MEMBERSHIP INTEREST PURCHASE AGREEMENT

Exhibit 2.1

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

AMONG

 

AMBASSADORS INTERNATIONAL, INC.,

 

AMBASSADORS CRUISE GROUP, LLC,

 

AND

 

OREGON RAIL HOLDINGS, LLC

 

DECEMBER 27, 2005

TABLE OF CONTENTS

 

 

-i-

 

-ii-

 

-iii-

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Agreement (“ Agreement ”) is entered into as of December 27, 2005, by and among AMBASSADORS INTERNATIONAL, INC., a Delaware corporation (“ Ambassadors ”), AMBASSADORS CRUISE GROUP, LLC, a Delaware limited liability company and wholly owned subsidiary of Ambassadors (the “ Buyer ”) and OREGON RAIL HOLDINGS, LLC, an Oregon limited liability company (the “ Seller ”). Ambassadors, the Buyer and the Seller are referred to collectively herein as the “ Parties .”

 

WHEREAS, the Seller owns all of the outstanding membership interests of American West Steamboat Company, LLC (“ AWSC ”), EN Boat, LLC (“ EN Boat ”) and QW Boat, LLC (“ QW Boat ”), each an Oregon limited liability company and wholly owned subsidiary of the Seller (each individually, a “ Target ” and collectively, the “ Targets ”); and

 

WHEREAS, this Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, all of the outstanding membership interests of each Target and certain other assets used and/or useful in the operation of certain vessels in return for the Buyer’s (a) assumption of all obligations of the Seller, subject to the restructuring of the MARAD Debt (as defined below), (b) payment or provision of funds to pay the KeyBank Settlement (as defined below), and (c) payment of one dollar in cash at the Closing.

 

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

 

ARTICLE I

 

DEFINITIONS

 

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

 

“ AAA ” has the meaning set forth in Section 11.15 below.

 

“ ABS ” means the American Bureau of Shipping.

 

“ Accredited Investor ” has the meaning set forth in Regulation D promulgated under the Securities Act.

 

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

 

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

 

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

 

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

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

 

“ Benefit Arrangement ” shall mean any employment, consulting, severance parachute or change in control, or other similar contract, agreement, arrangement or policy and each plan, arrangement (written or oral), program, agreement or commitment providing for insurance coverage (including without limitation any self-insured arrangements), workers’ compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, disability or accident benefits (including without limitation any “voluntary employees’ beneficiary association” as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (a) is not a Welfare Plan, Pension Plan or Multi-employer Plan, (b) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by any Target or any ERISA Affiliate of any Target or under which any Target or any ERISA Affiliate of any Target may incur any liability, and (c) covers or covered any employee or former employee of any Target or any ERISA Affiliate of any Target.

 

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

 

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

 

“ Cash Payment ” has the meaning set forth in Section 2.2(a) below.

 

“ Charter ” has the meaning set forth in Section 4.1 below.

 

“ Closing ” has the meaning set forth in Section 2.3 below.

 

“ Closing Date ” has the meaning set forth in Section 2.3 below.

 

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

 

“ Confidential Information ” means all information, knowledge, know-how, or data regardless of form (whether written, oral, photographic, electronic, magnetic, computer or otherwise) (i) regarding the business of Ambassadors, the Buyer, the Seller or any of the Targets which is not generally available to the public, including but not limited to Ambassadors’, the Buyer’s, the Seller’s or any of the Targets’ plans for future products, services or developments or (ii) concerning third persons (including employees) which is not generally available to the public. Notwithstanding the foregoing, Confidential Information shall not include: (x) information which is, or was at the time it was disclosed, generally or readily obtainable by the public, (y) information which is publicly known or becomes known, through no fault or activity of the party to whom the Confidential Information was disclosed, or (z) information which is required to be disclosed pursuant to applicable Law.

 

“ Contracts ” has the meaning set forth in Section 4.19 below.

 

“ Controlled Group of Corporations ” has the meaning set forth in Code Section 1563.

 

2

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

 

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

 

“ Dispute ” has the meaning set forth in Section 11.15 below.

 

“ Employee Plans ” means all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.

 

“ EN Boat ” has the meaning set forth in the preface above.

 

“ Environmental, Health, and Safety Laws ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other Laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including Laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. h

 

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

 

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

 

“ Excluded Taxes ” means the Taxes reflected on Section 4.15(a) of the Disclosure Schedule which are attributable to Pre-Closing Tax Periods and are subject to assessment and/or settlement proceedings in the states of Washington and/or Oregon.

 

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

 

“ Financial Statements ” has the meaning set forth in Section 4.12 below.

 

“ Floating Survey ” has the meaning set forth in Section 10.1 below.

 

“ Fund ” has the meaning set forth in Section 6.4(b) below.

 

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

 

3

“ Governmental Notifications and Approvals ” has the meaning set forth in Section 7.1(c) below.

 

“ Governmental Authority ” means any Federal, state, local or non-U.S. government or any court, legislature, governmental agency or governmental commission or any judicial or regulatory authority of any government.

 

“ In-Class ” means, with respect to any Vessel, that such Vessel is in full conformity with its ABS classification as set forth on a current ABS Certificate of Classification.

 

“ In-Compliance ” means, with respect to any Vessel, that such Vessel is in good condition; in working order and repair; sufficiently tackled, appareled, furnished, equipped and supplied; in every respect seaworthy and in good operating condition; in full conformity with all applicable regulations of the USCG, the ABS, and any other applicable Governmental Authority; and subject to a current USCG Certificate of Inspection.

 

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

 

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

 

“ Inspections ” has the meaning set forth in Section 10.1 below.

 

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

 

“ Interim Balance Sheets ” means the balance sheets included in the Interim Financial Statements.

 

“ Interim Financial Statements ” has the meaning set forth in Section 4.12 below.

 

“ Interim Financial Statements Date ” has the meaning set forth in Section 4.12 below.

 

“ KeyBank Settlement ” means the amount that KeyBank National Association has agreed to accept in full satisfaction of all amounts due or that may become due pursuant to that certain Loan Agreement entered into as of July 9, 1999, as amended, that certain Term Promissory Note

 

4

entered into as of July 9, 1999, as amended, and that certain Line of Credit Promissory Note entered into as of July 9, 1999, as amended, including, without limitation, all principal and accrued but unpaid interest under such agreements.

 

“ Knowledge ” means actual knowledge after reasonable investigation.

 

“ Knowledge of the Seller ” means actual knowledge after reasonable investigation of Tom Carman or Randy Burns.

 

“ Laws ” means (a) all applicable domestic, international, admiralty and maritime laws, including all statutes, codes, plans, ordinances, regulations, decrees, rules, municipal by-laws and orders of every Governmental Authority and (b) any applicable judicial, arbitral, administrative, ministerial, departmental or regulatory judgment, decision, injunction, decree, ruling or order of any court or governmental or regulatory agency, department, authority, body or instrumentality.

 

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

 

“ Major Defect ” has the meaning set forth in Section 10.2 below.

 

“ Major Defect Indemnity Basket ” has the meaning set forth in Section 10.2 below.

 

“ Major Defect Repair Cost ” has the meaning set forth in Section 10.2 below.

 

“ MARAD ” means the United States Department of Transportation Maritime Administration.

 

“ MARAD Debt ” means all amounts due or that may become due to MARAD pursuant to that certain U.S. Government Guaranteed Ship Financing Obligation for 4.63% Sinking Fund Obligations, 2003 Series, due July 18, 2028, including, without limitation, all principal and accrued but unpaid interest under such agreement.

 

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

 

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

 

“ Multiemployer Plan ” shall mean any “multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of ERISA, (a) which any Target or any ERISA Affiliate of any Target maintains, administers, contributes to or is required to contribute to, or, after September 25, 1980 and prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which any Target or any ERISA Affiliate of any Target may incur any liability and (b) which covers any employee or former employee of any Target or any ERISA Affiliate of any Target.

 

5

“ NASDAQ ” has the meaning set forth in Section 11.1 below.

 

“ Non-Compete Area ” has the meaning set forth in Section 6.4(b) below.

 

“ Non-Compete Period ” has the meaning set forth in Section 6.4(a) below.

 

“ Non-Solicitation Area ” has the meaning set forth in Section 6.5 below.

 

“ Non-Solicitation Period ” has the meaning set forth in Section 6.5 below.

 

“ NYSE ” has the meaning set forth in Section 11.1 below.

 

“ Operating Agreement ” has the meaning set forth in Section 4.1 below.

 

“ Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

 

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

 

“ PBGC ” shall mean the Pension Benefit Guaranty Corporation.

 

“ Pension Plan ” shall mean any “employee pension benefit plan,” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), (a) which any Target or any ERISA Affiliate of any Target maintains, administers, contributes to or is required to contribute to, or, prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which any Target or any ERISA Affiliate of any Target may incur any liability and (b) which covers or covered any employee or former employee of any Target or any ERISA Affiliate of any Target.

 

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

 

“ Physical Inspection ” has the meaning set forth in Section 10.1 below.

 

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

 

“ Pre-Closing Liabilities ” has the meaning set forth in Section 8.2 below.

 

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

 

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

 

“ QW Boat ” has the meaning set forth in the preface above.

 

“ Rail Subs ” has the meaning set forth in Section 6.4(b) below.

 

6

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

 

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

 

“ Security Interest ” means any mortgage, pledge, lien, encumbrance, charge, or other security interest.

 

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

 

“ Simmons Agreement ” has the meaning set forth in Section 6.7 below.

 

“ SOLAS ” has the meaning set forth in Section 4.6(b) below.

 

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

 

“ Subject Company ” has the meaning set forth in Section 6.4(a) below.

 

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

 

“ Target ” and “ Targets ” have the meanings set forth in the preface above.

 

“ Target Licenses and Permits ” has the meaning set forth in Section 4.9 below.

 

“ Target Membership Interest ” means any membership interest in any Target.

 

“ Tax ” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

 

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

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

 

7

“ Transfer Taxes ” has the meaning set forth in Section 6.8(a) below.

 

“ USCG ” means the United States Coast Guard.

 

“ Vessel ” means the ship EMPRESS OF THE NORTH, official number 1140867, and/or the ship QUEEN OF THE WEST, official number 1033572 (together, the “ Vessels ”).

 

“ Welfare Plan ” shall mean any “employee welfare benefit plan” as defined in Section 3(1) of ERISA, (a) which any Target or any ERISA Affiliate of any Target maintains, administers, contributes to or is required to contribute to, or under which any Target or any ERISA Affiliate of any Target may incur any liability and (b) which covers or covered any employee or former employee of any Target or any ERISA Affiliate of any Target.

 

“ Year End Financial Statements ” has the meaning set forth in Section 4.12 below.

 

ARTICLE II

 

SALE AND PURCHASE OF MEMBERSHIP INTERESTS

 

Section 2.1 Basic Transaction . On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Seller’s right, title and interest in the Target Membership Interests, free and clear of all liens, pledges, encumbrances, charges and claims thereon, for the consideration specified below. Upon consummation of the transaction, the Buyer will hold all of the issued and outstanding Target Membership Interests, free and clear of any and all liens and encumbrances.

 

Section 2.2 Consideration .

 

(a) Cash Purchase Price . The Buyer agrees to pay to the Seller at the Closing One Dollar ($1.00) (the “ Cash Payment ”) by delivery of cash payable by wire transfer or delivery of other immediately available funds.

 

(b) KeyBank Settlement . The Buyer agrees at the Closing to pay or provide the funds to pay Four Million Three Hundred Twenty Seven Thousand Four Hundred Twenty Six Dollars ($4,327,426) toward satisfaction of the KeyBank Settlement.

 

(c) Assumption of MARAD Debt . The Buyer agrees at the Closing to assume the then-remaining MARAD Debt, subject to the Seller’s obligation, prior to the Closing, to restructure the MARAD Debt as provided for in Section 5.2.

 

(d) The consideration set forth in this Section 2.2 (collectively, the “ Purchase Price ”) shall be allocated among the Targets and their assets as mutually agreed to by the Buyer and the Seller. The Purchase Price allocation shall be made in the manner required by Section 1060 of the Code. No later than 30 days prior to the filing thereof, each party shall deliver to the other parties Internal Revenue Service (“IRS”) Form 8594 and any required exhibits thereto setting forth the Purchase Price allocation. The Sellers and the Buyer shall (i) be bound by the Purchase Price allocation for all Tax purposes; (ii) prepare and file all Tax Returns in a manner

 

8

consistent with the Purchase Price allocation; and (iii) take no position inconsistent with the Purchase Price allocation in any Tax Return, any proceeding before any taxing authority or otherwise unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code. In the event that the Purchase Price allocation is disputed by any taxing authority, the party receiving notice of such dispute shall promptly notify and consult with the other parties and keep the other parties apprised of material developments concerning resolution of such dispute.

 

Section 2.3 The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Latham & Watkins in Costa Mesa, California, commencing at 11:00 a.m. local time on the second business day following the satisfaction or waiver of the conditions set forth in Article VII, other than those conditions relating to deliveries at the Closing, or such other date as the Buyer and the Seller may mutually determine (the “ Closing Date ”).

 

Section 2.4 Deliveries at the Closing . At the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 7.1 below, (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 7.2 below, (iii) the Seller will have delivered to the Buyer a duly executed assignment document transferring the Target Membership Interests, and (iv) the Buyer will deliver to the Seller the Cash Payment specified in Section 2.2(a) above.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

CONCERNING THE TRANSACTION

 

Section 3.1 Representations and Warranties of the Seller . The Seller represents and warrants to Ambassadors and the Buyer that the statements contained in this Section 3.1 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.1) with respect to the Seller, except as set forth in the Disclosure Schedule.

 

(a) Organization . The Seller is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Oregon. The Seller is duly qualified to do business as a foreign limited liability company and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary.

 

(b) Authorization of Transaction . The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution of this Agreement by the Seller and the delivery and performance by the Seller of this Agreement has been duly authorized. Any and all limited liability company acts and other proceedings required for the due and valid authorization, execution, delivery and performance by the Seller of this Agreement and the consummation by the Seller of the transfer of the Target Membership Interests to the Buyer have been validly and appropriately taken. This Agreement constitutes the

 

9

valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. Except as otherwise set forth on Section 3.1(b) of the Disclosure Schedule, the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or Governmental Authority in order to consummate the transactions contemplated by this Agreement.

 

(c) Noncontravention . Neither the execution and the delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance by the Seller of its obligations under this Agreement, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, Governmental Authority, or court to which the Seller is subject, nor any Charter, Operating Agreement, or material agreement of any of the Targets.

 

(d) Brokers’ Fees . The Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

 

(e) Target Membership Interests . The Seller holds of record and owns beneficially all Target Membership Interests free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities Laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any Target Membership Interests (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any Target Membership Interests. The Seller has delivered to the Buyer copies of all agreements relating to any Target Membership Interests.

 

Section 3.2 Representations and Warranties of the Buyer . Each of Ambassadors and the Buyer represents and warrants to the Seller that the statements contained in this Section 3.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.2).

 

(a) Organization of Ambassadors . Ambassadors is a corporation duly organized, validly existing, and in good standing under the Laws of Delaware.

 

(b) Organization of the Buyer . The Buyer is a limited liability company duly organized, validly existing, and in good standing under the Laws of Delaware.

 

(c) Authorization of Transaction . Each of Ambassadors and the Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its respective obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Ambassadors and the Buyer, enforceable in accordance with its terms and conditions. Neither Ambassadors nor the Buyer need give any notice to, make any filing with, or obtain any authorization, consent, or approval of any

 

10

government or Governmental Authority in order to consummate the transactions contemplated by this Agreement.

 

(d) Noncontravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, Governmental Authority, or court to which Ambassadors or the Buyer is subject or any provision of their certificate of incorporation or bylaws.

 

(e) Brokers’ Fees . Neither Ambassadors nor the Buyer has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated.

 

(f) Investment . The Buyer has been given sufficient access to information regarding the Seller and in connection with the transactions contemplated under this Agreement, including the opportunity to ask questions of, and receive answers from, persons acting on behalf of the Seller and concerning the Seller’s financial affairs, prospects and condition. The Buyer (i) is resident in or otherwise subject to the securities legislation of the United States, and the acquisition of the Target Membership Interests under this Agreement shall occcur only in the United States, (ii) by reason of its business or financial expertise, has the capacity to protect its own interests in connection with the acquisition of the Target Membership Interests, and (iii) is an “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act. The Buyer is acquiring the Target Membership Interests under this Agreement for its own account and not for the account or on behalf of others, and it is doing so with the intent of retaining such Target Membership Interests as an investment and without the current intent to redistribute (other than distributions to the Buyer’s stockholders as of the Closing) such Target Membership Interests.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF

THE SELLER CONCERNING THE TARGETS

 

The Seller represents and warrants to Ambassadors and the Buyer that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV), except as set forth in the disclosure schedule delivered by the Seller to the Buyer on the date hereof and initialed by the Parties (the “ Disclosure Schedule ”). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty addresses the existence of the document or other item itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Agreement.

 

11

Section 4.1 Organization, Qualification, and Corporate Power . Each Target is a limited liability company duly organized, validly existing, and in good standing under the Laws of Oregon. Each Target is duly authorized to conduct business and is in good standing under the Laws of each jurisdiction where such qualification is required. Each Target has full limited liability company power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and in which it presently proposes to engage and to own and use the properties owned and used by it. Section 4.1 of the Disclosure Schedule lists the managers, directors and officers of each Target. The Seller has delivered to the Buyer correct and complete copies of the articles of organization (the “ Charter ”) and limited liability company operating agreement (the “ Operating Agreement ”) of each Target (as amended to date). The minute books (containing the records of meetings and actions of the members and managers), the membership interest certificate books, and the membership interest record books of each Target are correct and complete. Each Target is not in default under or in violation of any provision of the Charter or the Operating Agreement.

 

Section 4.2 Membership Interest Ownership and Capitalization . The issued and outstanding membership interests of AWSC consist of 1,000 membership interests. The issued and outstanding membership interests of EN Boat consist of 1,000 membership interests. The issued and outstanding membership interests of QW Boat consist of 1,000 membership interests. The Seller is the sole record and beneficial owner of all of the issued and outstanding Target Membership Interests. All of the issued and outstanding Target Membership Interests have been duly authorized and are validly issued. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require any Target to issue, sell, or otherwise cause to become outstanding any Target Membership Interests. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to any Target. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the Target Membership Interests.

 

Section 4.3 Noncontravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, Governmental Authority, or court to which any Target is subject or any provision of any Target’s Charter or Operating Agreement or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which any Target is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). Each Target is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or Governmental Authority in order for the Parties to consummate the transactions contemplated by this Agreement.

 

Section 4.4 No Conflict . Neither the execution and the delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance by the Seller of its

 

12

obligations under this Agreement, will result in any conflict with, or result in a violation or breach of any of the provisions of, or constitute (with or without due notice, lapse of time or both) a default under, or give rise to a right of termination, cancellation or acceleration of any obligation under, or result in the creation of any lien or other encumbrances upon any of the properties or assets of any Target under (i) the Charter or Operating Agreement of such Target, (ii) any contract or agreement to which such Target is a party or by which any of the properties or assets of such Target is bound, or (iii) any permit, Law, rule, regulation, judgment, order or decree applicable to such Target or to which any of the properties or assets of such Target is subject.

 

Section 4.5 Brokers’ Fees . Each Target does not have any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

 

Section 4.6 Vessels .

 

(a) Section 4.6(a) of the Disclosure Schedule lists all vessels owned, chartered, subchartered or operated by each Target and sets forth, for each such Vessel, its (i) name, (ii) owner, (iii) the arrangement (including intercompany arrangements) pursuant to which such Vessel is chartered, subchartered or operated by such Target, (iv) official number and call sign, (v) registration and flag, (vi) TEU capacity as of the date hereof, (vii) vessel type, (viii) class description, (ix) name of classification society, (x) shipyard and year in which the Vessel was constructed, (xi) date of the Vessel’s last special survey as of the date hereof, (xii) date of the Vessel’s last drydocking as of the date hereof, and (xiii) the scheduled date of the Vessel’s next drydocking for purposes of the next scheduled special survey as of the date hereof.

 

(b) Each of the Vessels: (i) is free and clear of all Security Interests other than those securing the MARAD Debt; (ii) to the Knowledge of the Seller is adequate and suitable for use by its respective Target in its business as presently conducted in all material respects, ordinary wear and tear and depreciation excepted; (iii) to the Knowledge of the Seller is seaworthy in all material respects for hull and machinery insurance warranty purposes; (iv) is insured in all material respects in accordance with each of the arrangements pursuant to which the Vessel is chartered, subchartered or operated as set forth in Section 4.6(b) of the Disclosure Schedule; (v) is in compliance in all material respects with all demise charters and all mortgages covering such Vessels; (vi) to the Knowledge of the Seller is in compliance in all material respects with all material maritime and other Laws and requirements as are applicable to vessels documented under U.S. flag and operated in the manner operated by such Vessel’s respective Target in accordance with past practice; (vii) is properly documented under the Laws of the United States; (viii) holds a valid Certificate of Documentation with coastwise endorsement pursuant to 46 U.S.C. Section 12106; (ix) is in compliance with the Safety of Life at Sea Act (“ SOLAS ”) and all other legal and regulatory requirements governing safety; and (x) is properly documented and to the Knowledge of the Seller in compliance in all material respects with the requirements of its present class and classification society as set forth on Section 4.6(b) of the Disclosure Schedule. Neither the entry into this Agreement by the Seller nor the consummation of the transactions contemplated hereby will violate any Law relating to the business and operations of any Target and its ability to operate its respective Vessel in the manner in which such Vessel has been operated heretofore. Each Vessel’s owner is a citizen of the United States

 

13

for purposes of the Shipping Act of 1916. As of the date hereof, all class certificates and national and international certificates of the Vessels are clean and valid and free of recommendations affecting class. The Seller has made available to the Buyer true and complete copies, in all material respects, of all outstanding Notices of Merchant Marine Inspection Requirements (Forms CG-835), if any, or any equivalent notices received under any alternate compliance program established by the USCG or ABS for each Vessel listed on Section 4.6(b) of the Disclosure Schedule that are in the Seller’s or any of the Targets’ possession as of the date hereof. Section 4.6(b) of the Disclosure Schedule lists those Vessels that are subject to the restrictions of the Capital Construction Fund Program and the construction differential subsidy program, each established under the Merchant Marine Act of 1936, as amended, but which do not restrict, in any material respect, the use of the Vessels by any of the Targets in their business as presently conducted.

 

Section 4.7 Title to Vessels . Each Target has good and marketable title to its respective Vessel.

 

Section 4.8 Title to Other Assets . Each Target has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it, located on its premises, or identified to the Buyer or acquired after the date thereof, free and clear of all Security Interests.

 

Section 4.9 Licenses and Permits . Section 4.9 of the Disclosure Schedule includes all material licenses, permits, franchises, consents, approvals, registrations and other authorizations of any Governmental Authority possessed by or granted to any of the Targets and any of such Target’s predecessors and Affiliates which are necessary or used in the operation of such Target’s business or material to the ownership and/or use and operations of its assets as of the date hereof (the “ Target Licenses and Permits ”). Each Target owns or possesses its respective Target Licenses and Permits free and clear of any Security Interests, claims or Liabilities. All Target Licenses and Permits are in full force and effect and there are no proceedings pending or, to the Knowledge of the Seller, threatened that seek the revocation, cancellation, suspension or adverse modification thereof, except to the extent such revocation, cancellation, suspension or adverse modification would not reasonably be expected to have a Material Adverse Effect. No Target has violated any Target Licenses or Permits, and each Target is in substantial compliance in all respects with all such Target Licenses and Permits. No Target has received any notice to the effect that (i) such Target is not in compliance with, or is in a violation of, any Target Licenses or Permits or (ii) any currently existing circumstances are likely to result in a failure of such Target to comply with, or in a violation by such target of, any Target Licenses and Permits. Such Target Licenses and Permits constitute all of the material licenses, approvals, consents, franchises and permits necessary to permit the Targets to own, operate, use and maintain their assets in the manner in which they are now operated and maintained and to conduct the business of the Targets as currently conducted. All Target Licenses and Permits are renewable by their terms in the Ordinary Course of Business without the need to comply with any special qualification procedures or to pay any amounts other than routine filing fees and such Target Licenses and Permits will not be subject to suspension, modification or revocation or require any consent to transfer the same in connection with the completion of the transactions contemplated by this Agreement.

 

Section 4.10 [Reserved] .

 

14

Section 4.11 No Subsidiaries . Each Target does not own, and has never owned, directly or indirectly, any interest in any other Person.

 

Section 4.12 Financial Statements . Section 4.12 of the Disclosure Schedule contains a true and complete copy of the audited balance sheet and statements of operations, change in stockholders’ equity (including the related notes) and cash flow for each Target as of and for the twelve months ended December 31, 2002, December 31, 2003 and December 31, 2004 (the “ Year End Financial Statements ”) and as of the ten months ended October 31, 2005 (the “ Interim Financial Statements Date ”) (the “ Interim Financial Statements ,” and, along with the Year End Financial Statements, the “ Financial Statements ”). The Financial Statements (i) are in accordance with the books and records of the Seller, (ii) have been prepared in accordance with GAAP consistently applied through the periods covered thereby and (iii) fairly and accurately present the assets, Liabilities (including all reserves) and financial position of the Seller as of the respective dates thereof and the results of operations and changes in cash flows for the period then ended (subject, in the case of the Interim Financial Statements, to normal year-end adjustments and the fact that there are no notes thereto). The Year End Financial Statements have been examined by KPMG, LLP, independent certified public accountants, whose report thereon is included with such Year End Financial Statements. At the respective dates of the Financial Statements, there were no Liabilities of the Seller, which, in accordance with GAAP, should have been set forth or reserved for in the Financial Statements or the notes thereto, which are not set forth or reserved for in the Financial Statements or the notes thereto. The Seller does not have any Liabilities due or to become due, except Liabilities which are set forth or reserved for on the Interim Balance Sheet, which have not been paid or discharged since the Interim Balance Sheet Date. Nothing has come to the attention of the Seller since such respective dates that would indicate that such Financial Statements are not true and correct in all material respects as of the date hereof.

 

Section 4.13 Events Subsequent to Most Recent Fiscal Year End . Since October 31, 2005, there has not been any material change in the business, financial condition, operations, or results of operations of any Target. Without limiting the generality of the foregoing, since December 31, 2004:

 

(a) each Target has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business;

 

(b) each Target has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $50,000 or outside the Ordinary Course of Business (other than are no longer in force or effect);

 

(c) no party (including each Target) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $50,000 to which any Target is a party or by which any of its assets are bound;

 

(d) each Target has not imposed any Security Interest upon any of its assets, tangible or intangible;

 

15

(e) each Target has not made any capital expenditure (or series of related capital expenditures) either involving more than $50,000 or outside the Ordinary Course of Business;

 

(f) each Target has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions);

 

(g) each Target has not issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation;

 

(h) except as provided on Section 4.15(a) of the Disclosure Schedule, each Target has not accelerated, delayed or postponed the payment of accounts payable or other Liabilities (other than those that are current and where there is no claim or dispute about fees or expenses for such acceleration, delay or postponement);

 

(i) each Target has not cancelled, compromised, waived, or released any right or claim (or series of related rights and claims);

 

(j) each Target has not granted any license or sublicense of any rights under or with respect to any Intellectual Property;

 

(k) there has been no change made or authorized in the Charter or Operating Agreement of any Target;

 

(l) each Target has not issued, sold, or otherwise disposed of any Target Membership Interests, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any Target Membership Interests; Â!

 

(m) each Target has not made any distribution with respect to any Target Membership Interests (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any Target Membership Interests;

 

(n) except as provided on Section 4.15(a) of the Disclosure Schedule, each Target has not made or changed any material election in respect of Taxes, adopted or changed any accounting method or period in respect of Taxes, entered into any Tax-sharing, allocation, compensation or like agreement, settled any claim or assessment in respect of Taxes, requested any Tax ruling or consented to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

 

(o) each Target has not changed its methods or principles of accounting;

 

(p) each Target has not experienced any damage, destruction, or loss (whether or not covered by insurance) to its property in excess of $50,000;

 

16

(q) each Target has not made any loan to, or entered into any other transaction with, any of its members, managers, officers, and employees outside the Ordinary Course of Business;

 

(r) each Target has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement;

 

(s) each Target has not granted any increase in the base compensation of any of its members, managers, officers, and employees outside the Ordinary Course of Business;

 

(t) each Target has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its members, managers, directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan);

 

(u) each Target has not made any other change in employment terms for any of its members, managers, directors, officers, and employees outside the Ordinary Course of Business;

 

(v) each Target has not made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business;

 

(w) except as provided on Section 4.15(a) of the Disclosure Schedule, there has not been any other occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving any Target; and

 

(x) except as provided on Section 4.15(a) of the Disclosure Schedule, each Target has not committed to any of the foregoing.

 

Section 4.14 Legal Compliance . Except as provided on Section 4.15(a) of the Disclosure Schedule, each Target and each of its predecessors and Affiliates has complied with all applicable Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply.

 

Section 4.15 Tax Matters .

 

(a) Except as described on Section 4.15(a) of the Disclosure Schedule: (i) all Tax Returns required to be filed by each Target or the Seller, to the extent related to any Target, have been filed; (ii) all such Tax Returns are correct and complete in all material respects; (iii) all Taxes (whether or not shown on any Tax Return) owed by each Target and the Seller, to the extent related to any Target, have been paid; (iv) no Target nor the Seller (to the extent related to any Target) currently is the beneficiary of any extension of time within which to file any Tax Return; (v) no claim has ever been made by an authority in a jurisdiction where any Tax Returns by or with respect to any Target are not filed that such Target or the Seller, to the extent related to the income or operations of such Target, are or may be subject to taxation by that jurisdiction;

 

17

and (vi) there are no Security Interests on any of the assets of any Target that arose in connection with any failure (or alleged failure) to pay any Tax.

 

(b) Except as described on Section 4.15(a) of the Disclosure Schedule, no deficiencies for Taxes against any Target, including Taxes for which the Seller would be liable, have been claimed, proposed or assessed by any authority. No federal, state, local or foreign Tax audits or other administrative proceedings or court proceedings are presently pending or threatened with regard to any Taxes of any Target, including any Taxes for which the Seller would be liable, and there are no matters under discussion with any authority or known to the Seller, any manager, director or officer (or employee responsible for Tax matters) of any Target that are likely to result in an additional liability for Taxes with respect to a Target. Section 4.15(b) of the Disclosure Schedule lists all federal, state, local and foreign income Tax Returns that were required to be filed but were not filed with respect to each Target and the Seller for taxable periods ended on or after December 31, 2004, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Seller has delivered to the Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of each Target and the Seller since December 31, 2004.

 

(c) Except as described on Section 4.15(a) of the Disclosure Schedule, neither any Target nor the Seller (to the extent attributable to a Target) has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(d) No Target has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible due to the restrictions imposed by Code Section 280G. Neither any Target nor the Seller is a party to any Tax allocation or sharing agreement.

 

(e) Each Target is taxable as a partnership or an entity whose separate existence from the Seller is disregarded for federal income tax purposes. No Target has elected to be taxed as a corporation for federal or applicable state income Tax purposes. The Seller has included or will include its allocable share of any income, gain, loss, deduction or other Tax items of each Target for periods ending on or prior to the Closing Date on the Seller’s Tax Returns for such periods.

 

(f) Neither any of the Targets nor the Seller (to the extent attributable to the Targets) has or has had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country.

 

(g) Neither any of the Targets nor the Seller has entered into any transaction identified as a “listed transaction” for purposes of Treasury regulations Sections 1.6011-4(b)(2) or 301.6111-2(b)(2). If a Target or the Seller has entered into any transaction such that, if the treatment claimed by it were to be disallowed, the transaction would constitute a substantial understatement of federal income tax within the meaning of Section 6662 of the Code, then it

 

18

believes that it has either (i) substantial authority for the tax treatment of such transaction or (ii) disclosed on its Tax Return the relevant facts affecting the tax treatment of such transaction.

 

Section 4.16 Real Property . Each Target does not own any real property. Section 4.16 of the Disclosure Schedule lists and describes briefly all real property leased or subleased to each Target. The Seller has delivered to the Buyer correct and complete copies of the leases and subleases listed in Section 4.16 of the Disclosure Schedule (as amended to date). With respect to each lease and sublease listed in Section 4.16 of the Disclosure Schedule:

 

(a) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect;

 

(b) the lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms immediately following the consummation of the transactions contemplated hereby;

 

(c) no party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder;

 

(d) no party to the lease or sublease has repudiated any provision thereof;

 

(e) there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease;

 

(f) with respect to each sublease, the representations and warranties set forth in subsections (a) through (e) above are true and correct with respect to the underlying lease;

 

(g) each Target has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold;

 

(h) all facilities leased or subleased thereunder have received all approvals of Governmental Authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable Laws, rules, and regulations;

 

(i) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities; and

 

(j) to the Knowledge of the Seller and the Knowledge of the managers, directors and officers of each Target, the owner of the facility leased or subleased has good and marketable title to the parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except for installments of special easements not yet delinquent and recorded easements, covenants, and other restrictions which do not impair the current use, occupancy, or value, or the marketability of title, of the property subject thereto.

 

19

Section 4.17 Intellectual Property .

 

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

 

(b) Each Target has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and none of the Seller and the managers, directors and officers (and employees with responsibility for Intellectual Property matters) of such Target has ever received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that such Target must license or refr