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EXHIBIT 2.1
JULY 10, 1998
AGREEMENT AND PLAN OF MERGER
BETWEEN
VANS, INC.
AND
SWITCH MANUFACTURING
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS ................................................................... 1
ARTICLE 2 THE MERGER .................................................................... 8
2.1 The Merger .................................................................. 8
2.2 Merger Agreement ............................................................ 8
2.3 Effective Time .............................................................. 9
2.4 Name of the Surviving Corporation ........................................... 9
2.5 Merger Consideration ........................................................ 9
2.6 Convertible Securities ...................................................... 10
2.7 Registration Statements for Stock ........................................... 10
2.8 Cash in lieu of Fractional Shares ........................................... 11
ARTICLE 3 EFFECT OF THE MERGER .......................................................... 11
3.1 General ..................................................................... 11
3.2 Conversion of Securities .................................................... 12
3.3 Dissenting Shares ........................................................... 12
3.4 Exchange of Certificates .................................................... 13
3.5 No Transfers of Stock After Effective Time .................................. 15
ARTICLE 4 PROXY STATEMENT ............................................................... 15
4.1 Shareholders Meeting ........................................................ 15
4.2 Proxy Materials ............................................................. 15
4.3 Private Offering Memorandum ................................................. 16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................. 17
5.1 Organization and Qualification .............................................. 17
5.2 Capitalization .............................................................. 17
5.3 Authority ................................................................... 18
5.4 Financial Statements and Reports ............................................ 19
5.5 Absence of Undisclosed Liabilities .......................................... 19
5.6 Absence of Certain Changes or Events ........................................ 19
5.7 Assets ...................................................................... 22
5.8 Contracts and Commitments ................................................... 23
5.9 Compliance with Law ......................................................... 24
5.10 Brokers .................................................................... 24
5.11 Litigation ................................................................. 24
5.12 Taxes ...................................................................... 25
5.13 Environmental Matters ...................................................... 27
5.14 Proprietary Rights ......................................................... 29
5.15 Labor Matters .............................................................. 29
5.16 Employee Benefit Plans ..................................................... 30
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5.17 Transactions with Certain Persons .......................................... 32
5.18 Insurance .................................................................. 33
5.19 Payments ................................................................... 33
5.20 Board Actions .............................................................. 33
5.21 Required Vote .............................................................. 33
5.22 French Subsidiary .......................................................... 34
5.23 Year 2000 .................................................................. 34
5.24 Disclosure ................................................................. 35
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT ...................................... 35
6.1 Organization, Standing and Power ............................................ 35
6.2 Authority ................................................................... 35
6.3 Brokers ..................................................................... 35
6.4 No Breach ................................................................... 36
ARTICLE 7 PRE-CLOSING COVENANTS ......................................................... 36
7.1 Operation of Business ....................................................... 36
7.2 No Other Bids ............................................................... 38
7.3 Employee Benefit Plans ...................................................... 39
ARTICLE 8 ADDITIONAL AGREEMENTS ......................................................... 39
8.1 Access to Information of the Company; Confidentiality ....................... 39
8.2 Expenses and Taxes .......................................................... 39
8.3 News Releases ............................................................... 39
8.4 Additional Agreements ....................................................... 40
8.5 Notification of Certain Matters ............................................. 40
8.6 Confidentiality ............................................................. 40
8.7 Consents and Filings ........................................................ 41
8.8 Parent SEC Filings .......................................................... 41
8.9 Consent to Sale of Surviving Corporation .................................... 42
8.10 Commitment to the Company's Business ....................................... 42
8.11 Certain Covenants of the Parent ............................................ 42
ARTICLE 9 CONDITIONS .................................................................... 43
9.1 Conditions to Obligations of Each Party to Effect the Merger ................ 43
9.2 Additional Conditions to the Obligations of Parent .......................... 43
9.3 Additional Conditions to the Obligations of the Company ..................... 45
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ARTICLE 10 CLOSING ...................................................................... 46
10.1 Closing .................................................................... 46
10.2 Documents to be Delivered by Parent ........................................ 47
10.3 Documents to be Delivered by the Company ................................... 47
ARTICLE 11 TERMINATION .................................................................. 48
11.1 Termination ................................................................ 48
11.2 Effect of Termination ...................................................... 49
ARTICLE 12 INDEMNIFICATION .............................................................. 49
12.1 Survival of Representations and Warranties; Damages ........................ 49
12.2 Indemnity Claims ........................................................... 50
12.3 Sources of Indemnification due Parent ...................................... 50
12.4 Shareholder Representatives ................................................ 50
ARTICLE 13 GENERAL PROVISIONS ........................................................... 51
13.1 Amendment .................................................................. 51
13.2 Waiver ..................................................................... 51
13.3 Assignment and Binding Effect .............................................. 51
13.4 Governing Law .............................................................. 51
13.5 Entire Agreement ........................................................... 51
13.6 Severability ............................................................... 51
13.7 Titles ..................................................................... 52
13.8 Attorneys' Fees ............................................................ 52
13.9 Multiple Counterparts ...................................................... 52
13.10 Notices ................................................................... 52
13.11 Incorporation by Reference ................................................ 53
13.12 Arbitration ............................................................... 53
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and
entered into on July 10, 1998, by and between VANS, INC., a Delaware corporation
("Parent"), and SWITCH MANUFACTURING, a California corporation (the "Company"),
with reference to the following facts:
RECITALS:
A. The parties hereto desire to effect a reorganization of the
Company with Parent, whereby, subject to the terms and conditions hereof, the
Company will merge with and into a wholly-owned subsidiary of Parent which will
be a California corporation ("Sub"), and the outstanding shares of the capital
stock of the Company will be converted into the right to receive cash,
promissory notes and common stock of Parent in the amount provided herein.
B. The Board of Directors of the Company, deeming the
above-described merger in the manner contemplated herein and in accordance with
the California Corporations Code (the "Corporation Law") to be desirable and in
the best interests of the Company and its shareholders, has authorized and
approved such merger, subject to the terms and conditions set forth herein, and
the execution and delivery of this Agreement.
C. The Board of Directors of Parent, deeming the above-described
merger in the manner contemplated herein and in accordance with the Corporation
Law to be desirable and in the best interests of Parent and its stockholders,
has authorized and approved such merger, subject to the terms and conditions set
forth herein, and the execution and delivery of this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing facts and the
mutual covenants, representations, warranties and agreements herein contained,
the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 The terms defined in this Article, whenever used in this
Agreement, shall have the respective meanings indicated below for all purposes
of this Agreement. All references herein
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to a Section, Article or Schedule are to a Section, Article or Schedule of or to
this Agreement, unless otherwise indicated.
AAA: as defined in Section 13.12(a).
Actions: any action, claim, suit, litigation, arbitration,
proceeding, mediation, dispute, inquiry or investigation.
Affiliate: of a Person means a Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, the first Person, including, but not limited to, a
subsidiary of the first Person, a Person of which the first Person is a
subsidiary, or another subsidiary of a Person of which the first Person is also
a subsidiary.
Agreement: this Agreement and Plan of Merger, including the
Schedules attached hereto.
Articles: as defined in Section 5.1(d).
Assets: all property, including tangible or intangible, real or
personal property, rights and other assets.
Auditors: The independent, outside public accounting firm which
then audits Parent's financial statements.
Autolock System: as defined in Section 8.10(a).
Bank: as defined in Section 9.2(e).
Benefit Arrangements: as defined in Section 5.16(a)(v).
Business Day: any day other than a Saturday or Sunday on which
banks in the State of California are generally open for business.
Bylaws: as defined in Section 5.1(d).
California Secretary: as defined in Section 2.2.
CERCLA: the Comprehensive Environmental Response Compensation and
Liability Act, as amended. CERCLIS: the Comprehensive Environmental Response
Compensation and Liability Information System.
Certificates: as defined in Section 3.4(c).
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Claimant: as defined in Section 13.12(b). Closing: as defined in
Section 10.1(a).
Closing Conditions: as defined in Section 10.1(a).
Closing Date: as defined in Section 10.1(a).
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission.
Company: as defined in the Preamble.
Company Capital Stock: Common Stock, no par value, of the
Company, the Preferred Stock and any other capital stock of the Company.
Company Personnel: any current or former director, officer,
employee, independent contractor, agent, representative or consultant of the
Company.
Competing Transaction: (a) any merger, consolidation,
reorganization, share exchange or other business combination involving the
Company other than with Parent and Sub, or (b) any transaction involving a sale
of all of the Company Capital Stock or substantially all of the Assets of the
Company or similar transaction or which would result in a change in Control of
the Company other than with Parent and Sub.
Constituent Corporations: as defined in Section 3.1.
Control (including the terms "Controlled by" and "under common
control with"): the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a Person, whether through
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.
Controlled Group Member: any corporation or other trade or
business which is treated as a single employer with the Company under Section
414(b), (c), (m) or (o) of the Code or under Section 4001(b)(1) of ERISA.
Convertible Securities: as defined in Section 2.6(a).
Corporation Law: as defined in Recital B.
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Covered Indemnity Claim: an Indemnity Claim which by agreement of
the Parties, by reason of the failure of the Shareholders Representative to
respond to an Indemnity Notice pursuant to Section 12.2 or by judgment of an
arbitrator or a court of competent jurisdiction is an Indemnity Claim for which
Parent or its Affiliates, officers, directors, agents, successors,
representatives or assigns are entitled to indemnification pursuant to Article
12.
Damages: as defined in Section 12.1(b).
Dissenting Shares: shares issued by the Company held by any
"Dissenting Shareholder" (as such term is defined in Section 1300(c) of the
Corporation Law) with respect to which such Dissenting Shareholder has perfected
its rights to require the Company to purchase such Dissenting Shareholder's
shares for cash under Chapter 13 of the Corporation Law.
Earn-out Note: Senior and Subordinated Promissory Notes in the
form of Exhibit A-1 and A-2 attached hereto
Earn-out Note Payment: as defined in Section 2.5(d).
Earn-out Note Share Valuation: as defined in Section 2.5 (d).
Earn-out Payment Shares: as defined in Section 2.5(d).
Effective Time: as defined in Section 2.3.
Employee Plans: as defined in Section 5.16(a).
Environmental Condition: as defined in Section 5.13(c).
Environmental Law: as defined in Section 5.13(b).
Environmental Noncompliance: as defined in Section 5.13(d).
ERISA: Employee Retirement Income Security Act of 1974, as
amended.
Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
Exchange Agent: as defined in Section 3.4(a).
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Facility: as defined in Section 5.13(f).
Financial Statements: as defined in Section 5.4.
Fiscal Year: The financial reporting year for Parent, currently
June 1 through May 31.
French Subsidiary: Switch-Europe SARL.
GAAP: generally accepted accounting principles, consistently
applied.
Governmental Approval: any action, consent, approval,
authorization, permit, license, exemption, order or waiver of, registration or
filing with, or report or notice to, any Governmental Authority.
Governmental Authority: any foreign, federal, state, municipal or
other court, tribunal, department, commission, board or other government
authority or agency or any self-regulatory organization and any arbitrator or
other private tribunal.
Hazardous Materials: as defined in Section 5.13(a).
Indemnity Claim: as defined in Section 12.1(b).
Indemnity Notice: as defined in Section 12.2.
Initial Note: a Promissory Note in the form of Exhibit A-3
attached hereto.
Initial Stock Payment: as defined in Section 2.5(a).
IRS: the Internal Revenue Service or any successor agency.
ITC: As defined in Section 8.10
Japan: as defined in Section 8.10(b).
Japan Patent: a patent application pending for the Company in
Japan for the Autolock System (International Application No. PCT/U.S. 96/09841)
with the Japanese Patent and Trademark Office.
Japanese Trademark Dispute: Sega owns the Japanese trademark
registration for the ▇▇▇▇ "Switch" in Japanese class 28
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(sporting goods). Before the Company could approach Sega about assigning it the
registration, Sega assigned it to a company called Natural Cedars.
June 30th Financial Statements: as defined in Section 5.22.
Knowledge of the Company: information actually known by the
Company or which reasonably should be known by the Company upon reasonably
diligent inquiry by the Company.
Knowledge of Parent: information actually known by Parent or
which reasonably should be known by Parent upon reasonably diligent inquiry by
Parent.
Kikkawa Patent: as defined in Section 9.2(j).
K2 Action: as defined in Section 9.2(l).
Law: all statutes, laws, rules, regulations, requirements,
ordinances, injunctions, writs, decrees and orders of any Governmental
Authority.
Letter of Transmittal: as defined in Section 3.4(c).
Lien: any condition, restriction, assessment, mortgage, pledge,
hypothecation, security interest, title defect, claim, option, lien, charge or
other encumbrance or adverse claim, but excluding any restriction or limitation
on transferability imposed by Law.
Management Group: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. Sand, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and G. ▇▇▇▇▇▇ ▇▇▇▇▇.
Material Adverse Effect: any effect that is materially adverse to
the business, future prospects, results of operations or financial condition of
the Company, the French Subsidiary or the Parent as the context may require;
provided, however, any criminal act shall be deemed material.
Material Contract: as defined in Section 5.8(a).
Measurement Date: December 31, 1997.
Merger: as defined in Section 2.1.
Merger Agreement: as defined in Section 2.2.
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Merger Consideration: as defined in Section 2.5.
Multiemployer Plan: as defined in Section 5.16(a)(ii).
Note Payment: as defined in Section 2.5(c). Note Payment Shares:
as defined in Section 2.5(c).
Note Share Valuation: as defined in Section 2.5(c).
OSHA: Occupational Safety and Health Administration.
Outstanding Shares: as defined in Section 3.2(a).
Parent: as defined in the Preamble.
Parent Common:Common Stock, $.001 par value, of Parent.
Parent Documents: this Agreement and each agreement, document,
instrument or certificate executed by the Parent pursuant to the terms hereof.
Parent Filings: as defined in Section 8.8.
Party: any of the parties to this Agreement.
Pension Plan: as defined in Section 5.16(a)(iv).
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, joint venture, Governmental
Authority or other entity.
POM: as defined in Section 4.3(a).
Preferred Stock: The Series A Preferred Stock, no stated value,
Series B Preferred Stock, no stated value, and Series C Preferred Stock, no
stated value, of the Company.
Previous Facility: as defined in Section 5.13(f).
Promissory Note: either an Initial Note or an Earn-out Note.
Promissory Notes shall mean both the Initial Note and the Earn-out Note.
Proxy Materials: as defined in Section 4.2(a).
Proxy Statement: as defined in Section 4.2(a).
Proprietary Rights: as defined in Section 5.14.
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Registration Statement Delaying Event: as defined in Section
2.7(c).
Release: as defined in Section 5.13(e).
Request: as defined in Section 13.12(b).
Respondent: as defined in Section 13.12(b).
Return: any return, report, declaration, form or information
statement relating to Taxes that relates to the business or Assets of the
Company.
Ride Action: the patent infringement action between the Company,
on the one hand, and ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Bindings
Company, a wholly-owned subsidiary of Ride, Inc., on the other hand.
Section 9.3(i) Termination: as defined in Section 9.3(i).
Securities Act: the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Seller Documents: this Agreement and each agreement, document,
instrument or certificate executed by the Company pursuant to the terms hereof.
Senior Earn-out Notes: as defined in Section 2.5(d).
Shareholders Meeting: as defined in Section 4.1.
Shareholder Representatives: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or their successors appointed in accordance with Section
12.4.
Software: as defined in Section 5.23.
Stock Price Date: the last day of the one year period commencing
on the Closing Date, or if such date is not a trading date, the last trading
date immediately prior thereto.
Sub: as defined in Recital A.
Subordinated Earn-out Notes: as defined in Section 2.5(d).
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Surviving Corporation: as defined in Section 3.1.
Switch Sale: as defined in Section 8.9.
Tax: any federal, state, local, foreign or other income,
alternative minimum, accumulated earnings, personal holding company, profits,
windfall profits, franchise, capital stock, net worth, capital, gross receipts,
value added, sales, use, excise, custom duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance, environmental,
real and personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof (including, but not limited to, all interest and penalties thereon and
additions thereto), whether disputed or not and whether arising as a result of a
self-assessment, an audit or inquiry by a tax authority or other Governmental
Authority or otherwise.
Termination Date: July 30, 1998.
Termination Deadline: as defined in Section 9.3(i).
Unsolicited Offer: as defined in Section 7.2.
Valuation Price: as defined in Section 2.5(b).
Welfare Plan: as defined in Section 5.16(a)(i).
ARTICLE 2
THE MERGER
2.1 The Merger. At the Effective Time, upon the terms and subject
to satisfaction or waiver of the conditions of this Agreement, the Company shall
be merged with and into Sub in accordance with the Corporation Law (the
"Merger").
2.2 Merger Agreement. An agreement of merger, which shall include
the appropriate provisions to change the name of Sub in accordance with Section
2.4 hereof, (the "Merger Agreement"), together with all appropriate officers
certificates, shall be prepared, executed and delivered to the Secretary of
State of the State of California (the "California Secretary") for filing on the
Closing Date in accordance with the Corporation Law. The Parties shall take all
action necessary to permit the California Franchise Tax Board to issue a tax
clearance
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certificate for the Company and deliver it to the California Secretary prior to
the Closing Date.
2.3 Effective Time. The Merger shall become effective upon the
filing of the Merger Agreement with the California Secretary in accordance with
the provisions of the Corporation Law. The date and time of the filing with the
California Secretary is referred to herein as the "Effective Time."
2.4 Name of the Surviving Corporation. The name of the Surviving
Corporation shall be "Switch Manufacturing."
2.5 Merger Consideration. The consideration for the Merger shall
be the following (the "Merger Consideration"), subject to offset for Covered
Indemnity Claims, as provided in Article 12 hereof:
(a) 133,333 shares of Parent Common (the "Initial Stock
Payment");
(b) (i) Subject to Section 2.5(b)(ii), if the ask price
for the Parent Common does not equal or exceed $15.00 per share ( the "Valuation
Price")at any time during any one trading day during the one year period
commencing on the Closing Date, Parent shall pay in cash to each holder of a
share of Parent Common issued as part of the Initial Stock Payment an amount
equal to the difference between the closing ask price of Parent Common on the
Stock Price Date and $15.00. This payment shall be made no later than 30 days
after the Stock Price Date.
(ii) In lieu of the payment under Section 2.5(b)(i),
Parent, in its sole discretion, shall have the option, exercisable at any time
prior to the Stock Price Date, to pay in cash to each holder of a share of
Parent Common issued as part of the Initial Stock Payment an amount equal to the
difference between the closing ask price of Parent Common on any trading day
prior to the Stock Price Date and the Valuation Price. If this payment is made,
Parent shall send a notice with the payment indicating it has elected to make
this payment within three Business Days of the applicable trading date;
(c) Initial Notes in the aggregate principal amount of
$2.0 million subject to adjustment pursuant to the terms thereof (the "Note
Payment"). As set forth in the Initial Notes, Parent may in its sole discretion
make all or any portion of the payments under the Initial Notes in shares of
Parent Common (the "Note Payment Shares"). Any Note Payment Shares
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issued shall be valued as set forth in the Initial Notes (the "Note Share
Valuation"); and
(d) Earn-out Notes in the aggregate principal amount of
$12,000,000 subject to adjustment pursuant to the terms thereof (the "Earn-out
Note Payment") consisting of: (i) Senior Earn-out Notes in the aggregate
principal amount of $2,342,279 which are senior in the right of payment to the
Subordinated Earn-out Notes (the "Senior Earn-out Notes") and (ii) Subordinated
Earn-out Notes in the aggregate principal amount of $9,657,721 which are
subordinated in the right of payment to the Senior Earn-out Notes("Subordinated
Earn-out Notes"). As set forth in the Earn-out Notes, Parent may in its sole
discretion make all or any portion of the payments under the Earn-out Notes in
shares of Parent Common (the "Earn-out Payment Shares"). Any Earn-out Payment
Shares issued shall be valued as set forth in the Earn-out Notes (the "Earn-out
Note Share Valuation").
2.6 Convertible Securities.
(a) Except as set forth in Schedule 2.6, each option,
warrant or securities convertible into or exchangeable or exercisable for, or
rights to purchase or otherwise acquire, any shares of Company Capital Stock
("Convertible Securities") which has not been exercised at the Effective Time
shall terminate at, and shall no longer be of any force or effect after, the
Effective Time.
(b) The Company's stock option plan shall terminate at the
Effective Time.
(c) The Board of Directors of the Company (or, if
appropriate, any committee thereof) shall adopt such resolutions or take such
other actions as are necessary to reflect the terms set forth in Sections 2.6(a)
and (b).
2.7 Registration Statements for Stock.
(a) Within 90 days after the Closing Date, Parent shall
file with the Commission a registration statement under the Securities Act
covering the reoffer and resale of the Initial Stock Payment by the shareholders
of the Company. Parent shall use its best efforts to cause such registration
statement to become effective under the Securities Act within 120 days after the
Closing Date.
(b) Parent shall file with the Commission a registration
statement under the Securities Act covering the
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issuance of Note Payment Shares and Earn-out Payment Shares or, at the option of
Parent, such issuance may be covered under the registration statement described
in Section 2.7(a). Parent shall use its best efforts to cause such registration
statement to become effective under the Securities Act prior to the date on
which the first principal payment is due under the Initial Notes.
(c) Notwithstanding anything to the contrary contained
herein, Parent shall be entitled to (i) postpone the filing of any registration
statement required to be prepared and filed by it hereunder or (ii) withdraw any
registration statement which has been prepared and filed by it hereunder (but
which has not yet been declared effective), if, in either case, Parent
reasonably and in good faith determines that such registration would interfere
in any material respect with any proposal or plan by the Parent to engage in any
financing or any material acquisition or disposition by Parent or any subsidiary
thereof of the capital stock or substantially all of the assets of any other
Person (other than in the ordinary course of business), any tender offer or any
merger, consolidation, corporate reorganization or restructuring or other
similar transaction material to Parent and its subsidiaries as a whole
("Registration Statement Delaying Event"). In the event the filing of any such
registration statement is postponed or withdrawn, Parent shall file or refile
such registration statement upon the first to occur of either: (i) as soon as
practicable after the Registration Statement Delaying Event has been completed
or terminated, but in no event more than thirty (30) days thereafter or (ii) one
hundred and eighty (180) days after the commencement of the Registration
Statement Delaying Event. Upon the occurrence of a Registration Statement
Delaying Event the time periods during which the registration statements set
forth in Sections 2.7(a) and (b) shall become effective shall be extended by the
number of days equal to the lesser of: (i) the duration of the Registration
Statement Delaying Event or (ii) one hundred and eighty (180) days.
2.8 Cash in lieu of Fractional Shares. No fractional shares of
Parent Common will be issued. Parent will pay cash in lieu of any fractional
shares which would otherwise be issuable under Sections 2.5(a), 2.5(b)or 2.5(c).
The cash payment shall equal the product of the fraction of share which would
have been issuable multiplied by: (a) the Valuation Price in the case of the
Initial Shares, (b) the Note Share Valuation in the case of the Note Payment
Shares and (c) the Earn-out Note Share Valuation in the case of the Earn-out
Payment Shares.
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ARTICLE 3
EFFECT OF THE MERGER
3.1 General. At the Effective Time, the separate existence of the
Company shall cease and Sub shall continue as the surviving corporation (Sub
sometimes is referred to hereinafter as the "Surviving Corporation"), and shall
possess all the rights, privileges, powers, immunities and franchises, of a
public as well as a private nature, of Sub and the Company (collectively
referred to as the "Constituent Corporations"); all property, real, personal and
mixed, and all debts due on whatever account, including subscriptions for
shares, and all choices in action, and all and every interest, of or belonging
to or due each of the Constituent Corporations shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate, or any interest therein, vested in
either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Constituent Corporations so merged, and any claim existing or Action or
proceeding pending by or against either of the Constituent Corporations may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. The Surviving Corporation shall have all the
rights, privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under the Corporation Law, and
neither the rights of creditors nor any Liens upon the property of either of the
Constituent Corporations shall be impaired by the Merger, all with the effect
set forth in the Corporation Law.
3.2 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party or the holder of any
of the following securities:
(a) Each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than shares owned
beneficially or of record by Parent, Sub or any direct or indirect subsidiary of
Parent or Sub, and shares held in the treasury of the Company and Dissenting
Shares) ("Outstanding Shares") shall be canceled and be converted into, and
shall thereafter represent solely, the right to receive an amount equal to the
portion of the Merger Consideration allocated to the class of stock of which
such Company Capital Stock is a part (such allocation is set forth on Schedule
3.2 attached hereto) divided by the sum of the number of Outstanding Shares and
Dissenting Shares of such class.
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(b) Each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time and held by the Company as
treasury stock or owned beneficially or of record by Parent or Sub or any direct
or indirect subsidiary of Parent or Sub shall be canceled and no consideration
shall be delivered in exchange therefor.
(c) Each share of common stock, no par value, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, no par value, of the Surviving Corporation.
3.3 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, Dissenting Shares shall not be converted into the
right to receive the Merger Consideration at or after the Effective Time unless
and until the holder of such Dissenting Shares withdraws his or her demand for
payment of the fair market value of such shares in accordance with Chapter 13 of
the Corporation Law or becomes ineligible for such payment. If a holder of
Dissenting Shares shall withdraw his or her demand for payment of the fair
market value of such shares in accordance with Chapter 13 of the Corporation Law
or shall become ineligible to receive such payment, then, as of the later of the
Effective Time or the occurrence of such event, such holder's Dissenting Shares
shall be automatically converted into and represent the right to receive the
Merger Consideration as provided in Section 3.2. The Company shall deliver to
Parent copies of any demands for payment of fair market value received by the
Company and will not, except with the prior written consent of Parent, settle or
compromise or offer to settle or compromise any such demands, voluntarily make
any payment with respect to any such demands or approve any withdrawal of any
such demand. Each holder of Dissenting Shares shall have only such rights and
remedies as are granted to such holder under Chapter 13 of the Corporation Law.
3.4 Exchange of Certificates.
(a) Prior to the Closing Date, Parent shall appoint its
transfer agent to act as exchange agent (the "Exchange Agent") in the Merger.
(b) After the Effective Time and within five (5) business
days after its receipt of any applicable Letter of Transmittal, as hereinafter
defined, which has been properly completed and executed, Parent shall deliver to
the Exchange
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Agent: (i) Promissory Notes made payable to the Persons entitled to receive
Promissory Notes pursuant to Section 3.4(c) hereof; (ii) appropriate
instructions to the Exchange Agent to issue certificates for Parent Common to
the Persons entitled to receive such certificates pursuant to Section 3.4(c);
and (iii) sufficient cash to make cash in lieu of fractional share payments.
(c) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which represented Outstanding Shares (the "Certificates"), a letter
of transmittal (the "Letter of Transmittal") for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon surrender of
a Certificate to the Exchange Agent and a duly executed and completed Letter of
Transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor (i) a check in the amount of cash in lieu of any fractional
share pursuant to Section 2.8, (ii) an Initial Note in the principal amount
equal to the product of the number of shares of Company Capital Stock evidenced
by such Certificate multiplied by the portion of the Note Payment to which a
share of such Company Capital Stock is entitled under Section 3.2(a), (iii) an
Earn-out Note in the principal amount equal to the product of the number of
shares of Company Capital Stock evidenced by such Certificate multiplied by the
portion of the Earn-out Note Payment to which a share of such Company Capital
Stock is entitled under Section 3.2(a), and (iv) a certificate for the number of
shares of Parent Common equal to the product of the number of shares of Company
Capital Stock evidenced by such Certificate multiplied by the portion of the
Initial Stock Payment to which a share of such Company Capital Stock is entitled
under Section 3.2(a). Each Certificate surrendered hereunder shall forthwith be
canceled. At the Effective Time, the holder of a Certificate shall have no
rights with respect to shares of Company Capital Stock other than to surrender
such Certificate pursuant to this Section 3.4 or, if the holder holds Dissenting
Shares, to demand payment of the fair market value thereof pursuant to Chapter
13 of the Corporation Law. If the Merger Consideration (or any portion thereof)
is to be delivered to any Person other than the Person in whose name the
Certificate is registered, it shall be a condition to such exchange that the
Person requesting such exchange shall deliver to the Exchange Agent all
documents required to evidence the transfer of the surrendered Certificate from
the registered holder to the Person surrendering the Certificate and shall pay
to the Exchange Agent any transfer or other Taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered holder
of the Certificate so
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surrendered or shall establish to the satisfaction of the Exchange Agent that
such Tax has been paid or is not applicable.
(d) The Exchange Agent shall follow the same procedure
with respect to lost, stolen or mutilated Certificates as Parent follows with
respect to lost, stolen or mutilated certificates.
(e) Neither Parent nor any other Party hereto shall be
liable to a holder of Company Capital Stock for any Merger Consideration
delivered to a Governmental Authority pursuant to applicable abandoned property,
escheat and other Laws.
(f) If any Certificate shall not have been surrendered
prior to the second anniversary of the Closing Date (or immediately prior to
such earlier date on which any payment in respect hereof would otherwise escheat
to or become the property of any governmental unit or agency), the unclaimed
portions of the Merger Consideration in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of Parent, free and
clear of all claims of any Person previously entitled thereto.
(g) No holder of a Certificate shall be entitled to
receive any dividend or other distribution payable on the Parent Common issuable
as part of the Merger Consideration to holders of record as of any record date
after the Effective Time until the Certificate is surrendered in accordance with
Section 3.4(c). Upon such surrender, there shall be paid to the Person who
receives the Initial Stock Payment in exchange for the Certificate any dividends
or other distributions (without interest) which were paid to holders of Parent
Common of record as of any record date after the Effective Time but before the
date of surrender of the Certificate.
(h) No holder of a Certificate shall have any rights as a
holder of Parent Common until such Certificate is surrendered in accordance with
Section 3.4(c).
3.5 No Transfers of Stock After Effective Time. After the
Effective Time, there shall be no transfers of any shares of Company Capital
Stock on the stock transfer books of the Surviving Corporation. If, after the
Effective Time but prior to the date on which unclaimed Merger Consideration
becomes property of Parent pursuant to Section 3.4(f), Certificates are
presented to the Surviving Corporation, they shall be forwarded to the Exchange
Agent and exchanged in accordance with Section
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3.4(c), subject to applicable Law in the case of Dissenting Shares.
ARTICLE 4
PROXY STATEMENT/PRIVATE OFFERING MEMORANDUM
4.1 Shareholders Meeting. The Company shall, in accordance with
the Corporation Law and the Articles and Bylaws, duly call, give notice of,
convene and hold an annual or special meeting of its shareholders (the
"Shareholders Meeting") on or about July 20, 1998(and in any event on or before
July 24, 1998) for the purpose of considering and taking action upon the
approval of this Agreement and the Merger. The notice of Shareholders Meeting
shall state that shareholders of the Company are entitled to assert dissenters'
rights under Chapter 13 of the Corporation Law and shall be accompanied by a
copy of Chapter 13 of the Corporation Law. The Company will include in the Proxy
Statement the recommendation of the Board of Directors of the Company, in its
reasonable good faith judgement, that shareholders of the Company vote in favor
of the approval of this Agreement and the Merger at the Shareholders Meeting and
shall use its best efforts to solicit from all shareholders of the Company
proxies in favor of such approval and will take all other actions reasonably
necessary, or in the reasonable judgment of Parent advisable, to secure the
approval of the Merger and this Agreement by the Company's shareholders under
the Corporation Law.
4.2 Proxy Materials.
(a) In compliance with applicable Laws, the Company shall
prepare and deliver to Parent for its review and approval prior to mailing to
the shareholders of the Company a Proxy Statement and form of proxy with respect
to the Shareholders Meeting ("Proxy Statement") and promptly after receipt of
Parent's approval, the Company shall mail the Proxy Statement to shareholders of
the Company. The term "Proxy Statement" shall mean such proxy or information
statement at the time it initially is mailed to the Company's shareholders and
all amendments or supplements thereto, if any, similarly filed and mailed. The
term "Proxy Materials" shall mean the Proxy Statement and such other proxy
solicitation materials at the time initially mailed to the Company's
shareholders and all amendments or supplements thereto, if any, similarly filed
and mailed.
(b) Parent covenants that (i) none of the information
supplied by Parent for inclusion or incorporation by reference in the Proxy
Materials will, at the time the Proxy
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Statement is mailed to the shareholders of the Company and at the time of the
Shareholders Meeting, contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) if, at any time prior to the Effective Time, Parent
becomes aware of the occurrence of any event with respect to Parent or any of
its subsidiaries, or with respect to the other information supplied by the
Parent for inclusion in the Proxy Materials, which is required to be described
in an amendment of, or a supplement to, the Proxy Materials, Parent shall notify
the Company in writing, which notice shall describe, in reasonable detail, the
event to be so described.
(c) The Company covenants that (i) none of the information
included in the Proxy Materials at the time the Proxy Statement is mailed to the
shareholders of the Company and at the time of the Shareholders Meeting, and no
information supplied or to be supplied by the Company to Parent for inclusion in
any Parent Filings, at the time supplied to Parent, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, (ii) if, at any
time prior to the Effective Time, the Company becomes aware of the occurrence of
any event with respect to the Company, or with respect to other information
supplied by the Company for inclusion in the Proxy Materials, which is required
to be described in an amendment of, or a supplement to, the Proxy Materials,
such event shall be so described, and such amendment or supplement, as required
by law, disseminated to the shareholders of the Company, and (iii) the Proxy
Materials shall comply as to form in all material respects with the provisions
of all applicable Laws.
4.3 Private Offering Memorandum.
(a) In compliance with applicable Laws, Parent shall
prepare and deliver to the Company for mailing to the shareholders of the
Company as part of the Proxy Materials a private offering memorandum relating to
the private offering of the shares of Parent Common to be issued in the Merger
(the "POM").
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(b) The Company covenants that no information supplied by
the Company to Parent for inclusion in the POM, at the date of the POM, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
5.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
the requisite corporate authority and power to carry on its business as it is
now being conducted and the French Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of France and has the
requisite corporate authority and power to carry on its business as it is now
being conducted.
(b) Except for the French Subsidiary, the Company (i) does
not, directly or indirectly, own any stock or other interest in any corporation,
partnership, joint venture, limited liability company, or other business
association or Person and (ii) is not subject to any obligation or requirement
to provide funds to or to make any investment (in the form of a loan, capital
contribution or otherwise) in or to any Person.
(c) The Company and the French Subsidiary are duly
qualified or licensed to do business and are in good standing in California and
France, respectively, which includes each jurisdiction in which the nature of
their businesses or the properties owned or leased by them makes such
qualification or licensing necessary, except for any such jurisdiction where the
failure to so qualify or be licensed, individually and in the aggregate for all
such jurisdictions, would not reasonably be expected to have a Material Adverse
Effect on the Company or the French Subsidiary, as the case may be.
(d) Attached hereto as Schedule 5.1(d) are true and
correct certified copies of the articles of incorporation of the Company, as
amended through the date hereof, (the "Articles")
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and bylaws of the Company, as amended through the date hereof (the "Bylaws").
The Company has delivered to Parent the complete minute book and stock records
of the Company.
5.2 Capitalization.
(a) The authorized capital stock of the Company and the
number of issued and outstanding shares of Company Capital Stock, and the number
of shares subject to Convertible Securities are set forth on Schedule 5.2(a).
All issued and outstanding shares of Company Capital Stock are validly issued
and outstanding, fully paid and nonassessable and free of preemptive rights.
Other than the shares of Company Capital Stock and shares of Company Capital
Stock subject to Convertible Securities set forth in Schedule 5.2(a), there are
no shares of capital stock or other equity securities of the Company outstanding
and no outstanding Convertible Securities, subscription rights (including any
preemptive rights), calls or commitments of any character whatsoever to which
the Company is a party or is bound, requiring or which could require the
issuance, sale or transfer by the Company of any shares of Company Capital Stock
or any Convertible Securities. There are no stock appreciation rights relating
to the Company.
5.3 Authority.
(a) The Company has the requisite corporate power and
authority to enter into each Seller Document, to perform its obligations
thereunder, and to consummate the transactions contemplated thereby. Except for
the approval of shareholders of the Company, the execution and delivery of the
Seller Documents by the Company and the consummation by the Company of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company. Each Seller Document has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) The execution and delivery by the Company of the
Seller Documents do not, and the consummation of the transactions contemplated
thereby will not, (i) conflict with, or result in a violation of, any provision
of the Articles or Bylaws, (ii) constitute or result in a breach of or default
(or an event which with notice or lapse of time, or both, would constitute a
default) under, or result in the termination or suspension of, or accelerate the
performance required by, or result in a right of termination, cancellation or
acceleration
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of any obligation or a loss of a benefit under, any note, bond, mortgage,
indenture, deed of trust, lease, permit, concession, franchise, license,
agreement or other instrument or obligation to which the Company is a party or
to which the properties or Assets of the Company are subject, except for such
violations, conflicts, breaches, defaults, terminations or accelerations which
would not, individually or in the aggregate, have a Material Adverse Effect,
(iii) create any Lien upon any of the properties or Assets of the Company, or
(iv) constitute, or result in, a violation of any Law applicable to the Company
or any of the properties or Assets of the Company.
(c) Except as set forth on Schedule 5.3(c), no consent,
approval, order or authorization of, notice to, or registration, declaration or
filing with any Governmental Authority or other Person is necessary in
connection with the execution and delivery of the Seller Documents by the
Company or the consummation by the Company of the transactions contemplated by
the Seller Documents. Without limiting the generality of the foregoing,
currently there are not, and at the Effective Time there will not be, more than
35 holders of Company Capital Stock who are not "accredited" (as such term is
defined under all applicable federal and state securities Laws).
5.4 Financial Statements and Reports. Attached hereto as Schedule
5.4, are the audited income statements of the Company for its fiscal years ended
December 31, 1996 and 1997 and the audited balance sheets of the Company as of
December 31, 1996 and 1997(collectively, the "Financial Statements"). The
Financial Statements (a) were prepared in accordance with GAAP, (b) have been
maintained on a consistent basis for the periods covered thereby, (c) are
complete and correct, and (d) present fairly the financial position, results of
operations and changes in financial position of the Company as of the dates and
for the periods indicated. Except as noted in the opinions contained in the
Financial Statements, such Financial Statements and opinions were rendered
without qualification or exception and were not subject to any contingency. No
event has occurred since the preparation of the most recent Financial Statements
that would require a restatement of the Financial Statements under GAAP other
than by reason of a change in GAAP. The Financial Statements reflect, as of the
date thereof, the interest of the Company in the Assets, liabilities and
operations of the French Subsidiary.
5.5 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 5.5, the Company does not have any liability or obligation (absolute,
accrued, contingent or
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otherwise) of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except liabilities (a) stated or
adequately reserved against in the Financial Statements or disclosed in the
footnotes thereto; or (b) (i) incurred after the Measurement Date in the
ordinary course of business consistent with past practices, (ii) not prohibited
by this Agreement and (iii) not reasonably expected to have a Material Adverse
Effect.
5.6 Absence of Certain Changes or Events. Except as set forth in
Schedule 5.6 attached hereto(for the purposes of this Section 5.6 any disclosure
under one subsection of Section 5.6 will be deemed to be a disclosure under the
other subsections of Section 5.6 if such disclosure is cross-referenced), since
the Measurement Date, there has not been:
(a) any event, damage, destruction or loss, whether
covered by insurance or not, which has had or reasonably is expected to have a
Material Adverse Effect;
(b) any entry by the Company into a commitment or
transaction material to the Company, which is not in the ordinary course of
business consistent with prior practice;
(c) any change by the Company in accounting principles,
methods or practices, except insofar as may have been required by a change in
GAAP;
(d) any declaration, payment or setting aside for payment
of any dividends or distributions in respect to shares of Company Capital Stock,
or any redemption, purchase or other acquisition of any shares of Company
Capital Stock;
(e) any cancellation of any debts or waiver or release of
any right or claim of the Company individually or in the aggregate material to
the Company, whether or not in the ordinary course of business;
(f) any revaluations by the Company of any of its Assets
or liabilities, including without limitation, writing-off notes or accounts
receivable;
(g) any increase in the rate or terms of compensation
payable or to become payable by the Company to any Company Personnel; any bonus,
incentive compensation, service award or other benefit granted, made or accrued,
contingently or otherwise, for or to the credit of any Company Personnel;
employee welfare, pension, retirement, profit-sharing or similar
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payment or arrangement made or agreed to by the Company for any Company
Personnel except for contributions in accordance with prior practice made to,
and payments made to employees under, plans and arrangements existing on the
Measurement Date;
(h) any Tax election or settlement or compromise by the
Company of any federal, state, local or foreign Tax liability;
(i) any adoption of a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or other
reorganization of the Company, other than in connection with the transactions
contemplated hereby;
(j) any purchase, acquisition or sale by the Company of
any assets, other than in the ordinary course of business consistent with prior
practice;
(k) any addition to, or modification of, the Employee
Plans, arrangements or practices existing on the Measurement Date which affect
any Company Personnel, other than any addition or modification required by Law
or the extension of coverage to Company Personnel who became eligible after the
Measurement Date;
(l) any amendment, cancellation or termination of any
Material Contract, including, without limitation, license or sublicense, or
other instrument to which the Company is a party or to which the Company or any
of the Assets of the Company is bound;
(m) any failure to pay when due any material obligation of
the Company;
(n) any failure to operate the business of the Company in
the ordinary course with an effort to preserve the business intact, to keep
available to the Company the services of their personnel, and to preserve for
the Company the goodwill of their customers and others having business relations
with the Company;
(o) any Assets of the Company subjected to a Lien;
(p) any commitment to borrow money entered into by the
Company, or any loans made or agreed to be made by the Company, involving more
than $10,000 individually or $25,000 in the aggregate;
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(q) any liabilities incurred by the Company involving
$10,000 or more individually and $25,000 or more in the aggregate, other than
liabilities incurred in the ordinary course of business consistent with past
practices;
(r) any payment, discharge or satisfaction of any
liabilities of the Company or any capital expenditure of the Company, other than
(i) the payment, discharge or satisfaction in the ordinary course of business
consistent with prior practice of liabilities reflected or reserved against in
the Financial Statements or incurred in the ordinary course of business
consistent with prior practice since the Measurement Date, and (ii) any capital
expenditures involving $10,000 or less individually and $25,000 or less in the
aggregate;
(s) any expenditures in excess of $10,000 individually or
$25,000 in the aggregate made by the Company which are not reflected as an Asset
in the Company's balance sheet accounts or are not deductible for Federal income
tax purposes;
(t) (i) any agreement, commitment or other transaction
entered into by the Company, other than any agreements involving an expenditure
of not more than $10,000 individually or not more than $25,000 in the aggregate
entered into in the ordinary course of business consistent with past practices
or (ii) any agreement or commitment entered into by the Company involving more
than $10,000 that, pursuant to its terms, is not cancelable without penalty on
less than thirty days' notice;
(u) any amendment of the Articles or Bylaws; or
(v) any agreement by the Company to do any of the things
described in the preceding clauses (a) through (u) of this Section 5.6, other
than as expressly contemplated or provided for herein.
5.7 Assets.
(a) All Assets owned, leased or licensed by the Company
are in good and usable condition, except for reasonable wear and tear. Schedule
5.7 is a list of all Assets and indicates whether the Asset is owned, leased or
licensed.
(b) The Company (i) is the lawful owner of all of the
Assets it purports to own, (ii) has valid leasehold
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interests in the Assets it purports to lease, and (iii) has valid license rights
(whether as a licensor or licensee) in the Assets it purports to license, in all
cases free and clear of all Liens, except for Liens on real property for real
estate Taxes not yet due and payable. Without limiting the generality of the
foregoing, other than as set forth in Schedule 5.7 hereto, the Company owns all
tooling used to manufacture its products.
(c) The Company has not depreciated any of the Assets on
an accelerated basis or in any other manner inconsistent with applicable IRS
guidelines, if any.
(d) The Assets constitute all the properties and assets
which are necessary to operate the business of the Company as presently
conducted.
(e) The Company has delivered to Parent a true, accurate
and complete copy of each lease, license or sublicense regarding any Assets
leased, licensed or sublicensed.
(f) The Company enjoys peaceful and undisturbed possession
under all leases of real property and all of such leases are valid and in full
force and effect.
(g) There are no pending or, to the Knowledge of the
Company, threatened condemnation proceedings relating to any real property
leased or used by the Company.
(h) The Assets referred to as "Equipment" on the balance
sheet at the Measurement Date included in the Financial Statements include all
of the items of personal property (including personal computers, computer
printers and other office furniture and equipment) used by the Company as of
such date, and all of such items are located at, or at the Closing will be
located at, the Company's headquarters in San Francisco, California, other than
as set forth in Schedule 5.7 hereto.
5.8 Contracts and Commitments.
(a) Except for contracts, commitments, plans, licenses and
other agreements described in Schedule 5.8(a) (each individually, a "Material
Contract"), the Company is not a party to or subject to:
(i) any agreement or other commitment which is not
otherwise described in this Section 5.8(a) except agreements or other
commitments which involve payments to or by
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the Company of $10,000 or less individually and $25,000 or less in the
aggregate;
(ii) any agreement or other commitment with any
Person containing covenants limiting the freedom of the Company or any of the
Company Personnel to compete in any line of business or with any Person or in
any geographic location or to use or disclose any information in their
possession;
(iii) any license agreement (as licensor or
licensee); (iv) any agreement of indemnification, other than indemnification
rights granted in the Articles or Bylaws;
(v) any agreement which contains a fixed penalty or
liquidated damages clause for late performance or other default by the Company;
(vi) any agreement or undertaking for an amount in
excess of $2,500, pursuant to which the Company is: (A) borrowing or is entitled
to borrow any money; (B) lending or has committed itself to lend any money; or
(C) a guarantor or surety with respect to the obligations of any Person;
(vii) any agreement with any Company Personnel or an
Affiliate of Company Personnel;
(viii) any powers of attorney granted by the Company;
and
(ix) any leases of real property.
(b) The Company is not in violation or breach of any
Material Contract. There does not exist any event or condition that, after
notice or lapse of time or both, would constitute an event of default or breach
under any Material Contract on the part of the Company or, to the Knowledge of
the Company, any other party thereto or would permit the modification,
cancellation or termination of any Material Contract or result in the creation
of any Lien upon, or any Person acquiring any right to acquire, any Assets of
the Company. To the Knowledge of the Company, no other party to any Material
Contract is in default thereunder or breach thereof. The Company has not
received in writing any claim or threat that the Company has breached any of the
terms and conditions of any Material Contract.
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(c) The Company has delivered to Parent a true, accurate
and complete copy of each Material Contract, including all amendments,
supplements or modifications thereto or waivers thereunder.
(d) The consent of, or the delivery of notice to or filing
with, any party to a Material Contract is not required for the execution and
delivery by the Company of the Seller Documents or the consummation of the
transactions contemplated under the Seller Documents.
5.9 Compliance with Law.
(a) To the Knowledge of the Company, the Company is not in
violation of, and since January 1, 1995, the Company has not violated, (i) any
Law applicable to its business or operations, including, without limitation, all
foreign, federal, state and local energy, public utility, zoning, building code,
health, employee safety, labor, wages, collective bargaining, securities, OSHA
Laws and Environmental Laws, (ii) any judgment, decree, order, writ, injunction
or similar action of any Governmental Authority applicable to the Company's
business or operations.
(b) All Governmental Approvals necessary for the conduct
of the business of the Company have been duly obtained and are in full force and
effect. There are no proceedings pending or, to the Knowledge of the Company,
threatened, that might result in, and there are no facts or circumstances
existing which would be a basis for, the revocation, cancellation or suspension
of any such Governmental Approval, and the execution, delivery and performance
of the Seller Documents and the consummation of the transactions contemplated
thereby will not result in, or provide the basis for, any such revocation,
cancellation or suspension.
5.10 Brokers. The Company has not entered into any contract,
agreement, arrangement, commitment or understanding with any Person which will
result in the obligation to pay any brokerage, finder's or other fee or
commission (other than attorneys' and accountants' fees) in connection with the
transactions contemplated by this Agreement.
5.11 Litigation. Except as set forth in Schedule 5.11 attached
hereto, there are no Actions pending or, to the Knowledge of the Company,
threatened against or affecting the Company or the transactions contemplated by
this Agreement. The
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Company is not subject to any order, judgment, writ, injunction or decree of any
Governmental Authority.
5.12 Taxes.
(a) Except as set forth in Schedule 5.12(a), all Returns
required to be filed on or before the date hereof have been properly and timely
filed. All Returns required to be filed on or before the Closing Date shall have
been properly and timely filed. All Returns filed on or before the date hereof,
are, and all Returns filed after the date hereof will be, correct, true and
complete in all respects. To the extent that any Returns have been audited by
the applicable Tax authorities or other Governmental Authorities, all additional
Taxes claimed or assessed or deficiencies proposed resulting from such audits as
to which the Company is or may be liable have been paid or settled, and no facts
have come to the attention of the Company indicating that any such claim,
assessment or deficiency in respect of Taxes as to which the Company is or may
be liable have not been paid or settled. The Company has not granted any
extension of limitation periods applicable to audits or claims by any tax
authority or other Governmental Authority.
(b) There are no pending or, to the Knowledge of the
Company, threatened audits, investigations or claims against the Company for or
relating to any liability in respect of Taxes and, to the Knowledge of the
Company, no facts or circumstances exist which indicate that any such audits,
investigations or claims in respect of Taxes may be brought or are under
discussion with any tax Authority or other Governmental Authority.
(c) The Company has not filed a consent or entered into an
agreement or made an election with regard to any of its Assets, pursuant to
Section 341(f) of the Code.
(d) The Company has not received any notice of deficiency
or assessment from any federal, state or local Tax authority or other
Governmental Authority with respect to liabilities for Taxes of the Company
which has not been fully paid or finally settled.
(e) The Company is not a party to any Tax sharing, Tax
allocation, or similar agreement with any other Person.
(f) All Taxes due and payable by the Company (whether or
not shown on any Return) have been paid in full.
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(g) The Company has withheld all Taxes required to have
been withheld and paid by it on its behalf in connection with amounts paid or
owing to any Company Personnel or other Person, and such withheld Taxes have
either been duly paid to the proper Governmental Authority or set aside in
accounts for such purpose.
(h) The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that could
obligate it to make any payments that will not be deductible under Code Section
162(m) or 280G.
(i) The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii), and there is no
cause for Parent to deduct and withhold any amount pursuant to Code Section 1445
or any similar or other provision of Law from any consideration to be paid or
given by Parent pursuant to the transactions contemplated by this Agreement.
(j) The Company has not filed with respect to any item a
disclosure statement pursuant to Code Section 6662 or any comparable disclosure
with respect to foreign, federal, state and/or local Laws.
(k) The Company (i) has not been a member of any
affiliated group filing a consolidated federal income Tax Return and (ii) has no
liability for the Taxes of any Person as defined in Code Section 7701(a)(1)
under Treas. Reg. ? 1.1502-6 (or any similar provision of state, local, or
foreign Law), as transferee or successor, by contract or otherwise.
(l) The Company is a United States person within the
meaning of Code Section 7701(a)(30).
(m) There are no elections in effect made by the Company
pursuant to Code Sections 338 or 336(e) or the regulations thereunder and the
Company is not subject to any constructive elections under Code Section 338 or
the regulations thereunder.
(n) No Asset of the Company (i) is subject to a lease
under (A) former Section 168(f)(8) of the Code, or (B) Code Section 7701(h);
(ii) secures any debt the interest on which is tax-exempt under Code Section
103(a); or (iii) is tax-exempt use property within the meaning of Code Section
168(h).
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(o) The Company has not agreed, and is not required, to
make any adjustment pursuant to Code Section 481(a) by reason of a change in
accounting method initiated by the Company.
(p) The Company has made appropriate provision in the
Financial Statements for any Taxes not paid as of the respective dates of each
of such Financial Statements.
(q) The Company has not taken any action that would have
the effect of deferring any liability for Taxes for the Company to any taxable
period ending after the Closing Date.
(r) None of the income recognized for federal, state,
local, foreign or other Tax purposes by the Company prior to the Closing Date
will (i) be derived other than in the ordinary course of business, or (ii) arise
from transactions of a type not reflected in the relevant Returns for the last
taxable period ending prior to the Closing Date.
(s) The Company (i) has not participated in or cooperated
with any international boycott within the meaning of Code Section 999, (ii) has
not disposed of any Asset which for Tax purposes has been accounted for under
the installment method; (iii) is not a party to any interest rate swap, currency
swap or similar transaction; (iv) has not issued or assumed any corporate
acquisition indebtedness within the meaning of Code Section 279(b), or any
obligation described in Code Section 279(a)(2); (v) will not have sustained, as
of the Closing Date, an "overall foreign loss" within the meaning of Code
Section 904(f); and (vi) will not have, as of the Closing Date, any
"non-recaptured net section 1231 losses" within the meaning of Code Section
1231(c).
5.13 Environmental Matters.
(a) The term "Hazardous Materials" shall mean any
substance, material, liquid or gas defined or designated as hazardous or toxic
(or by any similar term) under any Environmental Law, including without
limitation petroleum products and friable materials containing more than one
percent (1.0%) asbestos by weight.
(b) "Environmental Law" shall mean any foreign, federal,
state or local Law relating to pollution, protection of the environment, or
actual or threatened releases, discharges, or emissions into the environment.
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(c) The term "Environmental Condition" shall refer to any
contamination or damage to the environment caused by or relating to the use,
handling, storage, treatment, recycling, generation, transportation, release,
spilling, leaking, pumping, pouring, emptying, discharging, injection, escaping,
leaching, disposal, dumping or threatened release of Hazardous Materials by the
Company or a predecessor in interest of the Company. With respect to claims by
employees, Environmental Condition also includes the exposure of Persons to
Hazardous Materials at a work place of the Company or at any other location.
(d) The term "Environmental Noncompliance" shall mean any
violation of any Environmental Law.
(e) "Release" means the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any other
release or threatened release, however defined, whether intentional or
unintentional, of any Hazardous Material.
(f) There are no Actions pending or, to the Knowledge of
the Company, threatened against the Company that involve, or relate to,
Environmental Conditions, Environmental Noncompliance or the release, use or
disposal of any Hazardous Materials at any facility owned, leased, used or
operated by the Company (individually, "Facility") or previously owned, leased,
used or operated by the Company (individually, the "Previous Facility"). The
Company has not received any notice of any violation of any Environmental Law
relating to any Facility or Previous Facility.
(g) There are no Hazardous Materials being stored or
otherwise held on, under or about any Facility by the Company (or, to the
Knowledge of the Company, any other Persons) and no Hazardous Materials were
used, stored or otherwise held on, under or about any Previous Facility by the
Company (or, to the Knowledge of the Company, any other Persons) during the time
the Company owned, leased, used or operated such Previous Facility. Each
Facility has been maintained by the Company in compliance with all Environmental
Laws and each Previous Facility was maintained by the Company in compliance with
all Environmental Laws during the time the Company owned, leased, used or
operated the Previous Facility.
(h) No Facility or Previous Facility is listed in the
United States Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites under CERCLA or any similar state list, schedule, log,
inventory or record (however
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defined), of sites from which there has been a release of Hazardous Materials.
(i) All transfer, transportation or disposal of Hazardous
Materials by the Company to properties not owned, leased or operated by the
Company has been in compliance with applicable Environmental Laws. The Company
has not transported or arranged for the transportation of any Hazardous
Materials to any location which is (A) listed on the United States Environmental
Protection Agency's National Priorities List of Hazardous Waste Sites under
CERCLA or any similar state list, schedule, log, inventory or record (however
defined), of sites from which there has been a release of Hazardous Materials;
(B) listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in CERCLIS or any similar state or local list;
or (C) the subject of any Action with respect to the Company brought or
instigated by any Governmental Authority or other Person in connection with any
Environmental Law whether or not seeking environmental costs.
(j) There has not been, and is not now occurring, any
Release of any Hazardous Material on, in, under, about, or from any Facility,
including to the Knowledge of the Company, a Release that has come to be located
on or under a Facility from another location.
(k) No above ground or underground storage tanks or ▇▇▇▇▇
are located on, under or about any Facility, or have been located on, under or
about any Facility and then subsequently been removed or filled. If any such
storage tanks exist on, under or about any Facility, such storage tanks have
been duly registered with all appropriate governmental entities and are
otherwise in compliance with all applicable Environmental Laws.
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5.14 Proprietary Rights. Schedule 5.14 attached hereto is a true,
accurate and complete list of all of the (a) registrations of trademarks,
service marks or trade names, and all pending applications for any such
registrations, (b) registration of patents and copyrights and all pending
applications therefor, (c) other trademarks, service marks or trade names,
whether or not registered, including, but not limited, to all Software (the
matters in clauses (a), (b) and (c) are collectively referred to herein as
"Proprietary Rights"), which are owned or used by the Company. Except as set
forth in Schedule 5.14, the use of the Proprietary Rights listed in Schedule
5.14 by the Company has not infringed, is not infringing upon and is not
otherwise violating the rights of any Person in or to such Proprietary Rights or
the asserted Proprietary Rights of others, nor has the Company received any
notices or claims that the use of the Proprietary Rights by the Company
infringes upon or otherwise violates any rights of a Person in or to such
Proprietary Rights or the proprietary rights of others. Except as set forth in
Schedule 5.14, to the Knowledge of the Company, no Person is infringing on the
Proprietary Rights owned by the Company. Notwithstanding anything to the
contrary contained above in this Section 5.14 or the disclosure of the Kikkawa
Patent in Schedule 5.14, the Company further expressly represents and warrants
that in connection with the Kikkawa Patent: (i) the use by the Company of the
Proprietary Rights has not infringed, is not infringing upon and is not
otherwise violating the rights of any Person; (ii) the Company has not received
any notices or claims that the use of the Proprietary Rights by the Company
infringes upon or otherwise violates any rights of a Person; and (iii) the use
of the Kikkawa Patent does not and will not infringe on any of the Proprietary
Rights owned by the Company.
5.15 Labor Matters. There are no present or, to the Knowledge of
the Company, threatened Actions, work stoppages or other labor difficulties
relating to any Company Personnel. The Company is not a party to any collective
bargaining agreement with respect to employees, and, to the Knowledge of the
Company, there are no past or present activities of any labor union seeking to
represent or organize the employees of the Company. No unfair labor practice,
wrongful termination, or race, sex, age, disability or other discrimination,
complaint is pending, nor is any such complaint, to the Knowledge of the
Company, threatened, nor, to the Knowledge of the Company, are there any facts
or circumstances which would form a basis for such complaint, against the
Company before the National Labor Relations Board, Equal Employment Opportunity
Commission or any other Governmental Authority, and no grievance is pending,
except as set forth in Schedule 5.15, nor is any grievance, to the
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Knowledge of the Company, threatened, nor, to the Knowledge of the Company, are
there any facts or circumstances which anyone would claim would form a basis for
a grievance, against the Company.
5.16 Employee Benefit Plans.
(a) Schedule 5.16 attached hereto is a true, accurate and
complete list of "Employee Plans" consisting of each:
(i) "employee welfare benefit plan", as defined in
Section 3(1) of ERISA, (A) which the Company maintains or administers or to
which the Company contributes or is required to contribute, and (B) which covers
any employee or former employee of the Company or under which the Company has
any liability (a "Welfare Plan");
(ii) "multiemployer plan," as defined in Section
3(37) of ERISA, (A) which the Company or Controlled Group Member maintains or
administers or to which the Company or Controlled Group Member contributes or is
required to contribute, either currently or at any time after September 25,
1980, and (B) which covers or covered any employee or former employee of the
Company or Controlled Group Member or under which the Company or Controlled
Group Member has any liability (a "Multiemployer Plan");
(iii) Employee Plan which is maintained in connection
with any trust described in Section 501(c)(9) of the Code;
(iv) "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which the Company
maintains or administers or to which the Company contributes or is required to
contribute, and (B) which covers any employee or former employee of the Company
or under which the Company has any liability (a "Pension Plan"); and
(v) plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, severance benefits, supplemental unemployment
benefits, vacation benefits, retirement 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
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(A) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered
into, maintained, contributed to or required to be contributed to, as the case
may be, by the Company or under which the Company has any liability, and (C)
covers any employee or former employee of the Company (collectively, "Benefit
Arrangements");
(b) (i) There is no Pension Plan, nor has the Company or
any Controlled Group Member at any time maintained, administered, contributed or
been required to contribute to any "employee pension benefit plan" as defined in
Section 3(2) of ERISA, which is subject to the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA, or the provisions of Title IV
of ERISA.
(ii) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument which is intended to be
qualified and tax-exempt under the provisions of Section 401(a) (or 403(a) as
appropriate) of the Code and Section 501(a) of the Code is so qualified and has
been so qualified during the period from its adoption to date.
(iii) Each Pension Plan, each related trust
agreement, annuity contract or other funding instrument and each Welfare Plan
complies in all respects and has been maintained in compliance with its terms
and, both as to form and in operation, with the requirements prescribed by any
and all statutes, orders, rules and regulations which are applicable to such
plans, including but not limited to ERISA and the Code.
(c) Each Benefit Arrangement has been maintained in
compliance with its terms and with the requirements prescribed by any and all
applicable Laws.
(d) (i) As of the date of this Agreement and as of the
Closing Date, neither the Company nor a Controlled Group Member maintains,
administers, contributes to or is required to contribute to a Multiemployer
Plan. Neither the Company nor a Controlled Group Member has, at any time,
withdrawn from a Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205 of ERISA respectively, which
has resulted in any liability to the Company.
(e) Neither the Company nor, to the Knowledge of the
Company, any plan fiduciary of any Welfare Plan or Pension Plan has engaged in
any transaction in violation of Section 406(a) or (b) of ERISA or any
"prohibited transaction," as
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defined in Section 4975(c)(1) of the Code, for which no exemption exists under
Section 4975(c)(2) or 4975(d) of the Code.
(f) Copies of each of the following documents have been
delivered by the Company to Parent: (i) each Welfare Plan, Pension Plan and
Multiemployer Plan (and, if applicable, related trust agreements) and all
amendments thereto, all written interpretations thereof and written descriptions
thereof which have been generally distributed to the persons entitled to
benefits thereunder, and all annuity contracts or other funding instruments,
(ii) each Benefit Arrangement, including written interpretations thereof and
written descriptions thereof which have been generally distributed to the
persons entitled to benefits thereunder (including descriptions of the number
and level of persons covered thereby) and complete descriptions of any Benefit
Arrangement which is not in writing, (iii) the most recent determination letter
and/or opinion letter or notification letter, as applicable, issued by the IRS
with respect to each Pension Plan intended to be a qualified plan under Section
401(a) of the Code, (iv) Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Pension Plan and Welfare Plan for the
three most recent plan years, (v) each form of notice and certification relating
to group health plans provided by the Company to its employees and their
beneficiaries required under the Consolidated Omnibus Budget Reconciliation of
1985, as amended, or under the Health Insurance Portability and Accountability
Act of 1996, as amended, (vi) the results of nondiscrimination testing performed
with respect to each Pension Plan for the three most recent plan years, (vii) a
description of complete age, salary, service and related data as of the last day
of the last plan year for employees and former employees of the Company covered
under the Pension Plans, and (viii) a description setting forth the amount of
any liability of the Company for payments more than thirty days past due with
respect to each Welfare Plan as of the Closing Date.
(g) Each Welfare Plan, Pension Plan, related trust
agreement, annuity contract or other funding instrument and each Benefit
Arrangement is a legal, valid and binding obligation of the Company and is in
full force and effect.
(h) Neither the Company nor any Welfare Plan has any
obligation to make any payment to or with respect to any former Company
Personnel pursuant to any retiree medical benefit or other Welfare Plan, except
as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and no condition exists which would prevent the Company from amending
or terminating any such benefit or Welfare Plan.
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(i) The Company would not have any obligation to make any
severance or other payments to any Company Personnel if such personnel was
terminated prior to, at or after the Closing.
(j) No benefit, payment or other entitlement under any
Pension Plan, Welfare Plan or Benefit Arrangement, or under any agreement
relating to the employment of Company Personnel, will be established or become
accelerated, vested, payable or funded by reason of the execution and delivery
of this Agreement, or any of the transactions contemplated under this Agreement.
(k) There are no Actions pending, or to the Knowledge of
the Company, threatened with respect to any Pension Plan, Welfare Plan or
Benefit Arrangement, other than claims for the payment of benefits in the
ordinary course of operation of such plan or arrangement.
5.17 Transactions with Certain Persons. Except for ownership of
stock of Parent by a shareholder of the Company and as set forth in Schedule
5.17, no current Company Personnel, or any member of the immediate family of any
current Company Personnel or any other Affiliate of the Company or such Company
Personnel is presently a party to any agreement, arrangement or other
transaction with the Company, other than as set forth on Schedule 5.8(a), or has
an interest in any party to a Material Contract.
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5.18 Insurance. Schedule 5.18(a) contains a true, accurate and
complete list of all policies or binders of fire, liability, title, workers'
compensation and other forms of insurance (showing as to each policy or binder
the carrier, policy number, coverage limits, expiration dates, annual premiums
and a general description of the type of coverage provided) maintained by the
Company on the business, Assets or personnel of the Company. All of such
policies are sufficient for compliance with all requirements of all contracts to
which the Company is a party and, to the Knowledge of the Company, all Laws
applicable to the Company. The Company is not in default under any of such
policies or binders, and the Company has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion
when the effect of such default or such failure would be to render a material
claim uninsured. The Company has not received any notice from any insurer
advising of reduced coverage or increased premiums on existing policies or
binders. Except as set forth on Schedule 5.18(b), there are no outstanding
unpaid claims under any such policies or binders. Such policies and binders are
in full force and effect, and the Company has delivered true and correct copies
of such policies and binders to Parent.
5.19 Payments. The Company has not, directly or indirectly, paid
or delivered any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, government official, Governmental
Authority or other Person, in the United States or any other country, which is
in any manner related to the business or operations of the Company which the
Company knows or has reason to believe to have been illegal under any federal,
state or local Law of the United States or the Laws of any other country having
jurisdiction; and the Company has not participated, directly or indirectly, in
any boycotts or other similar practices affecting any of its actual or potential
customers or which violate any applicable Law.
5.20 Board Actions. The Board of Directors of the Company (at a
meeting duly called and held) has resolved to recommend approval of this
Agreement by the shareholders of the Company.
5.21 Required Vote. Approval of the Merger and this Agreement by
shareholders of the Company will not require the approval of more than a
majority of the outstanding shares of common stock of the Company and the
holders of each class of the Preferred Stock, voting separately as a class.
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5.22 French Subsidiary. The French Subsidiary is being wound up
and dissolved. The French Subsidiary has no liabilities other than those
which:(a) will be paid in full from the current assets of the French Subsidiary
in connection with the dissolution thereof or (b) have been accrued for in the
Company's June 30, 1998 financial statements which will be subject to the review
and approval of the Parent, in its sole discretion, prior to the Closing (the
"June 30th Financial Statements"). All liabilities and assets of the French
Subsidiary will be included in the June 30th Financial Statements. Except as set
forth on Schedule 5.22(b), all of the representations and warranties contained
in Sections 5.1 through 5.20 and 5.24 are also true and correct for the French
Subsidiary as if made with respect to the French Subsidiary.
5.23 Year 2000. Except as set forth in Schedule 5.23 attached
hereto with respect to non-customized "off the shelf" Software utilized by the
Company, all computer hardware, software, and firmware (collectively,
"Software") utilized by the Company, whether directly or through outsourcing or
other agreements, accurately processes date data (including, but not limited to,
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, including leap year calculation. Without limiting
the generality of the foregoing:
(a) The Software will not abnormally end or provide
invalid or incorrect results as a result of date data, specifically including
date data which represents or references different centuries or more than one
century;
(b) The Software has been designed to ensure year 2000
compatibility, including, but not limited to, date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, and date data interface values that reflect the century;
(c) The Software includes "year 2000 capabilities." For
purposes of this Agreement, "year 2000 capabilities" means the Software:
(i) will manage and manipulate data involving dates,
including single century formulas and multi-century formulas, and will not cause
an abnormally ending scenario within the application or generate incorrect
values or invalid results involving such dates; and
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(ii) provides that all date-related user interface
functionalities and data fields include the indication of century; and
(iii) provides that all date-related interface
functionalities include the indication of century.
5.24 Disclosure. The representations and warranties of the
Company herein, in the Proxy Materials, or in any document, exhibit, statement,
certificate or schedule furnished by or on behalf of the Company to Parent as
required by this Agreement, do not contain and will not contain any untrue
statement of a material fact and do not omit and will not omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and as to Sections
6.1, 6.2 and 6.3 to each Shareholder and the Management Group as follows:
6.1 Organization, Standing and Power. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has the requisite corporate authority and power
to carry on its business as it is now being conducted.
6.2 Authority.
(a) Parent has all requisite corporate power and authority
to enter into the Parent Documents, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery of
the Parent Documents by Parent and the consummation by Parent of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Parent. The Parent Documents have been duly
executed and delivered by Parent and constitutes a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with their terms.
(b) Assuming the accuracy of the Company's representations
and warranties in Section 5.3(c), no consent, approval, order or authorization
of, notice to, or registration, declaration or filing with, any Governmental
Authority or other Person is necessary in connection with the execution and
delivery
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of the Parent Documents by Parent or the consummation by Parent of the
transactions contemplated thereby other than (i) the filing of the Agreement of
Merger with the California Secretary; and (ii) compliance with the applicable
requirements of the Exchange Act and the Securities Act.
6.3 Brokers. Parent has not entered into any contract, agreement,
arrangement, commitment or understanding with any Person which will result in
the obligation to pay any brokerage, finder's or other fee or commission (other
than attorneys' and accountants' fees) in connection with the transactions
contemplated by this Agreement.
6.4 No Breach. The execution and delivery by the Parent of the
Parent Documents do not, and the consummation of the transactions contemplated
thereby will not(i) conflict with, or result in a violation of, any provision of
the Parent's articles of incorporation or bylaws, (ii) constitute or result in a
breach of or default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the termination or suspension
of, or accelerate the performance required by, or result in a right of
termination, cancellation or acceleration of any obligation or a loss of a
benefit under, any note, bond, mortgage, indenture, deed of trust, lease,
permit, concession, franchise, license, agreement or other instrument or
obligation to which the Parent is a party or to which the properties or assets
of the Parent are subject, (iii) create any Lien upon any of the properties or
Assets of the Parent, or (iv) constitute, or result in, a violation of any Law
applicable to the Company or any of the properties or Assets of the Company;
except insofar as any breaches of (i) through (iv) above in this Section 6.4
would not, individually or in the aggregate, have a Material Adverse Effect with
respect to the Parent.
ARTICLE 7
PRE-CLOSING COVENANTS
7.1 Operation of Business.
(a) Between the date of this Agreement and the Closing
Date, the Company shall:
(i) preserve intact its business organization and
existing relationships with customers, suppliers, employees, agents and any
other Persons having business relations with it;
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(ii) preserve and protect all of its Assets in good
repair and condition, normal wear and tear excepted;
(iii) maintain its books of account and records in
the usual and ordinary manner, and in conformity with its past practices;
(iv) maintain its present insurance in full force and
effect, with policy limits and scope of coverage not less than is now provided
by its present insurance;
(v) pay accounts payable and other obligations when
they become due and payable in the ordinary course of business consistent with
past practices;
(vi) conduct its business in the ordinary course
consistent with past practices, or as required by this Agreement;
(vii) pay all Taxes when due and file all Returns on
or before the due date therefor;
(viii) make appropriate provisions in its books of
account and records for Taxes relating to its operations during such period
(regardless of whether such Taxes are required to be reflected in a Return
having a due date on or prior to the Closing Date);
(ix) take no action that would have the effect of
deferring any liability for Taxes to any taxable period ending after the
Measurement Date or Closing Date; and
(x) withhold all Taxes required to be withheld and
remitted by or on behalf of the Company in connection with amounts paid or owing
to any Company Personnel or other Person, and pay such Taxes to the proper
Governmental Authority or set aside such Taxes in accounts for such purpose.
(b) Without the prior written consent of Parent, between
the date of this Agreement and the Closing Date (or termination of this
Agreement), the Company shall not:
(i) issue any Company Capital Stock (other than upon
exercise of Convertible Securities listed on Schedule 5.2(a))or any Convertible
Securities;
(ii) directly or indirectly redeem, purchase, sell or
otherwise acquire any Company Capital Stock;
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(iii) grant any increase in the compensation payable,
or to become payable, to any Company Personnel or enter into any Benefit Plan
for or with any Company Personnel, except increases in compensation consistent
with past practices in the ordinary course of conducting employee reviews;
(iv) borrow or agree to borrow any funds, incur any
indebtedness or directly or indirectly guarantee or agree to guarantee the
obligations of others, or draw or borrow on any lines of credit that may be
available to the Company;
(v) enter into any agreement, contract, lease or
other commitment, other than in the ordinary course of business consistent with
past practices;
(vi) place or allow to be placed a Lien on any of the
Assets of the Company;
(vii) cancel, discount or otherwise compromise any
indebtedness owing to the Company or any claims which the Company may possess or
waive any rights of material value, except in the ordinary course of business
consistent with past practices;
(viii) sell or otherwise dispose of any Assets of the
Company, except in the ordinary course of business consistent with past
practices;
(ix) commit any act or omit to do any act which will
cause a breach of this Agreement or any other agreement, contract, lease or
commitment;
(x) violate any Law or Governmental Approval;
(xi) make any loan, advance, distribution or payment
of any type or to any Company Personnel or any member of the immediate family of
Company Personnel or any Affiliate of the Company or any Company Personnel,
except as regular compensation for services actually rendered;
(xii) amend the Articles or Bylaws;
(xiii) merge or consolidate with, or agree to merge
or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any business or any Person or division thereof;
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(xiv) make any Tax election or settle or compromise
any Tax liability;
(xv) purchase any assets or properties other than in
the ordinary course of business consistent with past practices; or
(xvi) settle or otherwise compromise the K2 Action
and the Ride Action.
7.2 No Other Bids. The Company and each member of the Management
Group agree that neither the Company, nor any member of the Management Group nor
any of the officers, directors, Affiliates, representatives or agents of the
Company or any member of the Management Group will directly or indirectly
solicit, contact, encourage or provide information to, or cooperate in any
manner with, any Person (other than Parent) regarding any Competing Transaction
or act in a manner which would have the effect, directly or indirectly, of
frustrating the completion of the Merger on the terms hereof. Upon receipt of an
unsolicited offer or inquiry regarding a Competing Transaction ("Unsolicited
Offer"), the Company or the applicable member of the Management Group will
immediately notify Parent orally and in writing that an Unsolicited Offer was
made and provide to Parent a copy of the Unsolicited Offer.
7.3 Employee Benefit Plans. The Company shall take all actions
necessary (a) to terminate all Benefit Plans which Parent desires to have
terminated on the Closing Date and (b) to cause all Persons covered under such
Benefit Plans to be covered under employee benefit plans maintained by Parent.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Access to Information of the Company; Confidentiality.
(a) From the date hereof to the Effective Time, the
Company shall afford, and shall cause its officers, directors, employees,
representatives and agents to afford, to Parent and to the officers, employees
and agents of Parent complete access during normal business hours at all
reasonable times to the Company's officers, employees, agents, representatives,
properties, books, records and contracts, and shall furnish to Parent all
financial, operating and other data and information as Parent, through its
agents, officers, employees or other representatives, may reasonably request.
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(b) From the date hereof to the Effective Time, Parent
shall afford, and shall cause its officers, directors, employees,
representatives and agents to afford, to the Company and to the officers,
employees and agents of the Company complete access during normal business hours
at all reasonable times to the Company's officers, employees, agents,
representatives, properties, books, records and contracts.
(c) No investigation pursuant to Section 8.1(a) or 8.1(b)
shall affect any representations or warranties of the Parties herein or the
conditions to the obligations of the Parties.
8.2 Expenses and Taxes. The Parties shall each pay their
respective costs incurred in connection with the preparation, negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the fees of
their respective attorneys, accountants and advisors.
8.3 News Releases. Any news releases or other public disclosure
pertaining to the transactions contemplated hereby shall be reviewed and
approved in writing by both Parent and the Company or their respective
representatives, and shall be acceptable to them prior to the dissemination
thereof; provided, however, if counsel to Parent advises it that applicable Law
requires Parent to make a press release or statement, Parent may do so only
after providing Company with the opportunity to review the press release prior
to the issuance thereof.
8.4 Additional Agreements. Subject to the terms and conditions of
this Agreement, each Party agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law to consummate and make
effective the transactions contemplated by this Agreement. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, Assets, rights, approvals, immunities and franchises of
either of the Constituent Corporations, the proper officers and directors of
each such corporation shall take all such necessary or desirable action.
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8.5 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent of (iv)
any material inaccuracy in any representation or warranty made by it herein, or
(v) any material failure of the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by the Company under
this Agreement; provided, however, that no such notification shall affect the
representations or warranties or covenants or agreements of the Company or the
conditions to the obligations of Parent hereunder.
(b) Parent shall give prompt notice to the Company of (i)
any material inaccuracy in any representation or warranty made by it herein, or
(ii) any material failure of Parent to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations or warranties or covenants or agreements of Parent or the
conditions to the obligations of the Company hereunder.
(c) The Company shall promptly advise Parent orally and in
writing of any change or event having, or which, insofar as can reasonably be
foreseen, in the future would have, a Material Adverse Effect.
8.6 Confidentiality.
(a) Each Party shall hold, and shall cause its officers,
employees, agents and representatives, including, without limitation, attorneys,
accountants, consultants and financial advisors who obtain such information to
hold, in confidence, and not use for any purpose other than evaluating the
transactions contemplated by this Agreement, any confidential information of
another Party obtained through the investigations permitted hereunder, which for
the purposes hereof shall not include any information which (i) is or becomes
generally available to the public other than as a result of disclosure by a
Party or one of its Affiliates in violation of its obligations under this
subsection, (ii) becomes available to a Party on a nonconfidential basis from a
source, other than the Party which alleges the information is confidential or
its Affiliates, which has represented that such source is entitled to disclose
it, or (iii) was known to a Party on a nonconfidential basis prior to its
disclosure to such Party hereunder. If this Agreement is terminated, at the
request of a Party, the other Party shall deliver, and cause its officers,
employees, agents, and
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representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain confidential information of the
requesting Party pursuant to investigations permitted hereunder, to deliver to
the requesting Party all such confidential information that is written
(including copies or extracts thereof).
(b) If a Party or a Person to whom a Party transmits
confidential information of another Party is requested or becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, criminal or civil investigative demand or similar process)
to disclose any of such confidential information, such Party or other Person
will provide the other Party with prompt written notice so that such Party may
seek a protective order or other appropriate remedy or waive compliance with
Section 8.6(a). If such protective order or other remedy is not obtained, or if
the applicable Party waives compliance with Section 8.6(a), the Party or Person
subject to the request will furnish only that portion of such confidential
information which is legally required and will exercise reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded such
confidential information.
8.7 Consents and Filings. Each Party will take all reasonable
actions to obtain any other consent, authorization, order or approval of, or any
exemption by, any Person required to be obtained or made in connection with the
Merger and the other transactions contemplated by this Agreement. Each Party
will cooperate with and promptly furnish information to the other Party in
connection with obtaining such consents or making any such filings and will
promptly furnish to the other Party a copy of all filings made with a
Governmental Authority.
8.8 Parent SEC Filings. Between the date hereof and the Closing
Date, the Company shall cooperate with Parent in connection with the preparation
and filing of, and provide all necessary information to Parent for inclusion in,
any reports, filings, schedules or registration statements (including any
prospectus contained in any such registration statement) to be filed by Parent
with the Commission (the "Parent Filings"). Without limiting the foregoing, the
Company shall take all reasonable actions requested by Parent to enable Parent
to include in the Parent Filings any Financial Statement of the Company and any
auditors' report thereon.
8.9 Consent to Sale of Surviving Corporation. A sale of the
Surviving Corporation on its own (not as part of a
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sale of Parent) during the term of the Promissory Notes ("Switch Sale")shall
require the prior written consent of the Shareholder Representatives to the
proposed transaction, including, without limitation, with respect to any
modifications to such Promissory Notes proposed with respect thereto, which
written consent shall not be unreasonably withheld, conditioned or delayed. In
the event the Shareholder Representatives may reasonably withhold their consent
from a Switch Sale pursuant to the terms of this Section 8.9, they shall have
the right to propose modifications to the terms of the Earn-out Notes.
8.10 Commitment to the Company's Business.
(a) Provided that International Trading Corporation
("ITC") is the Parent's exclusive or non-exclusive snowboard boot distributor in
Japan during the 2000/2001 selling season, the Parent shall use commercially
reasonable efforts to discourage ITC from selling or distributing any step-in
binding system other than the Company's Autolock step-in boot binding system, as
described in U.S. Patent 5,520,406(the "Autolock System").
(b) the Parent shall use commercially reasonable efforts
to ensure that ITC sells the Autolock System to Alpen for the 1998/1999 selling
season for use in conjunction with the boots produced by Japana Company Ltd.
("Japana") under the Company's one-year License Partner Agreement with Japana
dated June 2,1998.
8.11 Certain Covenants of the Parent. After the Closing and until
the termination or "Maturity Date" (as such term is defined in each of the
Promissory Notes) of each of the Promissory Notes the Parent covenants and
agrees as follows:
(a) To provide to the Shareholder Representatives, no
later than ninety (90) days after the end of each of its fiscal years commencing
with the fiscal year ended May 31, 1999, a report on the revenues, costs of
goods sold and gross profits, determined in accordance with GAAP, on sales of
the Autolock System by the Surviving Corporation.
(b) To provide to the Shareholder Representatives on a
quarterly basis within forty-five (45) days after to end of its fiscal quarters
commencing with the quarter ending November 28, 1998, a summary status report on
each of the following: (i) the Japanese Trademark Dispute; (ii) the Ride Action;
(iii) the Japanese Patent; and (iv) any license or purchase of step-in boot
binding technology by the Parent;
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provided, however, in the event the Parent fails to provide such status reports
on a timely basis to the Shareholder Representatives, the Parent shall have
fifteen (15) business days after receipt of written notice of such failure from
the Shareholders Representatives to cure any such failure.
(c) To provide to the Shareholder Representatives
reasonable access to the General Counsel and the Chief Financial Officer of the
Parent and the division managers of the Surviving Corporation, on a quarterly
basis commencing with the fiscal quarter ending November 28, 1998 to discuss the
business, operations and financial affairs of the Surviving Corporation.
ARTICLE 9
CONDITIONS
9.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each Party to consummate the transactions
contemplated hereby shall be subject to the fulfillment on or prior to the
Closing Date of each of the following conditions:
(a) This Agreement and the Merger shall have been approved
and adopted by the requisite vote of the shareholders of the Company.
(b) Any Governmental Approval required for consummation of
the Merger shall have been received.
(c) Receipt by the Parent of the Shareholders'
Questionnaires which have been completed and executed by all of the
Shareholders, other than Dissenting Shareholders. The Shareholders'
Questionnaire shall be substantially in the form attached hereto as Exhibit B.
9.2 Additional Conditions to the Obligations of Parent. The
obligations of Parent to consummate the transactions contemplated hereby are
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions, except to the extent Parent shall have waived in writing
satisfaction of such condition:
(a) The representations and warranties made by the Company
in this Agreement shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without
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any materiality qualification) as of the date of this Agreement and on the
Closing Date as though such representations and warranties were made on such
date.
(b) The Company shall have performed and complied in all
material respects with all covenants, agreements and undertakings required by
this Agreement to be performed or complied with by it prior to the Closing.
(c) No Action before any Governmental Authority shall have
been commenced, no investigation by any Governmental Authority shall have been
commenced, and no Action by any Governmental Authority shall have been
threatened against any Party, seeking to restrain, enjoin, rescind, prevent or
change the transactions contemplated hereby or questioning the enforceability,
validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
(d) Except for the filing of the Merger Agreement with the
California Secretary, all Governmental Approvals required to be made or obtained
by Parent in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby shall have
been made or obtained.
(e) All consents of, or notices to or filings with, any
Person (other than a Governmental Authority) required to be made or obtained by
the Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby shall have
been made or obtained; including, but not limited to the consent of Far East
National Bank (the "Bank") pursuant to the terms of that certain Credit Facility
between the Company and the Bank dated as of June 1, 1998.
(f) No event shall have occurred which has had, or is
reasonably expected to have, a Material Adverse Effect. Without limiting the
generality of the foregoing, no material change in the assets or liabilities of,
or in the business or condition, financial or otherwise, of, or in the results
of operations of, the Company from those reflected in the audited financial
statements of the Company at and for the period ended December 31, 1997.
(g) The Company shall have delivered the June 30th
Financial Statements in form and substance acceptable to Parent, in its sole
discretion.
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(h) Not more than 5% of the shares of common stock of the
Company issued and outstanding immediately prior to the Merger shall be
Dissenting Shares. For purposes of this subsection, all shares of Preferred
Stock issued and outstanding immediately prior to the Merger shall be deemed
converted into shares of common stock of the Company in accordance with the
rights of the Preferred Stock set forth in the Articles of Incorporation of the
Company.
(i) The Company shall have delivered to Parent all of the
documents required by Section 10.3 hereof.
(j) The results of Parent's due diligence regarding the
Company, including, without limitation: (i) the Parent's analysis of the utility
model registration for step-in boot bindings issued to Kikkawa Co. by the
Japanese Patent and Trademark Office(the "Kikkawa Patent"), and (ii) all
financial, business, tax and legal due diligence, are satisfactory to Parent, in
its sole and absolute discretion.
(k) Parent's agreement on: (i) all accruals and
liabilities scheduled on the June 30th Financial Statements and (ii) those
employees of the Company who will be terminated after the date hereof and prior
to the Closing Date and the amount of severance to be paid by the Company to
such employees.
(l) The Company shall have entered into a settlement and
release agreement satisfactory to Parent which evidences the settlement of the
patent infringement action brought by K2 Inc. against the Company (the "K2
Action")proposed by the Company described in the draft settlement agreement
received by the Parent on June 25, 1998, and if such agreement has not been
entered into in substantially the form described in such draft settlement
agreement, Parent shall be entitled to renegotiate the terms of the holdback of
$1.5 million under the Earn-out Notes.
9.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated hereby
are subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions, except to the extent the Company shall have waived in
writing satisfaction of such condition:
(a) The representations and warranties made by Parent in
this Agreement shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material
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respects (in the case of any representation or warranty without any materiality
qualification) as of the date of this Agreement and on the Closing Date as
though such representations and warranties were made on such date.
(b) Parent shall have performed and complied in all
material respects with all covenants, agreements, and undertakings required by
this Agreement to be performed or complied with by it prior to the Closing.
(c) No Action before any Governmental Authority shall have
been commenced, no investigation by any Governmental Authority shall have been
commenced, and no Action by any Governmental Authority shall have been
threatened against any Party, seeking to restrain, enjoin, rescind, prevent or
change the transactions contemplated hereby or questioning the enforceability,
validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
(d) Except for the filing of the Merger Agreement with the
California Secretary, all Governmental Approvals required to be made or obtained
by the Company in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby shall
have been made or obtained.
(e) All consents of, or notices to or filings with, any
Person (other than a Governmental Authority) required to be made or obtained by
Parent in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby shall have
been made or obtained.
(f) Parent shall have delivered to the Company all of the
documents required by Section 10.2 hereof.
(g) Each member of the Management Group shall have
received an employment agreement executed by Parent, effective on the Closing
Date, in the form attached hereto as Exhibit C which shall include: (i) salaries
for each member of the Management Group which are no less than the salaries
currently being received by such members of the Management Group as previously
reported to the Parent; (ii) titles comparable to those currently held by such
members of the Management Group; (iii) six-month severance provision; (iv)
participation in Parent?s 401(k) plan; and (v) participation in Parent?s
Vanstastic Employee Stock Option Plan. Each member of the Management Group shall
have also received, effective on the
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Closing Date, an incentive stock option under Parent?s 1991 Long-Term Incentive
Plan for 7,500 shares of Parent Common, with an exercise price based on the
closing sales price of Parent Common on the Closing Date and a three-year
vesting schedule.
(h) Between the date of this Agreement and the Closing
Date, there shall not have occurred any event that is materially adverse to the
business, results of operations or financial condition of the Parent, on a
consolidated basis.
(i) The results of the Company's discussions with Parent
regarding Parent's business plans for operating the Surviving Corporation are
satisfactory to the Company. In the event that the results of the Company's
discussions are not satisfactory to the Company, the Company may elect to
terminate this Agreement pursuant to this Section 9.3(i) (THE "SECTION 9.3(i)
TERMINATION"); provided, that it notifies Parent, in writing, of such
termination or or before 10:00 p.m. (Los Angeles time) on July 13, 1998 (THE
"TERMINATION DEADLINE"). In the event Parent is not notified by the Company of
the Section 9.3(i) Termination by the Termination Deadline, this condition to
Closing shall terminate and be of no further force and effect. The Section
9.3(i) Termination is only a condition to the Company's consummation of the
transactions contemplated by this Agreement, and shall not permit the Company to
renegotiate any of the terms or conditions of this Agreement.
ARTICLE 10
CLOSING
10.1 Closing.
(a) Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to the
provisions of Section 11.1, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Jeffer, Mangels,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, 2121 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, subject to satisfaction or waiver of the conditions set forth in
Article 9 (other than the delivery of documents under Sections 10.2. and 10.3)
(the "Closing Conditions")on July 21, 1998 or if the Closing Conditions have not
been meet by July 21, 1998, on the third Business Day after satisfaction of the
Closing Conditions. The Parties may change the place, time and date of the
Closing by mutually agreement in writing. The date and time of such Closing are
herein referred to as the "Closing Date." The Closing shall be deemed to have
occurred only when (i) the matters provided for in Sections 2.2
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and 2.3 shall have occurred and (ii) all of the certificates and other documents
required to be delivered at the Closing have been delivered (or the requirement
therefor waived), as specified in Sections 10.2 and 10.3 hereof.
(b) Notwithstanding any approval of this Agreement by the
shareholders of the Company, no agreement among the Parties to change the place,
time or date of the Closing shall require the approval of the shareholders of
the Company.
10.2 Documents to be Delivered by Parent. At the Closing, Parent
shall deliver to the Company the following:
(a) A certificate, executed by an officer of Parent in
such detail as the Company shall reasonably request, certifying to the
fulfillment or satisfaction of the conditions set forth in Sections 9.2(d) and
9.3(a), (b), (c) (with respect to Parent only) and (e). The delivery of such
certificate shall constitute a representation and warranty of Parent as to the
statements set forth therein.
(b) A copy of the resolutions adopted by the sole
shareholder and Board of Directors of Sub approving this Agreement and the
Merger, certified by its Secretary.
(c) An opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., counsel of the
Parent, dated as of the Closing Date, in a form acceptable to such counsel and
the Company which covers the matters set forth in Sections 6.1, 6.2 and 6.4.
10.3 Documents to be Delivered by the Company. At the Closing,
the Company shall deliver to Parent the following:
(a) A certificate, executed by the President of the
Company, in such detail as Parent shall reasonably request, certifying to the
fulfillment or satisfaction by the Company of the conditions set forth in
Sections 9.2(a), (b), (c), (e), (f), (g) and (h) and 9.3(d). The delivery of
such certificate shall constitute a representation and warranty of the Company
as to the statements set forth therein.
(b) A copy of the resolutions adopted by the Board of
Directors and the shareholders of the Company approving this Agreement and the
Merger, certified by the Secretary of the Company.
(c) An opinion of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to the Company, dated the Closing Date, in a form satisfactory to such
counsel and Parent which covers the
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matters set forth in Sections 4.1 (first sentence), 4.2 (first sentence),
5.1(a), 5.2(a), 5.3(a)(without any qualification with respect to shareholder
approval), 5.3(b)(i) and (iv) and 5(c).
ARTICLE 11
TERMINATION
11.1 Termination.
(a) This Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after approval of this Agreement by the
shareholders of the Company, as follows:
(i) By mutual written consent of the Parties;
(ii) By written notice from either Parent or the
Company, if any Governmental Authority shall have issued an order, decree or
ruling or taken any other Action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other Action shall have become final
and nonappealable; or
(iii) By written notice from either Parent or the
Company, if the shareholders of the Company fail to approve this Agreement and
the Merger at the Shareholders Meeting; provided, however, the Company may not
terminate this Agreement if any of the shareholders who are party to that
certain Voting Agreement and Irrevocable Proxy of even date herewith fail to
vote in favor of this Agreement and the Merger.
(b) This Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after approval of this Agreement by the
shareholders of the Company, as follows:
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(i) By written notice from Parent, provided Parent is
not in breach of its representations and warranties or covenants hereunder, if
the Company fails to perform or breaches any of its material obligations or
duties under this Agreement and the Company has not cured such failure to
perform or breach within 15 days after delivery of written notice from Parent or
upon a material breach of any representation and warranty of the Company
contained herein, in either case such that the conditions set forth in Sections
9.2(a) and/or (b) would not be satisfied;
(ii) By the Company, provided the Company is not in
breach of its representations and warranties or covenants hereunder, if Parent
fails to perform or breaches any of its material obligations or duties under
this Agreement, and Parent has not cured such failure to perform or breach
within 15 days after delivery of written notice from the Company to Parent
informing Parent of the details of the alleged breach, or upon a material breach
of any representation and warranty of Parent contained herein, in either case
such that the conditions set forth in Sections 9.3(a) or (b), as the case may
be, would not be satisfied;
(c) By written notice from Parent to the Company prior to
July 30, 1998, if the results of Parent's due diligence regarding the Company
are not satisfactory to Parent, in its sole and absolute discretion;
(d) By Parent if a Material Adverse Effect shall exist or
occur after the date hereof; or
(e) By either Parent or the Company, if (i) the conditions
to its respective obligations hereunder are not capable of satisfaction on or
before July 30, 1998 ("Termination Date") or (ii) the Effective Time shall not
have occurred on or before the Termination Date; provided, however, the right to
terminate this Agreement under this Section 11.1(e) shall not be available to
any Party whose failure to fulfill any obligation hereunder has been the cause
of, or results in, the failure of the Effective Time to have occurred on or
before the Termination Date.
11.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 11.1, this Agreement shall forthwith
become void and there shall be no liability or obligations on the part of any
Party hereto, except for the agreements set forth in Sections 8.3, 8.6, this
Section 11.2 and Article 12 and except for liability for any breach of
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any obligation, covenant or agreement contained herein or any failure of the
representations and warranties contained herein to have been true.
ARTICLE 12
INDEMNIFICATION
12.1 Survival of Representations and Warranties; Damages.
(a) All representations, covenants, agreements and
warranties of the Company made in this Agreement shall survive the Closing for a
period of three years from the Closing Date and notice of all claims for
indemnification hereunder shall be made within such period. The right to recover
Damages on any claim shall not be affected by the termination of any
representations and warranties as set forth above provided that notice of the
existence of such claim has been given prior to such termination.
(b) Subject to the notice and survival limitations in
Section 12.1(a), from and after the Closing, Parent and its Affiliates,
officers, directors, agents, successors, representatives and assigns shall be
entitled to assert a claim for indemnification under this Article 12 for any
liability, loss, cost, Tax, expense, judgment, order, settlement, obligation,
deficiency, claim, suit, proceeding (whether formal or informal), investigation,
Lien or other damage, including, without limitation, reasonable attorneys' fees
and expenses (all of the foregoing items for purposes of this Agreement are
referred to herein as "Damages"), resulting from, arising out of or incurred
with respect to a breach of any representation, warranty, covenant or agreement
of the Company contained herein (an "Indemnity Claim").
12.2 Indemnity Claims. In the event Parent becomes aware of any
Indemnity Claim pursuant to this Article 12, Parent shall give the Shareholder
Representatives written notice (the "Indemnity Notice"), together with all
documents and information reasonably necessary to substantiate the Damages and
the claim which gives rise to such Damages. Unless the Shareholder
Representatives deliver written notice to the Parent on or prior to the 20th
Business Day after delivery of the Indemnity Notice to the Shareholder
Representatives, specifying in reasonable detail all disputed items and the
basis therefore, the Shareholder Representatives shall be deemed to have
accepted and agreed that such an Indemnity Claim is a Covered Indemnity Claim.
If the Shareholder Representatives deliver such objection notice
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within such time, Parent and the Shareholder Representatives shall, within seven
Business Days following the delivery of such objection notice, attempt to
resolve their differences and any written resolution by them shall be final,
binding and conclusive. At the conclusion of such period, any amounts remaining
in dispute shall be submitted to arbitration for resolution of whether it is a
Covered Indemnity Claim in accordance with Section 13.12.
12.3 Sources of Indemnification due Parent. The sole source of
payment of a Covered Indemnity Claim shall be an offset against any payments due
under the Earn-out Notes. No payments shall be made on any Earn-out Note until
all Indemnity Claims are either paid or determined not to be a Covered Indemnity
Claim in accordance with Section 12.2.
12.4 Shareholder Representatives.
(a) The Shareholder Representatives shall not be liable
for any act taken in their role as Shareholder Representatives except for acts
of malfeasance or gross negligence.
(b) In the event any of the Shareholder Representatives
shall, for reason of death, disability, resignation or other, become unwilling
or unable to perform their duties, the remaining Shareholder Representatives
shall name Successor Shareholder Representatives to assume their duties.
ARTICLE 13
GENERAL PROVISIONS
13.1 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties.
13.2 Waiver. At any time prior to the Effective Time, whether
before or after approval of this Agreement and the Merger by the Company's
shareholders, any Party may (a) extend the time for the performance of any of
the obligations or other acts of any other Party hereto or (b) waive compliance
with any of the agreements of any other Party or with any conditions to its own
obligations. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of the Party making the waiver or
granting the extension by a duly authorized officer. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such
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waiver constitute a continuing waiver unless otherwise expressly provided.
13.3 Assignment and Binding Effect. Neither this Agreement nor
any of the rights or obligations hereunder may be assigned by the Company
without the prior written consent of Parent or assigned by Parent without the
prior written consent of the Company; provided, however, Parent may assign any
of its rights hereunder to any direct or indirect wholly-owned subsidiary of
Parent without the consent of the Company, although such assignment shall not
release Parent of any of its obligations hereunder. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, transferees, assigns, representatives, and agents
and no other Person shall have any right, benefit or obligation hereunder.
13.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of California, without
regard to the conflicts of Law principles thereof.
13.5 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties with respect to the subject matter
hereof, including but not limited to that certain letter agreement between
Parent, the Company and the Management Group dated April 23, 1998, as amended
and restated June 19, 1998.
13.6 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by Law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
13.7 Titles. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
13.8 Attorneys' Fees. Should any Party institute any Action to
enforce any provision of this Agreement, including, without limitation, an
Action for declaratory relief, damages by reason of an alleged breach of any
provision of this Agreement,
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equitable relief or otherwise in connection with this Agreement, or any
provision hereof, the court or the arbitrator, as the case may be, shall
allocate all of the attorneys' fees and costs for services rendered in such
Action between the Parties based on their view of the merits of the Parties'
respective positions in the Action.
13.9 Multiple Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
13.10 Notices. Unless applicable Law requires a different method
of giving notice, any and all notices, demands or other communications required
or desired to be given hereunder by any Party shall be in writing. Assuming that
the contents of a notice meet the requirements of the specific Section of this
Agreement which mandates the giving of that notice, a notice shall be validly
given or made to another Party if served either personally or if deposited in
the United States mail, certified or registered, postage prepaid, or if
transmitted by telegraph, telecopy or other electronic written transmission
device or if sent by overnight courier service, and if addressed to the
applicable Party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given three
business days after the deposit thereof in the United States mail. If such
notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the Parties are as follows:
If to the Company or the Management Group:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Hearth, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Jeffer, Mangels, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
2121 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change such Party's address for the purpose of receiving notices,
demands and other communications as herein provided, by a written notice given
in the aforesaid manner to the other Parties.
13.11 Incorporation by Reference. All Exhibits and Schedules
attached hereto or to be delivered in connection herewith are incorporated
herein by this reference.
13.12 Arbitration.
(a) Any dispute, controversy or claim arising out of,
relating to, or in connection with, this Agreement, or the breach, termination
or validity thereof, except for claims for equitable, including injunctive,
relief, shall be finally settled by arbitration conducted in accordance with
this Section. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association (the "AAA") in effect at the time of the
arbitration, except as they may be modified herein or by mutual agreement of the
Parties. The seat of the arbitration shall be Los Angeles, California. Each
Party hereby irrevocably submits to the jurisdiction of the arbitrator in Los
Angeles, California and waives any defense in an arbitration based upon any
claim that such Party is not subject personally to
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the jurisdiction of such arbitrator, that such arbitration is brought in an
inconvenient forum or that such venue is improper.
(b) The arbitration shall be conducted by three
arbitrators. The Party initiating arbitration (the "Claimant") shall appoint its
arbitrator in its request for arbitration (the "Request"). The other Party (the
"Respondent") shall appoint its arbitrator within 10 Business Days of receipt of
the Request and shall notify the Claimant of such appointment in writing. If the
Respondent fails to appoint an arbitrator within such 10 Business Day period,
the arbitrator named in the Request shall decide the controversy or claim as a
sole arbitrator. Otherwise, the two arbitrators appointed by the Parties shall
appoint a third arbitrator within 10 Business Days after the Respondent has
notified Claimant of the appointment of the Respondent's arbitrator. When the
third arbitrator has accepted the appointment, the two Party-appointed
arbitrators shall promptly notify the Parties of the appointment. If the two
arbitrators appointed by the Parties fail or are unable so to appoint a third
arbitrator or so to notify the Parties, then the appointment of the third
arbitrator shall be made by AAA, as the case may be, which shall promptly notify
the Parties of the appointment. The third arbitrator shall act as chair of the
panel.
(c) The arbitrator shall have the authority only to
enforce the legal and contractual rights of the parties and shall not add to,
modify, disregard, or refuse to enforce any contractual provision. There shall
be no pre-arbitration discovery. The Parties acknowledge and agree that by
entering into this Agreement they are agreeing to this arbitration provision and
are waiving all rights to a trial by jury. The arbitral award shall be in
writing and shall be final and binding on the Parties. The award shall include
an award of costs, including the fees and costs of the arbitrators and
reasonable attorneys' fees and disbursements in accordance with Section 13.8.
Except upon a finding of actual fraud, intentional or knowing misrepresentation,
willful and knowing omissions of material fact or willful misconduct, no such
award shall include punitive damages. Judgment upon the award may be entered by
any Governmental Authority having jurisdiction thereof or having jurisdiction
over the Parties or their assets.
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IN WITNESS WHEREOF, each of the Parties has executed this
Agreement as of the date first written above.
VANS, INC.
By:___________________________
Name:______________________
Title:_____________________
SWITCH MANUFACTURING
By:___________________________
Name:______________________
Title:_____________________
Agreed as to Section 7.2 and Article 13 only
"Management Group"
______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
______________________________
▇▇▇▇▇▇▇ ▇. SAND
______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
______________________________
G. ▇▇▇▇▇▇ ▇▇▇▇▇
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LIST OF SCHEDULES AND EXHIBITS
3.2 Allocation of Merger Consideration
5.1(d) Articles and Bylaws
5.2(a) Capitalization of the Company
5.3(c) Governmental Approvals
5.4 Financial Statements
5.5 Undisclosed Liabilities
5.6 Changes or Events since the Measurement Date
5.7 List of Assets, Schedule of Tooling Not Owned by the Company and List
of Equipment Not Located at the Company's Headquarters
5.8(a) List of Material Contracts
5.11 Litigation
5.12 Schedule of Excepted Tax Returns
5.14 List of Proprietary Rights, Notices or Claims of Infringement and
Schedule of Potential Infringements of the Company's Proprietary
Rights
5.15 Schedule of Threatened and Potential Labor Claims
5.16 List of Employee Benefit Plans
5.17 Affiliate Transactions
5.18(a) List of Insurance Policies
5.18(b) List of Outstanding Unpaid Claims
5.22(b) Schedule of Exceptions to the Company's Representations and
Warranties for the French Subsidiary
5.23 Schedule of Non-Customized Software Owned or Utilized by the Company
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Exhibits
A-1 Form of Senior Earn-out Note
A-1 Form of Subordinated Earn-out Note
A-3 Form of Initial Note
B Form of Shareholders' Questionnaire
C Form of Employment Agreement between the Parent and Members of the
Management Group
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