EXHIBIT 2.1
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
BETWEEN
AMBASSADORS INTERNATIONAL, INC.
AND
AMBASSADORS GROUP, INC.
EFFECTIVE AS OF
_________________, 2001
TABLE OF CONTENTS
PAGE
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1. SEPARATION........................................................................1
Section 1.1 Separation Date...................................................1
Section 1.2 Closing of Transactions...........................................1
Section 1.3 Exchange of Secretary's Certificates..............................1
2. DOCUMENTS AND ITEMS TO BE DELIVERED ON OR BEFORE THE SEPARATION DATE..............2
Section 2.1 Documents to Be Delivered by Ambassadors..........................2
Section 2.2 Documents to Be Delivered by Education............................2
Section 2.3 Capital Contribution..............................................2
3. THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION.............................3
Section 3.1 Transactions Prior to the Distribution............................3
Section 3.2 The Distribution..................................................3
Section 3.3 Conditions to Distribution........................................4
Section 3.4 Sole Discretion of Ambassadors....................................5
4. COVENANTS AND OTHER MATTERS.......................................................5
Section 4.1 Other Agreements..................................................5
Section 4.2 Agreement For Exchange of Information.............................5
Section 4.3 Audits and Reviews; Annual and Quarterly Statements and
Accounting.......................................................6
Section 4.4 Consistency with Past Practices...................................8
Section 4.5 Payment of Expenses...............................................8
Section 4.6 Dispute Resolution................................................8
Section 4.7 Governmental Approvals............................................9
Section 4.8 Representations and Warranties....................................9
5. MISCELLANEOUS.....................................................................9
Section 5.1 Authority.........................................................9
Section 5.2 Amendment and Execution..........................................10
Section 5.3 Counterparts.....................................................10
Section 5.4 Effectiveness....................................................10
Section 5.5 Effect If Separation And/or Distribution Does Not Occur..........10
Section 5.6 Termination......................................................10
Section 5.7 Binding Effect; Assignment.......................................10
Section 5.8 Performance......................................................10
Section 5.9 Additional Assurances............................................10
Section 5.10 Entire Agreement.................................................10
Section 5.11 Attachments......................................................10
Section 5.12 Conflicting Agreements...........................................11
Section 5.13 Descriptive Headings.............................................11
Section 5.14 Gender and Number................................................11
Section 5.15 Severability.....................................................11
Section 5.16 Survival of Agreements...........................................11
Section 5.17 Governing Law....................................................11
Section 5.18 Notices..........................................................11
Section 5.19 Waivers; Remedies................................................12
Section 5.20 Limitation of Liability..........................................12
Section 5.21 Force Majeure....................................................12
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PAGE
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6. DEFINITIONS......................................................................12
Section 6.1 Ambassadors Group................................................12
Section 6.2 Ambassadors' Auditors............................................12
Section 6.3 Ancillary Agreements.............................................12
Section 6.4 Business Day.....................................................12
Section 6.5 Capital Contribution.............................................12
Section 6.6 Code.............................................................12
Section 6.7 Commission.......................................................12
Section 6.8 Disputes.........................................................13
Section 6.9 Distribution.....................................................13
Section 6.10 Distribution Agent...............................................13
Section 6.11 Distribution Date................................................13
Section 6.12 Education's Auditors.............................................13
Section 6.13 Education Business...............................................13
Section 6.14 Education Group..................................................13
Section 6.15 Exchange Act.....................................................13
Section 6.16 Form 10 Registration Statement...................................13
Section 6.17 GAAP.............................................................13
Section 6.18 Governmental Approvals...........................................13
Section 6.19 Governmental Authority...........................................13
Section 6.20 Information......................................................13
Section 6.21 Information Statement............................................13
Section 6.22 NASDAQ...........................................................13
Section 6.23 Person...........................................................13
Section 6.24 Record Date......................................................13
Section 6.25 RMCPD............................................................14
Section 6.26 Separation.......................................................14
Section 6.27 Separation Date..................................................14
Section 6.28 Stock Split......................................................14
Section 6.29 Subsidiary.......................................................14
Section 6.30 Tax Ruling.......................................................14
Section 6.31 Transaction Agreements...........................................14
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EXHIBITS
Exhibit A Certificate of Secretary of Ambassadors
Exhibit B Certificate of Secretary of Education
Exhibit C Employee Matters Agreement
Exhibit D Tax Sharing Agreement
Exhibit E Confidential Disclosure Agreement
Exhibit F Indemnification and Insurance Matters Agreement
Exhibit G Transitional Services Agreement
Exhibit H Credit Facility Agreement
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MASTER SEPARATION AND DISTRIBUTION AGREEMENT
This Master Separation and Distribution Agreement (this "Agreement") is
entered into as of __________, 2001, between Ambassadors International, Inc., a
Delaware corporation ("Ambassadors"), and Ambassadors Group, Inc., a Delaware
corporation ("Education"). Ambassadors and Education are sometimes referred to
herein individually as a "party" or collectively as the "parties." Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in Article 6 hereof. Ambassadors and Education are sometimes referred
to herein individually as a "party" or collectively as the "parties."
RECITALS
WHEREAS, Ambassadors currently owns all of the issued and outstanding
capital stock of Education;
WHEREAS, the Board of Directors of Ambassadors has determined that it is
appropriate and desirable on the terms and conditions contemplated hereby to
separate the business of Ambassadors and Education (the "Separation") and to
distribute to the holders of its common stock, by means of a pro rata
distribution following the Separation, all of the shares of Education common
stock owned by Ambassadors (the "Distribution");
WHEREAS, Ambassadors and Education intend that the Separation and the
Distribution will qualify as a tax-free reorganization under Sections
368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement is intended to be, and is hereby adopted as, a
plan of reorganization under Section 368 of the Code;
WHEREAS, the parties intend in this Agreement, including the Exhibits and
Schedules hereto, to set forth the principal arrangements between them regarding
the separation of the Education Business.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth below, the parties hereto, intending to be legally
bound, agree as follows:
1. SEPARATION.
1.1. SEPARATION DATE. Unless otherwise provided in this Agreement, or in
any agreement to be executed in connection with this Agreement, the
effective time and date of the Separation shall be 12:01 a.m., Pacific
Time, ______________, 2001 or such other date as may be fixed by the Board
of Directors of Ambassadors (the "Separation Date").
1.2. CLOSING OF TRANSACTIONS. Unless otherwise provided herein, the closing
of the transactions contemplated in Article 2 shall occur by the lodging of
each of the executed undertakings, agreements, instruments or other
documents executed or to be executed pursuant to this Agreement with
Richman, Mann, Chizever, Xxxxxxxx & Xxxxxx ("RMCPD") 0000 Xxxxxxxx Xxxx.,
Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX to be held in escrow for delivery as
provided in Section 1.3 of this Agreement.
1.3. EXCHANGE OF SECRETARY'S CERTIFICATES. Upon receipt of a certificate of
the Secretary or an Assistant Secretary of Ambassadors in the form attached
to this Agreement as Exhibit A, RMCPD shall deliver to Education on behalf
of Ambassadors all of the items required to be delivered by Ambassadors
hereunder pursuant to Section 2.1 of this Agreement and each such item
shall be deemed to be delivered to Education as of the Separation Date upon
delivery of such certificate. Upon receipt of a certificate of the
Secretary or an Assistant Secretary of Education in the form attached to
this Agreement as Exhibit B, RMCPD shall deliver to Ambassadors on behalf
of Education all of the items required to be delivered by Education
pursuant to Section 2.2 hereunder and each such item shall be deemed to be
delivered to Ambassadors as of the Separation Date upon receipt of such
certificate.
2. DOCUMENTS AND ITEMS TO BE DELIVERED ON OR BEFORE THE SEPARATION DATE.
2.1. DOCUMENTS TO BE DELIVERED BY AMBASSADORS. On or before the Separation
Date, Ambassadors will deliver to Education all of the following items and
agreements (collectively, together with all agreements and documents
contemplated by such agreements, the "Ancillary Agreements"):
2.1.1. A duly executed Employee Matters Agreement substantially in the
form attached hereto as Exhibit C;
2.1.2. A duly executed Tax Sharing Agreement substantially in the form
attached hereto as Exhibit D;
2.1.3. A duly executed Confidential Disclosure Agreement substantially
in the form attached hereto as Exhibit E;
2.1.4. A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as Exhibit F;
2.1.5. A duly executed Transitional Services Agreement substantially in
the form attached hereto as Exhibit G;
2.1.6. A duly executed Credit Facility Agreement substantially in the
form attached hereto as Exhibit H;
2.1.7. Resignations of each person who is an officer of Education or
its Subsidiaries immediately prior to the Separation Date, but who will
be an employee of only Ambassadors or its Subsidiaries from and after
the Separation Date; and,
2.1.8. Such other agreements, documents or instruments as the parties
may agree are necessary or desirable in order to achieve the purposes
hereof, including, without limitation, those documents referred to in
Sections 4.1 and 4.2.
2.2. DOCUMENTS TO BE DELIVERED BY EDUCATION. On or before the Separation
Date, Education will deliver to Ambassadors all of the following:
2.2.1. In each instance in which Education is a party to any agreement
or instrument referred to in Section 2.1, a duly executed counterpart
of such agreement or instrument duly executed by Education; and
2.2.2. Resignations of each person who is an officer of Ambassadors or
its Subsidiaries immediately prior to the Separation Date, but who will
be an employee of only Education or its Subsidiaries from and after the
Separation Date.
2.3. CAPITAL CONTRIBUTION. On or before the Separation Date, Ambassadors
shall allocate to Education from the cash held by Education Group, as
paid-in capital (the "Capital Contribution"), an amount equal to the sum
of: (i) the cash Education requires to continue its operations ("CC"), and
(ii) an amount Education requires for operations after the Separation Date
("FC"). CC shall be an amount equal to (with respect to Education): (1) the
sum of participants funds and other liabilities (including any required
reserves), less (2) the sum of accounts receivable and prepaid expenses. CC
will be measured at the end of the month in which the board of directors of
Ambassadors gives its final approval to the Distribution. FC shall be an
amount equal to the sum of forecasted operating losses until Education
achieves operating profitability and one quarter of Education's operating
expenses. The measurements for the forecasted operating losses and
operating expenses shall be made in good faith at the end of the month in
which the board of directors of Ambassadors gives its final approval to the
Distribution.
3. THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION.
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3.1. TRANSACTIONS PRIOR TO THE DISTRIBUTION. Subject to the conditions
specified in Section 3.4, Ambassadors and Education shall use their
reasonable commercial efforts to consummate the Distribution. Such efforts
shall include, but not necessarily be limited to, those specified in this
Section 3.1.
3.1.1. TAX RULING. Ambassadors shall apply to the Internal Revenue
Services for a private letter ruling (the "Tax Ruling") that the
Distribution will qualify as a tax-free spinoff to the shareholders of
Ambassadors for federal income tax purposes under Section 368(a)(1)(D)
or Section 355(c) of the Code.
3.1.2. STOCK SPLIT. In order to facilitate the Distribution of the
Education common stock to Ambassadors shareholders on a 1:1 basis,
Education shall implement a split of its common stock and adjust the
number of shares of its common stock held by Ambassadors such that
immediately prior to the Separation Date such holding shall be exactly
equal to the number of shares of Ambassadors common stock then
outstanding (the "Stock Split").
3.1.3. REGISTRATION STATEMENT. Education, with the cooperation and
assistance of Ambassadors, shall register its common stock under
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act")
by filing a Form 10 registration statement (the "Form 10 Registration
Statement"), and such amendments or supplements thereto, as may be
necessary in order to cause the same to become and remain effective as
required by law, including, but not limited to, filing such amendments
to the Form 10 Registration Statement as may be required by the
Securities and Exchange Commission (the "Commission") or federal, state
or foreign securities laws. Ambassadors and Education shall also
cooperate in preparing and filing with the Commission any registration
statements or amendments thereof which are required to reflect the
establishment of, or amendments to, any employee benefit and other
plans necessary or appropriate in connection with the Separation, the
Distribution or the other transactions contemplated by this Agreement.
3.1.4. INFORMATION STATEMENT. Ambassadors and Education shall prepare
and mail, prior to the Distribution Date, to the holders of common
stock of Ambassadors, such information concerning Education and the
Distribution and such other matters as Ambassadors and Education shall
reasonably determine are necessary and as may be required by law (the
"Information Statement"). Ambassadors and Education will prepare, and
Education will, to the extent required under applicable law, file with
the Commission any such documentation which Ambassadors and Education
reasonably determine is necessary or desirable to effectuate the
Distribution, and Ambassadors and Education shall each use its
reasonable commercial efforts to obtain all necessary approvals from
the Commission with respect thereto as soon as practicable.
3.1.5. OTHER MATTERS. Ambassadors and Education shall consult with each
other and their financial advisors regarding all material matters with
respect to the Distribution.
3.1.6. BLUE SKY. Ambassadors and Education shall take all such actions
as may be necessary or appropriate under the securities or blue sky
laws of the United States (and any comparable laws under any foreign
jurisdiction) in connection with the Distribution.
3.1.7. NASDAQ LISTING. Education shall prepare, file and use reasonable
commercial efforts to make effective, an application for listing of the
common stock of Education distributed in the Distribution on the NASDAQ
National Market ("NASDAQ"), subject to official notice of distribution.
Education has reserved the NASADQ trading symbol "AGRP." Ambassadors
shall retain its present NASDAQ trading symbol, "XXXX" if it is
reasonably feasible to do so.
3.2. THE DISTRIBUTION.
3.2.1. DELIVERY OF SHARES FOR DISTRIBUTION. Subject to Sections 3.3 and
3.4 hereof, on or prior to the date the Distribution is effective (the
"Distribution Date"), Ambassadors will deliver to the distribution
agent (the
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"Distribution Agent") to be appointed by Ambassadors to distribute to
the stockholders of Ambassadors the shares of common stock of Education
held by Ambassadors pursuant to the Distribution for the benefit of
holders of record of common stock of Ambassadors on the Record Date, a
single stock certificate, endorsed by Ambassadors in blank,
representing all of the outstanding shares of common stock of Education
then owned by Ambassadors, and shall cause the transfer agent for the
shares of common stock of Ambassadors to instruct the Distribution
Agent to distribute on the Distribution Date the appropriate number of
such shares of common stock of Education to each such holder or
designated transferee or transferees of such holder.
3.2.2. SHARES RECEIVED. Subject to Sections 3.3 and 3.4 hereof, each
holder of common stock of Ambassadors on the Record Date (or such
holder's designated transferee or transferees) will be entitled to
receive in the Distribution a number of shares of common stock of
Education equal to the number of shares of common stock of Ambassadors
held by such holder on the Record Date.
3.2.3. OBLIGATION TO PROVIDE INFORMATION. Education and Ambassadors, as
the case may be, will provide to the Distribution Agent all share
certificates and any information required in order to complete the
Distribution on the basis specified above.
3.2.4. CONDITIONS. Ambassadors and Education shall take all reasonable
steps necessary and appropriate to cause the conditions set forth in
Section 3.3 to be satisfied and to effect the Distribution on the
Distribution Date.
3.3. CONDITIONS TO DISTRIBUTION. The parties hereto shall use their
reasonable commercial efforts to effect the Distribution prior to
___________, 2001, or as soon thereafter as practicable. The obligations of
the parties to consummate the Distribution shall be conditioned on the
satisfaction, or written waiver by Ambassadors, of the following
conditions:
3.3.1. TAX RULING. Ambassadors shall have received the Tax Ruling, and
the Tax Ruling shall be in full force and effect and shall not have
been modified or amended in any respect adversely affecting the tax
consequences set forth therein.
3.3.2. STOCK SPLIT. The Stock Split shall have been completed.
3.3.3. SEPARATION. The Separation shall have become effective as
described in Articles 1 and 2 hereof.
3.3.4. GOVERNMENT APPROVALS. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been
obtained and be in full force and effect.
3.3.5. CONSENTS. All material consents which are required to effect the
Distribution shall have been obtained and be in full force and effect.
3.3.6. REGISTRATION STATEMENT. The Form 10 Registration Statement shall
have been filed and become effective, and there shall be no stop-order
in effect with respect thereto.
3.3.7. INFORMATION STATEMENT. The Information Statement shall have been
distributed as provided in Section 3.1.4
3.3.8. NASDAQ LISTING. The common stock of Education to be issued in
the Distribution shall have been accepted for listing on the NASDAQ
National Market, subject to official notice of distribution.
3.3.9. ANCILLARY AGREEMENTS. Each and every Ancillary Agreement is in
full force and effect, and each party thereto shall be in full
compliance therewith.
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3.3.10. NO LEGAL RESTRAINTS. No order, injunction or decree issued by
any court or agency of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Distribution or any
of the other transactions contemplated by this Agreement shall be in
effect.
3.3.11. OTHER ACTIONS. Such other actions as the parties hereto may,
based upon the advice of counsel, reasonably request to be taken prior
to the Distribution in order to assure the successful completion of the
Distribution shall have been taken.
3.3.12. NO MATERIAL ADVERSE EFFECT. No other events or developments
shall have occurred subsequent to the Separation Date that, in the
judgment of the Board of Directors of Ambassadors, would result in the
Distribution having a material adverse effect on Ambassadors or on the
stockholders of Ambassadors.
3.3.13. FINAL BOARD APPROVAL. The Ambassadors Board shall have given
final approval of the Distribution.
3.3.14. NO TERMINATION. This Agreement shall not have been terminated.
3.4. SOLE DISCRETION OF AMBASSADORS. Ambassadors currently intends to
complete the Distribution by _________________, 2001. Ambassadors shall, in
its sole and absolute discretion, determine the date of the consummation of
the Distribution and all terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) to effect
the Distribution and the timing of and conditions to the consummation of
the Distribution. In addition, Ambassadors may at any time and from time to
time until the completion of the Distribution modify or change the terms of
the Distribution, including, without limitation, by accelerating or
delaying the timing of the consummation of all or part of the Distribution.
Education shall cooperate with Ambassadors in all respects to accomplish
the Distribution and, at Ambassadors' direction, shall promptly take any
and all actions necessary or desirable to effect the Distribution.
Ambassadors shall select any investment banker(s) and manager(s) in
connection with the Distribution, as well as any financial printer,
solicitation and/or exchange agent and outside counsel for Ambassadors;
provided, however, that nothing herein shall prohibit Education from
engaging (at its own expense) its own financial, legal, accounting and
other advisors in connection with the Distribution.
4. COVENANTS AND OTHER MATTERS.
4.1. OTHER AGREEMENTS. In addition to the specific agreements, documents
and instruments that are Exhibits to this Agreement, Ambassadors and
Education agree to execute or cause to be executed by the appropriate
parties and deliver, as appropriate, such other agreements, instruments and
other documents as may be necessary or desirable in order to effect the
purposes of this Agreement and the Ancillary Agreements.
4.2. AGREEMENT FOR EXCHANGE OF INFORMATION. Each of Ambassadors and
Education agrees to provide, or cause to be provided, to each other, at any
time before or after the Distribution Date, as soon as reasonably
practicable after written request therefor, any Information in the
possession or under the control of such party that the requesting party
reasonably needs (i) to comply with reporting, disclosure, filing or other
requirements imposed on the requesting party (including under applicable
securities laws) by a Governmental Authority having jurisdiction over the
requesting party, (ii) for use in any other judicial, regulatory,
administrative or other proceeding or in order to satisfy audit,
accounting, claims, regulatory, litigation or other similar requirements,
(iii) to comply with its obligations under this Agreement or any Ancillary
Agreement or (iv) in connection with the ongoing businesses of Ambassadors
or Education, as the case may be; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures
to permit the compliance with such obligations in a manner that avoids any
such harm or consequence.
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4.2.1. INTERNAL ACCOUNTING CONTROLS; FINANCIAL INFORMATION. Until the
seventh anniversary of the Separation Date, (i) each party shall
maintain in effect at its own cost and expense adequate systems and
controls for its business to the extent necessary to enable the other
party to satisfy its reporting, accounting, audit and other
obligations, and (ii) each party shall provide, or cause to be
provided, to the other party and its Subsidiaries in such form as such
requesting party shall request, at no charge to the requesting party,
all financial and other data and information as the requesting party
determines necessary or advisable in order to prepare its financial
statements and reports or filings with any Governmental Authority.
4.2.2. OWNERSHIP OF INFORMATION. Any Information owned by a party that
is provided to a requesting party pursuant to this Section 4.2 shall be
deemed to remain the property of the providing party. Unless
specifically set forth herein, nothing contained in this Agreement
shall be construed as granting or conferring rights of license or
otherwise in any such Information.
4.2.3. RECORD RETENTION. To facilitate the possible exchange of
Information pursuant to this Section 4.2 and other provisions of this
Agreement after the Distribution Date, each party agrees to use its
reasonable commercial efforts to retain all tax, employee and financial
Information in their respective possession or control on the
Distribution Date for seven years after the Distribution Date. No party
will destroy, or permit any of its Subsidiaries to destroy, any
Information that exists on the Separation Date (other than Information
that is permitted to be destroyed under the current record retention
policy of such party) without first using its reasonable commercial
efforts to notify the other party of the proposed destruction and
giving the other party the opportunity to take possession of such
Information prior to such destruction.
4.2.4. LIMITATION OF LIABILITY. No party shall have any liability to
any other party in the event that any Information exchanged or provided
pursuant to this Section 4.2 is found to be inaccurate, in the absence
of willful misconduct by the party providing such Information. No party
shall have any liability to any other party if any Information is
destroyed or lost after reasonable commercial efforts by such party to
comply with the provisions of Section 4.2.3.
4.2.5. OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The
rights and obligations granted under this Section 4.2 are subject to
any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of Information set
forth in this Agreement and any Ancillary Agreement.
4.2.6. PRODUCTION OF WITNESSES; RECORDS; COOPERATION. After the
Distribution Date, except in the case of a legal or other proceeding by
one party against another party (which shall be governed by such
discovery rules as may be applicable under Section 4.6 or otherwise),
each party hereto shall use its reasonable commercial efforts to make
available to each other party, upon written request, the former,
current and future directors, officers, employees, other personnel and
agents of such party as witnesses and any books, records or other
documents within its control or which it otherwise has the ability to
make available, to the extent that any such person (giving
consideration to business demands of such directors, officers,
employees, other personnel and agents) or books, records or other
documents may reasonably be required in connection with any legal,
administrative or other proceeding in which the requesting party may
from time to time be involved, regardless of whether such legal,
administrative or other proceeding is a matter with respect to which
indemnification may be sought hereunder. The requesting party shall
bear all costs and expenses in connection therewith.
4.3. AUDITS AND REVIEWS; ANNUAL AND QUARTERLY STATEMENTS AND ACCOUNTING.
Each party agrees that, for so long as Ambassadors is required in
accordance with GAAP to consolidate Education's results of operations and
financial position in Ambassadors' financial statements:
4.3.1. DATE OF AUDITORS' OPINION AND QUARTERLY REVIEWS. Education shall
use its reasonable commercial efforts to enable the Education Auditors
to complete their audit such that they will date their opinion on
Education's audited annual financial statements on the same date that
Ambassadors' independent certified
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public accountants ("Ambassadors' Auditors") date their opinion on
Ambassadors' audited annual financial statements, and to enable
Ambassadors to meet its timetable for the printing, filing and public
dissemination of Ambassadors' annual financial statements. Education
shall use its reasonable commercial efforts to enable the Education
Auditors to complete their quarterly review procedures such that they
will provide clearance on Education's quarterly financial statements on
the same date that Ambassadors' Auditors provide clearance on
Ambassadors' quarterly financial statements.
4.3.2. ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. Education shall
provide to Ambassadors on a timely basis all Information that
Ambassadors reasonably requires to meet its schedule for the
preparation, printing, filing, and public dissemination of Ambassadors'
annual and quarterly financial statements. Without limiting the
generality of the foregoing, Education will provide all required
financial Information with respect to Education and its Subsidiaries to
Education's Auditors in a sufficient and reasonable time and in
sufficient detail to permit Education's Auditors to take all steps and
perform all reviews necessary to provide sufficient assistance to
Ambassadors' Auditors with respect to Information to be included or
contained in Ambassadors' annual and quarterly financial statements.
Similarly, Ambassadors shall provide to Education on a timely basis all
Information that Education reasonably requires to meet its schedule for
the preparation, printing, filing, and public dissemination of
Education's annual and quarterly financial statements. Without limiting
the generality of the foregoing, Ambassadors will provide all required
financial Information with respect to Ambassadors and its Subsidiaries
to Ambassadors' Auditors in a sufficient and reasonable time and in
sufficient detail to permit Ambassadors' Auditors to take all steps and
perform all reviews necessary to provide sufficient assistance to
Education's Auditors with respect to Information to be included or
contained in Education's annual and quarterly financial statements.
4.3.3. IDENTITY OF PERSONNEL PERFORMING THE ANNUAL AUDIT AND QUARTERLY
REVIEWS. Education shall authorize Education's Auditors to make
available to Ambassadors' Auditors both the personnel who performed or
are performing the annual audits and quarterly reviews of Education and
work papers related to the annual audits and quarterly reviews of
Education, in all cases within a reasonable time prior to Education's
Auditors' opinion date, so that Ambassadors' Auditors are able to
perform the procedures they consider necessary to take responsibility
for the work of Education's Auditors as it relates to Ambassadors'
Auditors' report on Ambassadors' financial statements, all within
sufficient time to enable Ambassadors to meet its timetable for the
printing, filing and public dissemination of Ambassadors' annual and
quarterly statements. Similarly, Ambassadors shall authorize
Ambassadors' Auditors to make available to Education's Auditors both
the personnel who performed or are performing the annual audits and
quarterly reviews of Ambassadors and work papers related to the annual
audits and quarterly reviews of Ambassadors, in all cases within a
reasonable time prior to Ambassadors' Auditors' opinion date, so that
Education's Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of Ambassadors' Auditors
as it relates to Education's Auditors' report on Education's
statements, all within sufficient time to enable Education to meet its
timetable for the printing, filing and public dissemination of
Education's annual and quarterly financial statements.
4.3.4. ACCESS TO BOOKS AND RECORDS. Education shall provide
Ambassadors' internal auditors and their designees access to
Education's and its Subsidiaries' books and records so that Ambassadors
may conduct reasonable audits relating to the financial statements
provided by Education pursuant hereto as well as to the internal
accounting controls and operations of Education and its Subsidiaries.
Similarly, Ambassadors shall provide Education's internal auditors and
their designees access to Ambassadors' and its Subsidiaries' books and
records so that Education may conduct reasonable audits relating to the
financial statements provided by Ambassadors pursuant hereto as well as
to the internal accounting controls and operations of Ambassadors and
its Subsidiaries.
4.3.5. NOTICE OF CHANGE IN ACCOUNTING PRINCIPLES. Education shall give
Ambassadors as much prior notice as reasonably practical of any
proposed determination of, or any significant changes in, its
accounting estimates or accounting principles from those in effect on
the Separation Date. Education will consult with Ambassadors
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and, if requested by Ambassadors, Education will consult with
Ambassadors' independent public accountants with respect thereto.
Ambassadors shall give Education as much prior notice as reasonably
practical of any proposed determination of, or any significant changes
in, its accounting estimates or accounting principles from those in
effect on the Separation Date.
4.3.6. CONFLICT WITH THIRD-PARTY AGREEMENTS. Nothing in Sections 4.2
and 4.3 shall require Education to violate any agreement with any third
parties regarding the confidentiality of confidential and proprietary
Information relating to that third party or its business; provided,
however, that in the event that Education is required under Sections
4.2 AND 4.3 to disclose any such Information, Education shall use all
commercially reasonable efforts to seek to obtain such customer's
consent to the disclosure of such Information.
4.4. CONSISTENCY WITH PAST PRACTICES. At all times prior to the Separation
Date, Ambassadors will cause the Education Business to continue to ship
products, invoice customers, make payments, maintain properties, manage
distribution channels and otherwise conduct business in the ordinary
course, consistent with past practices.
4.5. PAYMENT OF EXPENSES. Except as otherwise provided in this Agreement,
the Ancillary Agreements or any other agreement between the parties
relating to the Separation or the Distribution, all costs and expenses of
the parties hereto in connection with the Separation and Distribution
(excluding internal costs and expenses of Education) shall be paid by
Ambassadors.
4.6. DISPUTE RESOLUTION. Resolution of any and all disputes, claims and
causes of action of any nature whatsoever (collectively, "Disputes"),
arising from or in connection with this Agreement, shall be exclusively
governed by and settled in accordance with the provisions of this Section
4.6.
4.6.1. NEGOTIATION. The parties shall make a good faith attempt to
resolve any Dispute arising out of or relating to this Agreement
through informal negotiation between appropriate representatives from
each of Ambassadors and Education. If at any time either party feels
that such negotiations are not leading to a resolution of the Dispute,
such party may send a notice to the other party describing the Dispute
and requesting a meeting of the senior executives from each party.
Within ten business days after such notice is given, each party shall
select appropriate senior executives (e.g., director or V.P. level) of
each party who shall have the authority to resolve the matter and shall
meet to attempt in good faith to negotiate a resolution of the Dispute
prior to pursuing other available remedies. During the course of
negotiations under this Section 4.6.1, all reasonable requests made by
one party to the other for information, including requests for copies
of relevant documents, will be honored. The specific format for such
negotiations will be left to the discretion of the designated
negotiating senior executives but may include the preparation of agreed
upon statements of fact or written statements of position furnished to
the other party. In the event that any Dispute arising out of or
related to this Agreement is not settled by the parties within thirty
days after the first meeting of the negotiating senior executives,
either party may commence litigation with respect to the Dispute.
However, neither party shall commence litigation against the other
party to resolve the Dispute (i) until the parties try in good faith to
settle the Dispute by negotiation for at least thirty days after the
first meeting of the negotiating senior executives or (ii) until forty
days after notice of a Dispute is given by either party to the other
party, whichever occurs first.
4.6.2. PROCEEDINGS. Any Dispute regarding the following is not required
to be negotiated prior to seeking relief from a court of competent
jurisdiction: breach of any obligation of confidentiality;
infringement, misappropriation, or misuse of any intellectual property
right; or any other claim where interim relief from the court is sought
to prevent serious and irreparable injury to a party. However, the
parties shall make a good faith effort to negotiate such Dispute,
according to Section 4.6.1, while such court action is pending.
4.6.3. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed
in writing, the parties will continue to provide service and honor all
other commitments under this Agreement and each Ancillary Agreement
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during the course of dispute resolution pursuant to the provisions of
this Section 4.6 with respect to all matters not subject to such
dispute, controversy or claim.
4.7. GOVERNMENTAL APPROVALS. To the extent that the Separation requires any
Governmental Approvals, the parties will use their reasonable commercial
efforts to obtain any such Governmental Approvals.
4.8. REPRESENTATIONS AND WARRANTIES. Ambassadors hereby represents and
warrants as follows:
4.8.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. Ambassadors is
duly organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to carry
on its business as currently conducted.
4.8.2. CORPORATE POWER. Ambassadors has all requisite legal and
corporate power to (i) execute and deliver this Agreement, the
Ancillary Agreements and all applicable exhibits and schedules attached
hereto and thereto at such times as are contemplated by this Agreement
and the Ancillary Agreements; and (ii) perform its obligations
hereunder and thereunder.
4.8.3. NO OTHER REPRESENTATIONS OR WARRANTIES. Ambassadors does not, in
this Agreement or any other agreement, instrument or document
contemplated by this Agreement, make any representation as to, warranty
of or covenant with respect to:
4.8.3.1. the value of any asset or thing of value transferred
or to be transferred to Education;
4.8.3.2. the freedom from encumbrance of any asset or thing of
value transferred or to be transferred to Education;
4.8.3.3. the absence of defenses or freedom from counterclaims
with respect to any claim transferred or to be transferred to
Education; or
4.8.3.4. the legal sufficiency of any assignment, document or
instrument delivered hereunder to convey title to any asset or
thing of value upon its execution, delivery and filing.
4.8.4. RISK ASSOCIATED WITH TRANSFERRED ASSETS. Except as may expressly
be set forth herein or in any Ancillary Agreement, all assets
transferred or to be transferred to Education shall be transferred "as
is, where is" and Education shall bear the economic and legal risk that
any conveyance shall prove to be insufficient to vest in Education good
and marketable title, free and clear of any lien, claim, equity or
other encumbrance.
5. MISCELLANEOUS.
5.1. AUTHORITY. Each of the parties hereto represents to the other that (i)
it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (ii) the execution, delivery and
performance of this Agreement by it have been duly authorized by all
necessary corporate or other actions, (iii) it has duly and validly
executed and delivered this Agreement, and (iv) this Agreement is a legal,
valid and binding obligation, enforceable against it in accordance with its
terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
5.2. AMENDMENT AND EXECUTION. The Boards of Directors of Education and
Ambassadors may mutually agree to amend the provisions of this Agreement at
any time or times, for any reason, either prospectively or retroactively,
to such extent and in such manner as the Boards mutually deem advisable.
Each Board may delegate its amendment power, in whole or in part, to one or
more Persons or committees as it deems advisable. No change or amendment
will be made to this Agreement, except by an instrument in writing signed
by authorized individuals. This Agreement and amendments hereto shall be in
writing and executed on behalf of Ambassadors and Education by
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their respective duly authorized officers and representatives.
5.3. COUNTERPARTS. This Agreement, including any attachments hereto and the
other documents referred to herein, may be executed via facsimile or
otherwise in counterparts, each of which shall be deemed to be an original
but all of which shall constitute one and the same agreement.
5.4. EFFECTIVENESS. All covenants and agreements of the parties contained
in this Agreement shall be subject to and conditioned upon the Distribution
becoming effective.
5.5. EFFECT IF SEPARATION AND/OR DISTRIBUTION DOES NOT OCCUR. If the
Separation and/or Distribution does not occur, then all actions and events
that are, under this Agreement, to be taken or occur effective as of the
Separation Date and/or Distribution Date, or otherwise in connection with
the Separation and/or Distribution, shall not be taken or occur except to
the extent specifically agreed by Education and Ambassadors.
5.6. TERMINATION. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Time of Distribution by and in the sole
discretion of the Ambassadors Board of Directors without the approval of
Education or of Ambassadors's shareholders. In the event of such
termination, no party will have any liability of any kind to any other
party on account of such termination.
5.7. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement. Except as
herein specifically provided to the contrary, neither party may assign this
Agreement or any rights or obligations hereunder, without the prior written
consent of the other party, and any such assignment shall be void;
provided, however, either party (or its permitted successive assignees or
transferees hereunder) may assign or transfer this Agreement as a whole
without consent to an entity that succeeds to all or substantially all of
the business or assets of such party to which this Agreement relates.
5.8. PERFORMANCE. Each party hereto will cause to be performed, and hereby
guarantees the performance of all actions, agreements and obligations set
forth herein to be performed by any subsidiary or any member of such
party's Group.
5.9. ADDITIONAL ASSURANCES. Except as may be specifically provided herein
to the contrary, the provisions of this Agreement shall be self-operative
and shall not require further agreement by the parties; provided, however,
at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable, and
as the requesting party may reasonably deem necessary, to effectuate this
Agreement.
5.10. ENTIRE AGREEMENT. This Agreement together with all other Transaction
Agreements, including any annexes, schedules and exhibits hereto or
thereto, and other agreements and documents referred to herein and therein,
will together constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof and shall supersede all
prior negotiations, agreements and understandings of the parties of any
nature, whether oral or written, with respect to such subject matter.
5.11. ATTACHMENTS. All attachments hereto are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Capitalized
terms used in the attachments hereto but not otherwise defined therein will
have the respective meanings assigned to such terms in this Agreement.
5.12. CONFLICTING AGREEMENTS. In the event of conflict between this
Agreement and any Ancillary Agreement or other agreement executed in
connection herewith, the provisions of such other agreement shall prevail.
5.13. DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way
the
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meaning or interpretation of this Agreement. When a reference is made in
this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule
to, this Agreement unless otherwise indicated.
5.14. GENDER AND NUMBER. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine and
neuter, and the number of all words herein shall include the singular and
plural.
5.15. SEVERABILITY. The parties hereto have negotiated and prepared the
terms of this Agreement in good faith with the intent that each and every
one of the terms, covenants and conditions herein be binding upon and inure
to the benefit of the respective parties. Accordingly, if any one or more
of the terms, provisions, promises, covenants or conditions of this
Agreement or the application thereof to any person or circumstance shall be
adjudged to any extent invalid, unenforceable, void or voidable for any
reason whatsoever by a court of competent jurisdiction, such provision
shall be as narrowly construed as possible, and each and all of the
remaining terms, provisions, promises, covenants and conditions of this
Agreement or their application to other persons or circumstances shall not
be affected thereby and shall be valid and enforceable to the fullest
extent permitted by law. To the extent this Agreement is in violation of
applicable law, then the parties agree to negotiate in good faith to amend
the Agreement, to the extent possible consistent with its purposes, to
conform to law and effect the original intent of the parties.
5.16. SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall remain in full force and effect and shall survive the time
of Distribution.
5.17. GOVERNING LAW. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior
Court of Los Angeles County and/or the United States District Court for the
Southern District of California shall have jurisdiction and venue over all
Disputes between the parties that are permitted to be brought in a court of
law pursuant to Section 4.6 above.
5.18. NOTICES. Any notice, demand, offer, request or other communication
required or permitted to be given by either party pursuant to the terms of
this Agreement shall be in writing and shall be deemed effectively given
the earlier of (i) when received, (ii) when delivered personally, (iii) one
Business Day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one Business Day after being deposited with
a nationally recognized overnight courier service or (v) four days after
being deposited in the U.S. mail, First Class with postage prepaid, and
addressed to:
If to Ambassadors: With a copy to:
Ambassadors International Inc. Xxxxxx X. Xxxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxxx Richman, Mann, Chizever, Philips & Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 0000 Xxxxxxxx Xxxx., Xxxxxxxxx Xxxxx
Xxxxxxxxx: Xxxxxxx Xxxxx, XX 00000
Facsimile: 000 000-0000
If to Education: With a copy to:
Ambassadors Group, Inc. Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx X. Xxxxxxxxxx Building Richman, Mann, Chizever, Philips & Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxx., Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000 Xxxxxxx Xxxxx, XX 00000
Facsimile: Facsimile: 000 000-0000
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Ambassadors and Education may substitute a different address or facsimile
number, from time to time, if such substitute is provided to the intended
notice recipient in writing by notice given in the manner provided in this
section.
5.19. WAIVERS; REMEDIES. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power
or privilege hereunder, nor will any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at
law or equity.
5.20. LIMITATION OF LIABILITY. In no event shall any member of the
Ambassadors Group or Education Group be liable to any other member of the
Ambassadors Group or Education Group for any special, consequential,
indirect, incidental or punitive damages or lost profits, however caused
and on any theory of liability (including negligence) arising in any way
out of this agreement, whether or not such party has been advised of the
possibility of such damages; provided, however, that the foregoing
limitations shall not limit each party's indemnification obligations for
liabilities to third parties as set forth in the Indemnification and
Insurance Matters Agreement.
5.21. FORCE MAJEURE. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or
other interruption of service deemed to result, directly or indirectly,
from acts of God, civil or military authority, acts of public enemy, war,
accidents, explosions, earthquakes, floods, failure of transportation,
strikes or other work interruptions by either party's employees, or any
other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in
this Agreement.
6. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the following meanings.
6.1. "AMBASSADORS GROUP" means Ambassadors and each Subsidiary of
Ambassadors (other than any member of the Education Group) immediately
after the Separation Date, and each Person that becomes a Subsidiary of
Ambassadors after the Separation Date.
6.2. "AMBASSADORS' AUDITORS" has the meaning set forth in Section 4.3.2
hereof.
6.3. "ANCILLARY AGREEMENTS" has the meaning set forth in Section 2.1
hereof.
6.4. "BUSINESS DAY" means a day other than a Saturday, a Sunday or a day on
which banking institutions located in the State of California are
authorized or obligated by law or executive order to close.
6.5. "CAPITAL CONTRIBUTION"has the meaning set forth in Section 2.3 hereof.
6.6. "CODE" has the meaning set forth in the Recitals hereof.
6.7. "COMMISSION" has the meaning set forth in Section 3.1.3 hereof.
6.8. "DISPUTES" has the meaning set forth in Section 4.6 hereof.
6.9. "DISTRIBUTION" has the meaning set forth in the Recitals hereof.
6.10. "DISTRIBUTION AGENT" has the meaning set forth in Section 3.2 hereof.
6.11. "DISTRIBUTION DATE" has the meaning set forth in Section 3.2 hereof.
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6.12. "EDUCATION'S AUDITORS" shall mean PriceWaterhouseCoopers, L.L.P.
6.13. "EDUCATION BUSINESS" means the business and operations of Education
as they currently exist as described in the Form 10 Registration Statement.
6.14. "EDUCATION GROUP" means Education and each Subsidiary of Education
immediately after the Separation Date and each Person that becomes a
Subsidiary of Education after the Separation Date.
6.15. "EXCHANGE ACT" has the meaning set forth in Section 3.1.3 hereof.
6.16. "FORM 10 REGISTRATION STATEMENT" shall mean the Form 10 Registration
Statement described in Section 3.1.3 including any amendments or
supplements thereto.
6.17. "GAAP" means generally accepted accounting principals promulgated by
the Financial Accounting Standards Board, in effect on the Separation Date,
consistently applied.
6.18. "GOVERNMENTAL APPROVALS" means any notices, reports or other filings
to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
6.19. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or
governmental authority.
6.20. "INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams,
models, prototypes, samples, flow charts, data, computer data, disks,
diskettes, tapes, computer programs or other software, marketing plans,
customer names, communications by or to attorneys (including
attorney-client privileged communications), memos and other materials
prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, employee or business information
or data.
6.21. "INFORMATION STATEMENT" has the meaning set for in Section 3.1.4
hereof.
6.22. "NASDAQ" has the meaning set for in Section 3.1.5 hereof.
6.23. "PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
6.24. "RECORD DATE" means the close of business on the date to be
determined by the Board of Directors of Ambassadors as the record date for
determining the stockholders of Ambassadors entitled to receive shares of
common stock of Education in the Distribution.
6.25. "RMCPD" has the meaning set forth in Section 1.2 hereof.
6.26. "SEPARATION" has the meaning set forth in the Recitals hereof.
6.27. "SEPARATION DATE" has the meaning set forth in Section 1.1 hereof.
6.28. "STOCK PURCHASE WARRANT" has the meaning set forth in Section 2.2.3
hereof.
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6.29. "STOCK SPLIT" has the meaning set forth in Section 3.1.2 hereof.
6.30. "SUBSIDIARY" means with respect to any specified Person, any
corporation, any limited liability company, any partnership or other legal
entity of which such Person or its Subsidiaries owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to
vote on the election of the members of the board of directors or similar
governing body.
6.31. "TAX RULING" has the meaning set forth in Section 3.1.1 hereof.
6.32. "TRANSACTION AGREEMENTS" means this Agreement together with the
Ancillary Agreements.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties as of the date first written above.
Ambassadors International, Inc., Ambassadors Group, Inc.,
a Delaware corporation a Delaware corporation
By: By:
----------------------------- ------------------------------
Title: Title:
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