly pay to the Purchaser 30% of the amount of such excess, (ii) the amount that the A Participation Interest shall be entitled to receive (before interest) shall be reduced by an amount equal to 70% of such excess (the " Reduced Participation Amount "), (iii) any interest accrued on such Reduced Participation Amount shall be eliminated and (iv) if any interest was previously paid to and received by Fremont in respect of the portion of the A Participation Interest attributable to such Reduced Participation Amount, such interest shall promptly be paid to the Purchaser. Any amounts required to be paid under this Section 2.09(c) shall be paid within two Business Days after the Initial Adjustment Schedule shall be determined, by wire transfer of immediately available funds to an account designated in writing by the Seller or the Purchaser, as applicable, together with interest from the Closing Date to the date of payment at the Federal Funds Rate in effect from time to time during such period. (d) In the event that the Purchaser is entitled to a reduction in the Cash Loan Purchase Price as contemplated by Section 2.08(a), then, as promptly as practicable but no later than 15 Business Days after the Closing Date, the Seller shall cause to be prepared a schedule (the " Net Earnings Schedule ") setting forth in reasonable detail the Seller's calculation of Net Earnings and the components thereof as reflected in the definition of such term. The Purchaser shall cooperate with the Seller in the preparation of such schedule in the manner provided in Section 2.09(b). Upon the availability of the Net Earnings Schedule, the Seller shall deliver the same to the Purchaser, together with a duly completed and executed certificate of a senior officer of the Seller to the effect that, to the best knowledge of such officer, such schedule has been prepared in accordance with the requirements of 19
this Agreement. With the written consent of the Purchaser, such schedule shall serve as the basis for the calculation of Net Earnings. Within two Business Days after the delivery of the Net Earnings Schedule to the Purchaser, the Seller shall pay to the Purchaser by wire transfer of immediately available funds to an account designated in writing by the Purchaser the amount by which the Cash Loan Purchase Price shall be reduced as contemplated hereby, together with interest from the Closing Date to the date of payment at the Federal Funds Rate in effect from time to time during such period. The Purchaser shall have the right to review the Seller's books and records following the Closing Date for the purpose of determining whether it is entitled to any Net Earnings pursuant to this Agreement as well as the accuracy of any determination of the Seller of Net Earnings and the Seller shall make such books and records (and knowledgeable personnel) available to the Purchaser in connection with such review during the Seller's regular business hours. (e) As promptly as practicable but no later than five Business Days after the Closing Date, the Seller shall cause to be prepared a schedule setting forth all fees paid by a borrower to the Seller pursuant to an Extension Amendment or an Upsize Amendment. Upon the availability of such schedule, the Seller shall deliver the same to the Purchaser, together with a duly completed and executed certificate of a senior officer of the Seller to the effect that, to the best knowledge of such officer, such schedule has been prepared in accordance with the requirements of this Agreement. With the written consent of the Purchaser, such schedule shall serve as the basis for the calculation of any amounts owed to the Purchaser pursuant to Section 2.08(d). Within two Business Days after the delivery of such schedule to the Purchaser, the Seller shall pay to the Purchaser by wire transfer of immediately available funds to an account designated in writing by the Purchaser any amounts owed to the Purchaser pursuant to Section 2.08(d) that were not paid on the Closing Date as contemplated by Section 2.08(d), together with interest from the Closing Date to the date of payment at the Federal Funds Rate in effect from time to time during such period. The Purchaser shall have the right to review the Seller's books and records following the Closing Date for the purpose of determining and confirming the amounts owed to it pursuant to Section 2.08(d) and the Seller shall make such books and records (and knowledgeable personnel) available to the Purchaser in connection with such review during the Seller's regular business hours. Section 2.10 Special Loans. (a) As soon as practicable following the execution of this Agreement, as to any Closed Special Loan originated prior to such date, Fremont shall enter into a participation agreement granting the Purchaser 100% of all of the economic rights (including, without limitation, commitment fees) of Fremont in such Closed Special Loan and requiring the Purchaser to assume all of the obligations of Fremont pursuant to such Closed Special Loan, including, without limitation, the obligation to fund any advances required to be made by Fremont pursuant to such Closed Special Loan. Within 5 Business Days of the earlier of (i) the Closing Date and (ii) the date on which all required consents and approvals from the borrower or any other party thereto have been obtained, in exchange for any such participations, Fremont shall convey to the Purchaser any Closed Special Loans, including, without limitation, all rights and obligations thereunder. The definitive terms and conditions with respect to the foregoing transactions shall be set forth in definitive transaction documents to be entered into after the date hereof. (b) As soon as practicable following the execution of this Agreement, the Purchaser and the Seller shall send a joint written notice to each borrower under the Class 1 Loans and the Class 2 Loans listed on Schedule 2.10(b) informing them that all interests of Fremont with respect thereto have been assigned to i Star and containing such other matters as are agreed upon. Such notices shall require that the borrower confirm in writing the receipt and acceptance of the terms thereof and indicate that for all purposes i Star is the prospective lender thereunder. From and after the date of this Agreement, the Class 1 Loans and the Class 2 Loans shall be subject to the terms of Section 5.01 hereof and if closed with i Star's approval and direction, shall be closed in i Star's name. 20
Section 2.11 Sublease Agreements. The Purchaser and the Seller will proceed with reasonable diligence to finalize the Sublease Agreements after the execution and delivery of this Agreement, including the determination of the location, size and configuration of the applicable subleased premises and also the plans and specifications for the physical separation of the applicable subleased premises from the remainder of the premises demised under the applicable Excluded Lease (such separation, " Landlord's Work "). The term of the Sublease Agreements will commence on the Closing Date and shall end on the scheduled termination date of the Excluded Lease with respect to the Brea Sublease and on the 18th monthly anniversary of the Closing Date with respect to the Santa Monica Sublease; provided that, the Santa Monica sublease term may, at the election of the subtenant, be terminated sooner than such date upon not less than 30 days prior notice. The base rent payable under the applicable Sublease Agreement will be the pro rata share of the base, minimum or fixed rent and "pass-through" rent on account of taxes and operating expenses and any other additional rent payable under the applicable Excluded Lease. The Seller shall use commercially reasonable efforts to complete Landlord's Work not later than the Closing Date, including by preparing (or causing to be prepared) plans and specifications for Landlord's Work reasonably satisfactory to the Seller and the Purchaser. The Purchaser and the Seller acknowledge and agree that the effectiveness of the Sublease Agreements is expressly conditioned upon receiving the prior written consent thereto of the applicable landlord as and to the extent required under the applicable Excluded Lease and that the Seller shall use reasonable best efforts to obtain such prior written consent. REPRESENTATIONS AND
WARRANTIES OF FREMONT As an inducement to the Purchaser to enter into this Agreement, Fremont hereby represents and warrants to the Purchaser as follows: Section 3.01 Organization, Authority and Qualification of the Seller. The Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction where the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect. The execution and delivery of this Agreement and the Ancillary Agreements by the Seller, the performance by the Seller of its obligations hereunder and thereunder and the consummation by the Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Seller. This Agreement has been, and upon their execution the Ancillary Agreements shall have been, duly executed and delivered by the Seller. Section 3.02 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller does not and will not (a) violate, conflict with or result in the breach of any provision of the Articles of Incorporation or By-Laws of the Seller, (b) assuming the making or obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 3.03 or the Consent Schedule, except as may result from any facts or circumstances relating solely to the Purchaser, materially conflict with or violate any Law or Governmental Order applicable to the Seller, the Business and the Purchased Assets, or (c) assuming the making or obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 3.03 or the Consent Schedule (as defined in Section 3.03), except as may result from any facts or circumstances relating solely to the Purchaser, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, 21
acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the Purchased Assets pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Seller is a party, except for any such conflicts, breaches, defaults, consent requirements, rights or Encumbrances that would not have a Material Adverse Effect. Section 3.03 Consents and Approvals. The execution, delivery and performance of this Agreement and each Ancillary Agreement by the Seller does not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority or other third party, except (a) with respect to any Governmental Authority, as described in Section 3.03(i) of the Disclosure Schedule, (b) with respect to any third party other than a Governmental Authority, as described in Section 3.03(ii) of the Disclosure Schedule, which schedule shall be prepared to the knowledge of the Seller and shall be delivered to the Purchaser within 14 calendar days of the date of this Agreement (the " Consent Schedule ") and (c) for such consents, approvals, authorizations or other orders, actions, filings and notifications which would not be reasonably expected to (i) impair in any material respect the ability of the Seller to perform its obligations hereunder or in the Ancillary Agreements, (ii) prevent any of the transactions contemplated by this Agreement or the Ancillary Agreements, or (iii) impair in any material respect the ability of the Purchaser to perform, following the Closing Date, its obligations under the Loan Documents, enforce, administer and service the Loans, or perform its obligations under this Agreement and the Ancillary Agreements. Section 3.04 Conduct in the Ordinary Course; Absence of Certain Changes and Events. Since March 31, 2007, the Purchased Assets have been serviced, administered and operated in the ordinary course and consistent with past practice. As amplification and not limitation of the foregoing, since March 31, 2007, the Seller has not: (a) permitted or allowed any of the Purchased Assets to be subjected to any Encumbrance, other than Permitted Encumbrances and Encumbrances that will be released at or prior to the Closing; (b) except as set forth in Section 3.04(b) of the Disclosure Schedule, materially amended, modified or consented to the termination of any Loan Agreement, Transferred IP Agreement or Transferred Lease Agreement or the Seller's rights thereunder; (c) (i) abandoned, sold, assigned, or granted any security interest in or to any of the Owned Intellectual Property, Licensed Intellectual Property, IT Systems or Transferred IP Agreements, including failing (A) to perform or cause to be performed in all material respects all applicable filings, recordings and other acts or (B) to pay or cause to be paid all required fees and taxes to maintain and protect its interest in such Intellectual Property or IT Systems, (ii) granted to any third party any license with respect to any Owned Intellectual Property, Licensed Intellectual Property or IT System, (iii) developed, created or invented any Intellectual Property or IT System jointly with any third party other than in the ordinary course and consistent with past practice, or (iv) disclosed, or allowed to be disclosed, any confidential Intellectual Property or any confidential information relating to any of the IT Systems, unless the recipient of such Intellectual Property or such information is subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof; or (d) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.04 or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section 3.04, except as expressly contemplated by this Agreement and the Ancillary Agreements. Section 3.05 Litigation. Except as disclosed in Section 3.05(i) of the Disclosure Schedule, there are no Actions by or against the Seller or any of its Affiliates and relating to the Business or affecting any of the Purchased Assets pending before any Governmental Authority (or, to the knowledge of the 22
Seller, threatened to be brought by or before any Governmental Authority) as to which there is a reasonable probability of an adverse determination, and which, if adversely determined, would have a Material Adverse Effect. Except as disclosed in Section 3.05(ii) of the Disclosure Schedule, neither the Seller nor any of the Purchased Assets is subject to any Governmental Order (nor, to the knowledge of Fremont, are there any such Governmental Orders threatened to be imposed by any Governmental Authority) which would reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby in any material respect. Section 3.06 Compliance with Laws. Except as set forth in Section 3.06 of the Disclosure Schedule, Seller has conducted and continues to manage, operate, administer and service the Purchased Assets in all material respects in accordance with all Laws and Governmental Orders applicable to Purchased Assets, and the Seller is not in violation in any material respect of any such Law or Governmental Order. Section 3.07 Purchased Assets. (a) Seller owns, leases or has the legal right to use all the Purchased Assets and, with respect to contract rights, to the Seller's knowledge, the Seller is a party to and/or enjoys the right to the benefits of all contracts, agreements and other arrangements relating to the Purchased Assets. The Seller has good title to, or, in the case of leased Purchased Assets, valid and subsisting leasehold interests in, all of the Purchased Assets, free and clear of all Encumbrances, except for Permitted Encumbrances. (b) Assuming the receipt of all of the consents listed on the Consent Schedule, following the consummation of the transactions contemplated by this Agreement and the execution of the instruments of transfer contemplated by this Agreement, i Star or its designated Affiliate will own, with good title, or lease under valid and subsisting leases, or otherwise acquire the interests of the Seller in the Purchased Assets, respectively, free and clear of any Encumbrances, except for Permitted Encumbrances. (c) As of April 30, 2007, (i) except as provided in the Loan Documents, Fremont has not waived in writing any material defaults or any material terms of the Loan Documents, (ii) to Fremont's knowledge, no material default by any borrower which is reasonably likely to become an Event of Default (as defined in the applicable Loan Document) exists under the Loan Documents (other than with respect to entitlement receipt dates, out of balance issues on construction costs and interest reserves and presale requirements not timely met), (iii) except as contemplated by the terms of the Loan Documents (including, without limitation, with respect to any "holdback" under the Loan Documents), Fremont has not advanced any material sums to cure any defaults of a borrower, and (iv) to the knowledge of Fremont, except as set forth in Section 3.07(c) of the Disclosure Schedule, there are no currently outstanding default notices or notices with respect to loan balancing sent by Fremont with respect to any Loan or the Loan Documents. The Seller agrees to use all reasonable efforts to apprise the Purchaser of any changes with respect to the matters set forth in this Section 3.07(c). Section 3.08 Purchased Loans; Special Loans. (a) Section 2.01(i) of the Disclosure Schedule accurately sets forth the following information as of the Reference Date and as of April 30, 2007 concerning the Loans: (i) the gross amount of the commitment with respect to the Loan, whether funded or not, (ii) the outstanding principal balance of the Loan, (iii) the remaining unfunded commitment of the Loan, (iv) if applicable, the outstanding principal amount of any participation rights granted to any third party in such Loan, (v) the outstanding principal amount owed to the Seller or any of its Affiliates under such Loan, (vi) a list of the Loans that are currently in foreclosure or where the borrower thereunder is, to the knowledge of the Seller, the subject of bankruptcy or foreclosure proceedings, (vii) all deposits held by Fremont under any of the Loans, and (viii) all obligations of Fremont to refund deposits or other sums. 23
(b) The Seller and its Affiliates have materially complied with, and have materially performed, all obligations required to be complied with or performed by them under the Loan Documents and the Seller and its Affiliates have not breached any of their representations or warranties under any of the Loan Documents in any material respect. To the Seller's knowledge, except as set forth in Section 3.08(b) of the Disclosure Schedule, no Loan is subject to any borrower's, guarantor's, indemnitor's or other obligor's or participant's or co-lender's right of set-off, equitable subordination or other defense to payment. (c) Neither the Seller nor its Affiliates nor, to the Seller's knowledge, the Seller's predecessors in interest, has effected or received the benefit of any setoff against any borrower or any obligor on account of any of the Loans. (d) The Seller has provided to the Purchaser or its representatives access to true, correct and complete copies of each Loan Document in the Seller's possession or control. The Seller is in possession of the original promissory note for each Loan except where it is a participant only and with respect to participated Loans, the Seller has possession of the original participation certificate. No Encumbrances on the collateral have been released by the Seller or any of its Affiliates, except for such Encumbrances relating to collateral (i) sold in the ordinary course of the related borrower's or obligor's business, (ii) sold in accordance with the terms of the related Collateral Documents that has resulted in a payment of principal on the related Loan, or (iii) otherwise sold or transferred to the extent expressly permitted under the related Loan Documents. Except as otherwise disclosed in the Schedules hereto and except for immaterial changes in the normal course of the administration of a Loan, no Collateral Document relating to a Loan has been terminated or canceled. (e) To the Seller's knowledge, all material waivers, modifications and consents with respect to the Loans are in writing. (f) As of April 30, 2007, neither the Seller nor any of its Affiliates has received any written notice (and does not otherwise have any actual notice) that (i) any payment or other transfer made to or for the account of the Seller or such Affiliate from or on account of any borrower or any obligor with respect to any Loan is or may be void or voidable as an actual or constructive fraudulent transfer or as a preferential transfer or (ii) the Loans or any portion of them are void, voidable, unenforceable or subject to any Impairment. The Seller agrees to use all reasonable efforts to apprise the Purchaser of any changes with respect to the matters set forth in this Section 3.08(f). (g) To the Seller's knowledge, each Loan (i) is denominated and payable only in United States dollars, (ii) is not unsecured and is not secured solely by equity in the related borrower or obligor, if any, or any other Person, (iii) has not been rescinded in writing, (iv) is not subordinated in writing to any other obligation of the related borrower or obligor, and (v) does not provide for interest payable as a percent of profits or, as to condominium loans, as a percent of proceeds from the sale of condominiums. (h) To the knowledge of the Seller, each Loan is the legal, valid and binding payment obligation of the related borrower and other obligors with respect to such Loan, if any, enforceable against the related borrower and such obligors in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (i) To the knowledge of the Seller, except as previously disclosed in third-party environmental site assessments made available to the Purchaser by the Seller, (i) no collateral relating to any Loan and no REO Property is subject to any environmental hazard (including, without limitation, any situation involving Hazardous Materials) which under applicable Laws would have to be eliminated before the sale of, or which could otherwise materially affect the value or marketability of, such collateral, 24
(ii) there exist no circumstances or conditions respecting any collateral relating to any Loan or to any REO Property that would reasonably be expected to (x) constitute or result in a material violation of an Environmental Law, (y) impose any material constraint on the business or operations of the related borrower or obligor or such collateral or result in any material change in the operation or use of such collateral or (z) require Remedial Action under any applicable Environmental Laws, (iii) as of April 30, 2007 the Seller has not given to or received from any Governmental Authority written notice of any release or presence of Hazardous Materials with respect to any collateral relating to any Loan or to any REO Property, or become aware of any such conditions, and (iv) the Seller has not taken any action in relation to any Loan, the related borrower or obligor or the related collateral that would reasonably be expected to subject it or the Purchaser to material liability under any Environmental Laws. Neither the Seller nor any of its Affiliates has received any written notice or other written communication by or on behalf of any agent on any Loan relating to the subject matter set forth in clauses (i) through (iv) above (or in respect of any Loan for which the Seller or any of its Affiliates is the Agent, that Fremont is aware of). In addition, the Seller has delivered or caused to be delivered or made available to the Purchaser or its representatives copies of any environmental assessment or report on any collateral relating to the Loans and REO Property that the Seller or any of its Affiliates has in its possession or received from the related agent (or in respect of any Loan for which any of the Seller or any of its Affiliates is agent, that Fremont is aware of). (j) The Seller has delivered to the Purchaser true and complete copies of all non-binding commitment letters relating to the Class 1 Loans and all letters of interest relating to the Class 2 Loans and, to the extent applicable, has made available to the Purchaser all Loan Documents relating thereto (including all amendments to any of the foregoing). The Seller has not issued any commitment letters with respect to the Class 2 Loans or indicated in writing that any will be coming. Section 3.09 Bulk Sales Laws. The Seller is not required to comply with "bulk sales laws" or regulations relating to transfers governed by Article 6 of the UCC of any state or any other applicable laws or regulations relating to bulk transfers in connection with the consummation of any of the transactions contemplated hereby. Section 3.10 Intellectual Property and IT Systems. (a) The Seller or its Affiliates own or have a valid and legally enforceable right to use all Intellectual Property used in the conduct of the Business as currently conducted and as conducted during the past six months (the " Business Intellectual Property "). The Seller and its Affiliates do not license, sell or distribute any Business Intellectual Property to third parties. Sections 3.10(b)(i)-(iv) of the Disclosure Schedule contains information as described below with respect to the following Intellectual Property: registered and material unregistered trademarks; registered or pending applications for patents; registered or pending applications for copyrights; registered domain names and material IT Systems. (b) Section 3.10(b)(i) of the Disclosure Schedule sets forth a true and correct list of Owned Intellectual Property which is used exclusively in the Business as currently conducted and as conducted during the past six months. Section 3.10(b)(ii) of the Disclosure Schedule sets forth a true and correct list of material Owned Intellectual Property which is used non-exclusively in the Business as currently conducted and as conducted during the past six months. Section 3.10(b)(iii) of the Disclosure Schedule sets forth a true and correct list of all Licensed Intellectual Property which is exclusively used in the Business as currently conducted and as conducted during the past six months. Section 3.10(b)(iv) of the Disclosure Schedule sets forth a true and correct list of all Licensed Intellectual Property which is used non-exclusively in the Business as currently conducted and as conducted during the past six months. Each of said sections of the Disclosure Schedule also sets forth (A) the specific entity (the Seller or one of its Affiliates) which owns or is the stated licensee (or rights holder) of the Business Intellectual Property, and (B) the jurisdictions in which each such item of Owned Intellectual Property has been 25
issued or registered or in which an application for such issuance and registration has been filed (including the respective registration or application numbers). No Owned Intellectual Property that is or has been the subject of an application or registration has had such application or registration canceled, abandoned, adjudicated invalid, or otherwise terminated; and all renewal and maintenance fees in respect of the applicable Owned Intellectual Property have been duly paid. The Seller and its Affiliates have taken all reasonable measures, as appropriate, to maintain and protect the confidential and proprietary nature of the Owned Intellectual Property. (c) Fremont is the sole and exclusive owner of the entire right, title and interest in and to the Owned Intellectual Property (free and clear of any Encumbrances (other than Permitted Encumbrances) or obligations to pay any compensation to any third party in respect thereof or in connection with the use thereof). All Owned Intellectual Property has been developed or created by (i) employees of the Seller or its Affiliates who developed or created such Owned Intellectual Property acting within the scope of their employment, and who have, to the extent necessary, assigned all of their rights thereto to the Seller or (ii) independent contractors who have assigned all of their rights thereto to the Seller. No government funding or university or college facilities were used in the development of any Owned Intellectual Property. (d) Subject to the last sentence of this Section 3.10(d), Section 3.10(d) of the Disclosure Schedule, which shall be delivered to the Purchaser within 7 calendar days of the date of this Agreement, shall set forth Intellectual Property Contracts for Business Intellectual Property to which the Seller or any of its Affiliates is a party (" Business Intellectual Property Contracts "), and includes the identity of all parties thereto and a description of the nature and subject matter thereof. The Seller has made available to the Purchaser complete and correct copies of all Transferred IP Agreements. Section 3.10(d) of the Disclosure Schedule does not need to include any licenses for commercially available, "off-the-shelf" IT Systems licensed pursuant to shrink-wrap or click wrap license that are not material to the Purchased Assets. None of the Seller or its Affiliates is in material default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any of the Transferred IP Agreements, and, to the knowledge of the Seller, no other party is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any of the Transferred IP Agreements. The Business does not use any Business Intellectual Property not owned by the Seller or its Affiliates, except pursuant to Business Intellectual Property Contracts listed under Sections 3.10(b)(iii) or (iv) of the Disclosure Schedule. (e) To the knowledge of Fremont, the conduct of the Business does not infringe, misappropriate or violate, and has not infringed, misappropriated or violated, the Intellectual Property of any third party, and no Action alleging any of the foregoing is pending, and no Claim has been threatened or asserted against the Seller or any of its Affiliates alleging any of the foregoing. To the knowledge of Fremont, no Person is engaging in any activity that infringes the Owned Intellectual Property. (f) No Owned Intellectual Property is subject to any outstanding decree, order, injunction, judgment or ruling restricting the use of such Owned Intellectual Property or that would impair the validity or enforceability of such Owned Intellectual Property. (g) Each item of Business Intellectual Property (including the IT Systems) will, immediately subsequent to the Closing hereunder, be owned or otherwise available for use by iStar (i) on such terms and in such a manner as are identical in all material respects to those pursuant to which the Seller and its Affiliates immediately prior to the Closing, own or have the right to use such item, or (ii) pursuant to the Transition Services Agreement. The IT Systems constitute all of the IT systems material to the current servicing and maintenance of the Loans. (h) The Seller and its Affiliates have taken all reasonable steps in accordance with industry standards to secure the material IT Systems from unauthorized access or use by any Person and to enable the continued and uninterrupted operation of the material IT Systems. The Business has not 26
suffered any failures, errors or breakdowns in the IT Systems used in the servicing and maintenance of the Loans within the past 12 months which have caused any substantial disruption or interruption in the Business. Section 3.11 Real Property. (a) Except as would not reasonably be expected to have a Material Adverse Effect, as of the date of this Agreement, Seller and its Affiliates have complied with and performed all obligations required to be complied with or performed by them under the Transferred Lease Agreements. Neither the Seller nor any of its Affiliates has received notice from any other party to any Transferred Lease Agreement, or otherwise has knowledge of, such party's intention to terminate such Transferred Lease Agreement. (b) The rent set forth in, or calculated pursuant to, each Transferred Lease Agreement and Excluded Lease is the actual rent being paid under such Transferred Lease Agreement and Excluded Lease, and there are no separate agreements or understandings with respect to the same. (c) To the Seller's knowledge, no REO Property is subject to any mortgage or any lien or Encumbrance that would materially adversely affect the use thereof, other than mortgages or analogous documents securing a Loan for the benefit of the Seller and which are assigned to the Purchaser. Section 3.12 Labor and Employee Benefit Matters. (a) Section 3.12(a) of the Disclosure Schedule lists all Benefit Plans. No Benefit Plan is subject to Section 302 or Title IV of ERISA or Section 412 of the Code. No Benefit Plan is a "multi-employer plan" (as such term is defined in Section 3(37) or 4001 of ERISA). (b) With respect to each Benefit Plan, the Seller has made available to the Purchaser true, complete and correct copies of (to the extent applicable): (i) all documents pursuant to which the Benefit Plan is maintained, funded and administered (including the plan and trust documents, any amendments thereto, the summary plan descriptions, and any insurance contracts or service provider agreements); (ii) the three most recent annual reports (IRS Form 5500 series) filed with the IRS (with applicable attachments); and (iii) the most recent determination letter, if any, received from the IRS. (c) Section 3.12(c) of the Disclosure Schedule lists each Business Employee by identification number, including his or her work location, job title, current base rate of wages or salary, and whether he or she is eligible for any incentive compensation or bonus. 27
(d) During the two-year period ending on the Closing Date, with respect to any operation of the Seller that employs any of the Business Employees: (i) there has not been (and to the Seller's knowledge there is not now threatened) any strike, lockout, picketing, primary or secondary boycott, handbilling, concerted work stoppage or slowdown, or similar, material labor dispute; (ii) no employees of the Seller have been represented by any labor organization with respect to their employment by the Seller; (iii) the Seller has not been a party to or negotiated any collective bargaining agreement, labor contract, or other written or oral agreement or understanding with any labor organization covering wages, hours, or terms or conditions of employment; (iv) no labor organization or employee of the Seller has, to the Seller's knowledge, attempted to organize any of the Seller's employees, made a demand for voluntary recognition, presented the Seller with any petitions or authorization cards seeking to have a labor organization represent any group of the Seller's employees, filed any representation petition with the National Labor Relations Board, or given the Seller notice of any election of a collective bargaining representative (nor, to the Seller's knowledge, has any of these actions been threatened); and (v) the Seller has not authorized any employer or multiemployer association or organization to represent the Seller in collective bargaining with any labor organization. (e) The Seller has made available to the Purchaser all Employment Contracts, which include (i) all written agreements between the Seller and any Business Employee that describe any terms or conditions of employment for any Business Employee, including any and all employment agreements, retention agreements, severance agreements, compensation agreements change of control agreements, consulting agreements; and (ii) all written agreements between the Seller and any Business Employee that (A) impose upon any Business Employee any obligation with respect to the assignment of inventions or the nondisclosure or confidentiality of proprietary or confidential information or (B) restrict the activities of any Business Employee during or after his or her employment by the Seller, including any agreement that restricts any Business Employee's ability to compete with any Person, provide services to any Person, solicit any Person's employees, or solicit any Person's customers or prospective customers (the " Employment Contracts "). (f) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a determination from the IRS that such Benefit plan is so qualified, and nothing has occurred since the date of such determination that would reasonably be expected to cause such determination letter to become unreliable. (g) Each Benefit Plan that is subject to the health care continuation requirements of COBRA has been administered in material compliance with such requirements. No Benefit Plan provides medical or life or other welfare benefits to any current or future retired or terminated employee (or any dependent thereof) of the Seller other than as required pursuant to COBRA or applicable state law. (h) The transactions contemplated by this Agreement would not reasonably be expected to constitute transactions to evade or avoid liability (as described in Section 4069(a) or 4212(c) of ERISA). (i) The transactions contemplated by this Agreement would not reasonably be expected to constitute nonexempt prohibited transactions (within the meaning of Section 406 of ERISA and Section 4975 of the Code). (j) Except as set forth in Section 3.12(j) of the Disclosure Schedule, no Business Employee has any plans to terminate his or her employment with the Seller on or before the Closing Date (other than in connection with accepting employment with the Purchaser). (k) Section 3.12(k) of the Disclosure Schedule sets forth a true, complete and correct list, by work location, of all employees of the Seller whose services were performed primarily for the benefit of any of the Purchased Assets and who have suffered an "employment loss "or "mass layoff"—as defined by WARN—during the 90-day period prior to the date of this Agreement. On the Closing Date, the Seller shall provide the Purchaser with an updated version of Section 3.12(k) of the Disclosure Schedule, listing all employees of the Seller whose services were performed primarily for the benefit of the 28
Purchased Assets and who have suffered an "employment loss" or "mass layoff" (as those terms are defined by WARN) during the 90-day period ending on and including the Closing Date. Section 3.13 Taxes. Except as set forth in Section 3.13 of the Disclosure Schedule, (a) all material Tax Returns required to be filed by or with respect to the Purchased Assets and the Business have been timely filed and all such Tax Returns are true, correct and complete in all material respects; (b) all material Taxes shown on such Tax Returns have been timely paid; (c) no material adjustment relating to such Tax Returns has been proposed in writing by any Governmental Authority; (d) there are no material Tax liens on any of the Purchased Assets (except for liens for Taxes that are not yet due); (e) the Seller has not received any notice in writing from any jurisdiction where the Seller does not currently file Tax Returns to the effect that such filings may be required with respect to the Business or that the Business may otherwise be subject to taxation by such jurisdiction; and (f) the Seller is not aware of any Tax audits by any Tax authority in progress relating to the Purchased Assets or the Business, nor has the Seller received any written notice indicating that a Governmental Authority intends to conduct such an audit. Section 3.14 Brokers. No broker, finder or investment banker (other than Credit Suisse Securities LLC, the fees and expenses of which will be paid by the Seller or its Affiliates) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or the Ancillary Agreements based upon arrangements made by or on behalf of the Seller or any of its Affiliates. Section 3.15 Solvency. The Seller is, and after giving effect to the transactions contemplated by this Agreement will be, solvent. Section 3.16 Letters of Credit and Reserve Accounts. Section 3.16(i) of the Disclosure Schedule lists, and the Seller has made available to the Purchaser, each letter of credit delivered to, and held by, the Seller or its Affiliates pertaining to the Loans. Section 3.16(ii) of the Disclosure Schedule lists all impounded or reserve accounts held by the Seller or its Affiliates with respect to the Loans. As an inducement to the Seller to enter into this Agreement, the Purchaser hereby represents and warrants to the Seller as follows: Section 4.01 Organization and Authority of the Purchaser. The Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Purchaser of this Agreement and the Ancillary Agreements to which it is a party, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Purchaser. This Agreement has been, and upon their execution the Ancillary Agreements to which the Purchaser is a party shall have been, duly executed and delivered by the Purchaser. Section 4.02 No Conflict. The execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements to which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Charter or Bylaws of the Purchaser, (b) assuming the making or obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.03, except as may result from any facts or circumstances relating solely to the Seller, materially conflict with or violate any Law or Governmental Order applicable to the Purchaser, or (c) assuming the making or obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.03, except as may result from any facts or circumstances 29
relating solely to the Seller, conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Purchaser is a party, except for any such conflicts, breaches, defaults, consent requirements or rights that would not reasonably be expected to materially adversely affect the ability of the Purchaser to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement or the Ancillary Agreements. Section 4.03 Governmental Consents and Approvals. The execution, delivery and performance by the Purchaser of this Agreement and each Ancillary Agreement to which the Purchaser is a party does not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to any Governmental Authority or third party, except with respect to Subleases and the Required Consents. Section 4.04 Litigation. No material Action by or against the Purchaser is pending or, to the knowledge of the Purchaser, threatened, which would reasonably be expected to materially affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or t | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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