Exhibit 2.1
Execution Copy
ACQUISITION AGREEMENT
dated as of March 26, 1999
by and between
K2 ACQUISITIONS INC.
a Delaware corporation
and
XXXXXX SNOWBOARDS, INC.,
an Oregon corporation
TABLE OF CONTENTS
PAGE
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ARTICLE I. SALE OF ASSETS; PURCHASE PRICE.................................. 1
1.1 Sale of Assets................................................. 1
(a) Sale of Assets.......................................... 1
(b) Definition of Assets.................................... 1
(c) Assumption of Certain Contracts......................... 3
1.2 Purchase Price and Payment..................................... 3
(a) Purchase Price.......................................... 3
(b) Mechanics of Payment.................................... 3
1.3 Time and Place of Closing...................................... 3
1.4 Closing Date Deliveries........................................ 4
(a) Company Deliveries...................................... 4
(b) Purchaser Deliveries.................................... 4
(c) Additional Deliveries................................... 5
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 5
2.1 Organization, Standing and Power............................... 5
2.2 Authority and Enforceability................................... 5
2.3 Title to Assets; Condition..................................... 6
2.4 No Violations Resulting From Transactions...................... 6
2.5 Compliance with Laws........................................... 6
2.6 Litigation..................................................... 7
2.7 Financial Advisors............................................. 7
2.8 Financial Statements and Financial Condition................... 8
(a) Financial Statements.................................... 8
(b) No Undisclosed Liabilities.............................. 8
(c) Solvency................................................ 8
2.9 Intellectual Property.......................................... 9
(a) List of Intellectual Property; Sufficiency.............. 9
(b) Title; Validity; Pending Applications; Infringements.... 9
(c) Forfeiture of Rights.................................... 10
(d) Protection and Maintenance of Intellectual Property..... 10
2.10 Contracts..................................................... 11
2.11 Inventory..................................................... 11
2.12 Product Warranties............................................ 11
2.13 Labor and Employment Matters.................................. 11
2.14 No Misrepresentation.......................................... 12
ARTICLE III. MISCELLANEOUS COVENANTS OF THE COMPANY........................ 12
3.1 Confidentiality................................................ 12
3.2 Right of First Refusal......................................... 12
2
PAGE
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(a) Offer Notice............................................ 12
(b) Corporate Event Defined................................. 13
ARTICLE IV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER......... 14
4.1 Organization, Standing and Power............................... 14
4.2 Authority...................................................... 14
4.3 No Violations Resulting From Transactions...................... 14
ARTICLE V. ADDITIONAL AGREEMENTS........................................... 15
5.1 Additional Agreements.......................................... 15
(a) Further Assurances...................................... 15
(b) Non-Assignable Agreements............................... 15
5.2 Publicity...................................................... 15
5.3 Ceasing Use of the Name of the Business........................ 16
5.4 Sale of Excess Inventory....................................... 16
5.5 Access to Premises............................................. 16
5.6 Termination of Xxxxxx Sales Representatives.................... 17
5.7 Provision of Replacement Snowboards............................ 17
ARTICLE VI. SURVIVAL; INDEMNIFICATION...................................... 17
6.1 General Survival............................................... 17
6.2 Indemnification................................................ 17
(a) Indemnification Provisions in General................... 17
(b) Disregarding Specific Materiality Exceptions............ 19
6.3 Notice......................................................... 19
ARTICLE VII. GENERAL PROVISIONS............................................ 19
7.1 Notices........................................................ 19
7.2 Counterparts................................................... 20
7.3 Entire Agreement; No Third Party Beneficiaries................. 20
7.4 Governing Law.................................................. 20
7.5 Arbitration.................................................... 20
7.6 Severability................................................... 21
7.7 Assignment..................................................... 21
7.8 Specific Performance........................................... 21
7.9 Amendment...................................................... 22
7.10 Fees and Expenses............................................. 22
7.11 Sales and Use Taxes........................................... 22
7.12 Interpretation................................................ 22
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ACQUISITION AGREEMENT
Acquisition Agreement dated as of March 26, 1999 (the "Agreement"), by
and between K2 Acquisitions Inc., a Delaware corporation ("Purchaser"), and
Xxxxxx Snowboards, Inc., an Oregon corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is engaged in, among other things, the business of
manufacturing, marketing and selling snowboards and related equipment and
snowboard apparel and casual apparel;
WHEREAS, the parties hereto desire that the Company sell, and Purchaser
acquire, on the date hereof, all of the right, title and interest of the Company
in and to certain Assets (as hereinafter defined) used by the Company in
connection with the manufacture, marketing and sale of snowboards, snowboard
bindings and related products (the "Business"), for the consideration and
subject to the terms and conditions set forth herein (such transaction, the
"Acquisition");
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I.
SALE OF ASSETS; PURCHASE PRICE
1.1 SALE OF ASSETS.
(a) SALE OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, at the Closing, in consideration for the payment
of the Purchase Price (as defined below) by the Purchaser to the Company, the
Company shall irrevocably sell, convey, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase and acquire from the Company, free and
clear of any and all Encumbrances, all right, title and interest in and to the
Assets. Notwithstanding anything to the contrary in this Agreement, except as
provided in Section 1.1(c) below, the Company and its subsidiaries shall retain,
pay, perform, defend and discharge all liabilities or obligations of the Company
and its subsidiaries and affiliates of any and every kind whatsoever, whether or
not related to the Business, whether direct or indirect, fixed or contingent,
liquidated or unliquidated, known or unknown, or otherwise, and of whatever kind
or nature.
(b) DEFINITION OF ASSETS. For purposes of this Agreement,
the term "Assets" shall mean and include the following assets:
(i) all of the Company's right, title and
interest in and to (A) the
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"Xxxxxx" and "Xxxxxx Snowboards" names and the other trademarks, trade names and
service marks of the Company as set forth on SCHEDULE 1.1(b)(i) attached hereto
and any derivation thereof (collectively, the "Transferred Trademarks"), (B) all
catalogs, tradebooths, posters, flyers, demo vans, marketing, sales and
promotional literature, customer and supplier lists and files, preprinted
materials and art work in the possession or control of the Company, which in
each case are either used in connection with or relate solely to the Business,
(C) each process, invention, design, plan, process, prototype, shop drawing,
know how, trade secret, computer program, software (including CAD and design
software), source code, object code, database and formula which is either owned
by the Company relating to the Business or which the Company has the right to
use in connection with the operation of the Business (including all of the
foregoing associated with the Company's "xxxxxxxxxxxxxxxx.xxx" Website but
excluding any accounting or enterprise software used in connection with both the
Business and the Company's other businesses and the Company's Adobe design
software used in connection with the Company's apparel business); and (D) each
patent and patent application (including, but not limited to those listed in
SCHEDULE 1.1(b)(i)), copyright and copyright application, trade name and trade
name registration, trademark and trademark registration, service xxxx and
service xxxx registration, in any of the foregoing (whether registered or to be
registered in the United States of America or elsewhere) applied for, issued to
or owned by the Company (the assets to be conveyed to Purchaser pursuant to this
Section 1.1(b)(i) are hereinafter referred to collectively as the "Company
Intellectual Property");
(ii) all of the machinery, equipment and tooling
used for the manufacture of snowboards and bindings that is owned by the
Company, including the equipment listed on SCHEDULE 1.1(b)(ii) (the "Owned
Equipment");
(iii) all of the Company's rights to the
machinery, equipment and tooling used for the manufacture of snowboards and
bindings that is leased by the Company (the "Leased Equipment"), including the
Company's rights under those certain equipment lease agreements identified on
SCHEDULE 1.1(b)(iii) (the "Lease Agreements");
(iv) all of the Company's snowboard inventory
(including raw materials and supplies, work in process and finished goods)
identified on SCHEDULE 1.1(b)(iv) (the "Inventory");
(v) those certain outstanding purchase orders
reflecting sales orders received and accepted by the Company with respect to the
Business prior to the date hereof and identified on SCHEDULE 1.1(b)(v) and those
additional purchase orders with respect to the Business received by the Company,
whether before or after the Closing Date, that Purchaser in its sole discretion
elects in writing to accept (collectively, the "Purchase Orders");
(vi) the License Agreement, dated November 21,
1996, the Trademark License Agreement, dated November 21, 1996, and the
International Distribution Agreement dated January 1, 1997, in each case by and
between the Company and X. X. Xxxxxx Japan (collectively, the "License and
Distribution Agreements") and that certain Agreement dated as of April 9, 1998
(effective as of November 1, 1997) between the Company and Xxxx Xxxxxxxx (the
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"Endorsement Agreement"); and
(vii) all of the Company's rights, claims,
credits, causes of action or rights of set-off against third parties relating to
the Assets, whether liquidated or unliquidated, fixed or contingent, including
claims pursuant to all warranties, representations and guarantees made by
suppliers, manufacturers, contractors and other third parties in connection with
products or services purchased by or furnished to the Company for use in the
Business or affecting any of the Assets of the Company.
Notwithstanding anything to the contrary in this Agreement, the term "Assets"
shall not include any minute books, tax records or corporate seals of the
Company.
(c) ASSUMPTION OF CERTAIN CONTRACTS. In addition to the
foregoing, upon the terms and subject to the conditions of this Agreement, at
the Closing, Purchaser and the Company shall execute and deliver an Assignment
and Assumption Agreement (as provided for in Section 1.4), under the terms of
which the Company shall assign its rights, and Purchaser shall assume the
Company's obligations, with respect to the License and Distribution Agreements
and the Lease Agreements and the Endorsement Agreement (collectively, the
"Assigned Contracts").
1.2 PURCHASE PRICE AND PAYMENT.
(a) PURCHASE PRICE. In consideration for the sale,
conveyance, assignment, transfer and delivery of the Assets and the various
undertakings of the Company hereunder and under the Ancillary Agreements (as
defined in Section 2.1 below), Purchaser shall, upon the terms and subject to
the conditions of this Agreement, pay the Company at the Closing (except as
otherwise indicated below) an aggregate cash amount determined as follows: (i)
with respect to the Company Intellectual Property and the Purchase Orders,
$830,000; (ii) with respect to the Owned Equipment and Leased Equipment,
$500,000 (of which $243,205 will be paid to the Company in respect of the Owned
Equipment and $256,795 will be retained by Purchaser to satisfy its obligations
under the Lease Agreements with respect to the Leased Equipment); (iii) with
respect to all Inventory consisting of finished goods, $798,431 (of which
$200,000 (the "Deposit") was previously wired directly to counsel to the Company
on March 22, 1999 and $598,431 will be paid at the Closing); and (iv) with
respect to all Inventory consisting of raw materials, supplies and work in
process, $914,403 (the sum of such amounts, the "Purchase Price").
(b) MECHANICS OF PAYMENT. The Company hereby directs the
Purchaser to pay the Purchase Price at the Closing by wire transfer directly to
its secured lender, Foothill Capital Corporation, to an account designated in
writing by Foothill Capital Corporation (the "Foothill Account"); and Purchaser
hereby directs counsel to the Company to forward the Deposit to the Foothill
Account by wire transfer.
1.3 TIME AND PLACE OF CLOSING. The closing of the Acquisition (the
"Closing") shall take place simultaneously with the execution of this Agreement,
at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, unless another date, time or place is agreed to in
writing by the parties hereto (the day on which the
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Closing takes place being the "Closing Date").
1.4 CLOSING DATE DELIVERIES.
(a) COMPANY DELIVERIES. At the Closing, the Company
shall, as appropriate, enter into, execute and/or deliver:
(i) the Xxxx of Sale in the form attached hereto
as Exhibit A;
(ii) the Assignment and Assumption Agreement in
the form attached hereto as Exhibit B;
(iii) the Assignment of Patents and Trademarks
(the "Patent and Trademark Agreement") in the form attached hereto as Exhibit C;
(iv) the Internet Domain Name Assignment in the
form attached hereto as Exhibit D;
(v) copies of any permits issued by any
Governmental Entity (as defined below) and any consents executed by third
parties required for the valid transfer of the Assets as contemplated by this
Agreement;
(vi) resolutions adopted by the Board of
Directors of the Company approving this Agreement and the Ancillary Agreements
and the transactions contemplated hereby and thereby, certified by the Company's
corporate secretary;
(vii) evidence satisfactory to the Purchaser of
the release of any and all Encumbrances on the Assets; and
(viii) any other instruments of conveyance or
transfer which may be reasonably necessary in the sole discretion of Purchaser,
including, without limitation, any additional instruments of assignment in
connection with Company Intellectual Property, each in form and substance
reasonably acceptable to Purchaser, pursuant to which the Company shall sell,
convey, assign, transfer and deliver to Purchaser all right, title and interest
in, to and under the Assets, free and clear of any and all Encumbrances.
(b) PURCHASER DELIVERIES. At the Closing, the Purchaser
shall, as appropriate, enter into, execute and/or deliver:
(i) the Purchase Price, payable as provided in
Section 1.2;
(ii) the Assignment and Assumption Agreement;
(iii) the Internet Domain Name Assignment; and
(iv) a waiver letter, signed by K-2 Corporation,
stating that K-2 Corporation waives any right to collect royalties from the
Company pursuant to that certain
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License Agreement dated as of November 9, 1998 in connection with the sale by
the Company of side-step bindings prior to the Closing Date or the sale of
step-in bindings pursuant to Section 5.4 after the Closing Date.
(c) ADDITIONAL DELIVERIES. The Company shall
simultaneously with such deliveries take all additional steps as may be
necessary to put Purchaser in actual possession and operating control of the
Assets. On and after the Closing Date, the parties hereto shall enter into,
execute and deliver such other and further agreements, documents and
instruments, as any of them may reasonably request, for the purpose of
effectuating the transactions contemplated by this Agreement, in each case upon
the terms and conditions of Section 5.1(a) below.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
2.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation
duly incorporated and validly existing under the laws of the State of Oregon and
has all requisite corporate power and authority to own, lease and operate its
properties (including, without limitation, the Assets) and to carry on its
business as now being conducted (including, without limitation, the Business).
The Company is duly qualified and in good standing to conduct business in each
jurisdiction in which the Business it is conducted, or the operation, ownership
or leasing of its properties, makes such qualification necessary, except where
the failure to be so qualified would not result in a Business Material Adverse
Effect (as defined below). For purposes of this Agreement, the term "Business
Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business operations, assets, results of operations,
value, condition (financial or otherwise) or prospects of the Business, or any
event or circumstance which would likely prevent, hinder or materially delay the
consummation of any of the transactions contemplated by this Agreement, the Xxxx
of Sale, the Assignment and Assumption Agreement, the Patent and Trademark
Agreement and the Internet Domain Name Assignment (the Xxxx of Sale, the
Assignment and Assumption Agreement, the Patent and Trademark Agreement and the
Internet Domain Name Assignment, collectively, the "Ancillary Agreements").
2.2 AUTHORITY AND ENFORCEABILITY. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to perform fully its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Board of Directors of the Company. No action of or consent or approval of
the shareholders of the Company is necessary in order for the Company to execute
this Agreement or the Ancillary Agreements or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Ancillary Agreements have
each been duly executed and delivered by the Company and, assuming this
Agreement and the Ancillary Agreements constitute the valid and binding
agreement of the other parties hereto and thereto, this Agreement and the
Ancillary Agreements
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constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
2.3 TITLE TO ASSETS; CONDITION. Except for the rights of the
lessors under the Lease Agreements with respect to any Leased Equipment included
within the Assets, the Company owns beneficially and of record, and has good and
marketable title to, the Assets, free and clear of any Encumbrances (as defined
below) and upon consummation of the transactions contemplated hereby, Purchaser
will acquire good and marketable title to the Assets, free and clear of any
Encumbrances. All tangible assets included within the Assets are in reasonably
good working condition and repair, except for normal wear and tear. For purposes
of this Agreement, the term "Encumbrance" shall mean and include any mortgage,
pledge, claim, charge, lien, encumbrance, interest, option, right of first
refusal, restriction, condition, violation, security interest or assessment of
any nature affecting in any way the assets or property involved.
2.4 NO VIOLATIONS RESULTING FROM TRANSACTIONS. The execution and
delivery by the Company of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby by the Company
or any of its affiliates will not (a) conflict with or violate any provision of
the articles of incorporation, as amended, or by-laws, as amended, of the
Company, (b) require any consent, waiver, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity (as defined in
Section 2.5 below), (c) result in or constitute a breach or default, or require
any consent or approval of or notice to any person or entity, or result in the
creation of an Encumbrance, under or pursuant to (i) any of the Lease Agreements
or the License and Distribution Agreements or (ii) any other material agreement
which in any way relates to any of the Assets, the breach of which would (A)
impair the abilities of the parties to consummate the transactions contemplated
hereby or (B) create or impose any Encumbrance on any of the Assets, or (d)
violate any court order or injunction or Law (as defined in Section 2.5 below)
applicable to the Company or by which any of their respective assets are bound.
2.5 COMPLIANCE WITH LAWS. The Business is, and at all times has
been, in material compliance with all Laws applicable to the Business or to the
conduct of the business or operations of the Business or the use of its
properties (including any leased properties) and assets, and the Company has not
received, and does not know of the issuance or threatened issuance by any
Governmental Entity, of any notices of violation or alleged violation of any Law
applicable to the Business. For purposes of this Agreement, (a) the term
"Governmental Entity" shall mean any governmental authority, court,
administrative agency or commission or other governmental or regulatory body or
entity, whether federal, state, local or foreign, (b) the term "Law" shall mean
any statute, law, ordinance, rule, regulation or administrative ruling or any
governmental permit, franchise or license or any injunction, judgment, order or
consent or similar decree or agreement, whether federal, state, local or foreign
and shall include Environmental Laws, (c) the term "Environmental Laws" shall
mean all Laws relating to Hazardous Substances, toxic torts, occupational health
and safety, or the environment, including
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without limitation, the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"),
the Clean Air Act, the Water Pollution Control Act, the Safe Drinking Water Act,
and the Toxic Substances Control Act ("TSCA"), and any requirements promulgated
pursuant to these Laws or any analogous foreign, state or local Laws and (d) the
term "Hazardous Substance" shall mean any substance or material: (i) the
presence of which requires investigation or remediation under any Law; or (ii)
that is defined as a "hazardous waste" or "hazardous substance" under any law;
or (iii) that is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic or mutagenic or otherwise hazardous and is regulated
by any Governmental Entity having or asserting jurisdiction over the Company; or
(iv) the presence of which causes a nuisance, trespass or other tortious
condition; or (v) the presence of which poses a hazard to the health or safety
of persons; or (vi) without limitation, that contains gasoline, diesel fuel or
other petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
2.6 LITIGATION. There is no action, suit, claim, investigation or
proceeding, whether at Law or in equity (each, a "Legal Proceeding"), pending
or, to the knowledge of the Company, threatened that relates in any way to the
Assets or that questions the validity of this Agreement or the Ancillary
Agreements or any action taken or to be taken by the Company or any of its
affiliates in connection with the consummation of the transactions contemplated
hereby or thereby. To the knowledge of the Company, no event has occurred and no
circumstance, matter or set of facts exist which would constitute a valid basis
for the assertion by any third party of any claim or Legal Proceeding
challenging the validity of this Agreement or the Ancillary Agreements or any
action taken or to be taken by the Company. There is no outstanding or, to the
knowledge of the Company, threatened judgment, injunction, judgment, order or
consent or similar decree or agreement of any Governmental Entity against,
affecting the Business or any of the Assets. Section 2.6 of the Disclosure
Schedule sets forth a complete list of all of the litigation to which the
Company is a party as of the date hereof or to which the Company has been a
party during the prior 12 months, together with a complete list of all product
liability claims that have been brought against the Company during the past 12
months (whether or not resulting in litigation).
2.7 FINANCIAL ADVISORS. No person or entity has acted directly or
indirectly as a broker, finder or financial advisor for or to the Company or any
of its affiliates in connection with the negotiations relating to or the
transactions contemplated by this Agreement, and no person or entity is entitled
to any fee or commission or like payment, or expense reimbursement, in respect
of this Agreement or any of the transactions contemplated hereby, based in any
way on agreements, arrangements or understandings made by or on behalf of the
Company or any of its affiliates.
2.8 FINANCIAL STATEMENTS AND FINANCIAL CONDITION.
(a) FINANCIAL STATEMENTS. Attached hereto as Schedule 2.8
are true, correct and complete copies of the balance sheet (the "Balance Sheet")
of the Company as at December 31, 1998 (the "Balance Sheet Date") and the
related statements of earnings, shareholders' equity and cash flows of the
Company for the periods then ended (including the
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related notes and schedules thereto) (the "Financial Statements"). The Financial
Statements were prepared in accordance with the books and records of the Company
and the Business, are complete and correct in all material respects, have each
been prepared in accordance with U.S. generally accepted accounting principles
applied consistently with the past practices of the Company ("GAAP") and present
fairly the financial position (except as noted in the following sentence),
results of operations and changes in financial position (except as noted in the
following sentence) or cash flows, whichever is applicable, of the Company and
the Business, as the case may be, as at the dates and for the periods indicated.
The parties hereto acknowledge that in connection with an ongoing audit of the
Financial Statements by the Company's accountants, certain assets of the Company
relating to the Business reflected on the Financial Statements may be written
down on the Balance Sheet to the extent that the Business is characterized as
"discontinued operations" of the Company on the Balance Sheet.
(b) NO UNDISCLOSED LIABILITIES. As of December 31, 1998,
the Company did not have any indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due or asserted or unasserted), and, to the knowledge of the Company,
there was no basis for the assertion of any claim or liability of any nature
against the Company, which was not fully reflected in, reserved against or
otherwise described in the Balance Sheet that would be required to be disclosed
on a balance sheet prepared as of December 31, 1998 in conformity with GAAP.
Since December 31, 1998, the Company has not incurred any indebtedness,
obligations or liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or unasserted) that
would be required to be disclosed on a balance sheet prepared as of the date
hereof in conformity with GAAP, other than those which (x) were incurred in the
ordinary course of business consistent with past practice, and (y) would not, in
the aggregate, result in a Business Material Adverse Effect.
(c) SOLVENCY. The Company has provided Purchaser with a
true and correct copy of an operating plan, dated March 25, 1999, pursuant to
which the Company will utilize the proceeds from the transactions contemplated
hereby to repay certain indebtedness owed to Foothill Capital Corporation and
will take other actions to satisfy obligations to its outstanding trade
creditors (the "Operating Plan"). The Operating Plan, in the form in which it
was provided to Purchaser, is acceptable to Foothill Capital Corporation as it
relates to the payment of amounts owing to Foothill Capital Corporation, and the
Board of Directors of the Company and has been reviewed and acknowledged by
representatives of the Company's principal trade creditors; and no trade
creditor of the Company that is owed in excess of $50,000, and no group of trade
creditors that is owed in excess of $250,000 in the aggregate, has expressed any
material objection to the Operating Plan. Immediately after giving effect to the
transactions contemplated by this Agreement and the Operating Plan, the Company
shall be able to pay its debts as they become due and shall own property having
a fair saleable value greater than the amounts required to pay its debts
(including a reasonable estimate of the amount of all contingent liabilities).
Immediately after giving effect to the transactions contemplated by this
Agreement and the Operating Plan, the Company shall have adequate capital to
carry on its business. The Operating Plan includes, among other things,
assumptions regarding revenues, margins, the market acceptance of the Company's
products, the sale of the Company's building, financing
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from Foothill Capital Corporation or another financing source, interest rates,
receivable repayment experience, operating costs and the absence of any adverse
action against the Company by the Company's creditors. No transfer of property
is being made and no obligation is being incurred in connection with the
transactions contemplated by this Agreement with the intent to hinder, delay or
defraud either present or future creditors of the Company.
2.9 INTELLECTUAL PROPERTY.
(a) LIST OF INTELLECTUAL PROPERTY; SUFFICIENCY. Section
2.9 of the Disclosure Schedule attached to the Agreement sets forth a true,
correct and complete list of all Company Intellectual Property (as defined in
Section 1.1(b)) which is either owned by the Company, licensed by the Company or
otherwise used in its business (other than commonly-used computer software which
is generally available to the public and the use rights to which were legally
acquired by the Company either for free or through established retail
facilities) and indicates, with respect to each item of Intellectual Property
listed thereon, (i) the owner thereof, (ii) if applicable, the name of the
licensor and licensee thereof and the date(s) of any licenses or other
agreements or contracts with respect thereto, (iii) with respect to the
Transferred Trademarks, a list of each jurisdiction in which the Transferred
Trademarks are registered or in which applications for registration are pending
(including the registration and/or application number for each) and (iv) with
respect to any patents included in the Company Intellectual Property, a list of
all jurisdictions in which patents have been issued or patent applications have
been filed (including the registration and/or application number for each). The
Company owns or has the lawful right to use all intellectual property necessary
for the conduct of its business as now conducted.
(b) TITLE; VALIDITY; PENDING APPLICATIONS; INFRINGEMENTS.
Except as set forth in Section 2.9 of the Disclosure Schedule:
(i) To the knowledge of the Company, the Company
owns, or has valid and enforceable rights to, the Company Intellectual Property
sufficient to operate the Business as currently conducted. The Company has not
received any notice or claim (whether written, oral or otherwise) challenging
the validity or enforceability of any such Company Intellectual Property or
challenging the Company's ownership or rights in such Company Intellectual
Property or suggesting that any other person has any claim of legal or
beneficial ownership with respect thereto;
(ii) The Company has obtained valid and enforceable
trademark registrations with respect to the Transferred Trademarks in the
United States, Japan and the member countries of the European Union and, to
the Company's knowledge, the Transferred Trademarks are legally valid and
enforceable without any material qualification, limitation or restriction on
their use in every other jurisdiction in which the Business has been operated;
(iii) To the knowledge of the Company, the use of any
of the Company Intellectual Property will not conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title or
interest held by any other person or entity, and there have been no claims made
with respect thereto; and
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(iv) To the knowledge of the Company, no other
Person is infringing in any material respect on any part of the Company
Intellectual Property.
(c) FORFEITURE OF RIGHTS. The Company has not conducted
its business, and has not used or enforced (or failed to use or enforce) any
Company Intellectual Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Company Intellectual
Property, and the Company has not taken or failed to take any action that would
result in the forfeiture or relinquishment of any Company Intellectual Property
used in the conduct of the Business as now conducted. The Company has, and after
giving effect to the consummation of the transactions contemplated by this
Agreement, the Company will have, a valid registration and full rights (free of
any material restriction) with respect to all Internet domain names which are
currently used by the Company in the Business. The Company does not know of any
new developments in any of the Company Intellectual Property owned, created or
used by the Company or its competitors that might reasonably be expected to
result in a Business Material Adverse Effect.
(d) PROTECTION AND MAINTENANCE OF INTELLECTUAL PROPERTY.
Except as set forth in Section 2.9 of the Disclosure Schedule, the Company has
taken all reasonable steps to (A) protect the Company's rights to the Company
Intellectual Property and (B) prevent the unauthorized use thereof by, or the
unauthorized disclosure thereof to, any other person, in each case in accordance
with standard industry practice. Except as set forth in Section 2.9 of the
Disclosure Schedule and except in the ordinary course of business consistent
with past practices, neither the Company nor any of its affiliates, has granted
to any other person any rights or permissions to use any of the Company
Intellectual Property. With respect to any part of the Company Intellectual
Property which was created by the Company or any of its agents or
representatives (E.G., any copyrights, know-how, trade secret, trade right or
confidential or proprietary report or information of the Company), (A) to the
knowledge of the Company, no third party has any rights (whether non-exclusive
or otherwise) in such Company Intellectual Property, and, except pursuant to
reasonably prudent safeguards, no third party has received any confidential
information relating to such Company Intellectual Property, (B) the Company is
not under any contractual or other obligation to disclose to any third party any
such Company Intellectual Property except pursuant to prudent and reasonable
safeguards, and (C) there are no known significant defects therein and such
Company Intellectual Property substantially conforms to all documentation and
materials produced by the Company which describe such Company Intellectual
Property.
2.10 CONTRACTS. The Company has provided Purchaser with true and
correct copies of the Assigned Contracts. With respect to the Assigned
Contracts, there exists no default by the Company or, to the knowledge of the
Company, any default or threatened default by any third party thereunder, that
has affected or could reasonably be expected to affect the rights and privileges
thereunder of the Purchaser as assignee of such contracts or result in any
liability on the part of the Purchaser. Each Assigned Contract is a legal, valid
and binding obligation of the Company and each other party thereto, enforceable
against each such party thereto in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
13
moratorium or similar laws affecting creditors' rights generally and subject to
general principles of equity. The transfer and assignment of the Assets
contemplated by this Agreement will not result in any breach or default under,
penalty under or modification to any Assigned Contract.
2.11 INVENTORY. All items included in the Inventory are owned by
the Company, free and clear of any Encumbrances, and are not held by the Company
on consignment from others. All of the Inventory consisting of finished goods is
of a quality and quantity usable and salable in the ordinary course of business.
The Company's aggregate actual cost with respect to the Inventory is equal to
the amount to be paid to the Company by Purchaser for such Inventory pursuant to
Section 1.2.
2.12 PRODUCT WARRANTIES. Except as set forth on Section 2.12 of the
Disclosure Schedule, no product manufactured, sold, leased, licensed or
delivered by the Company is subject to any guaranty, warranty, right of return
or other indemnity beyond the applicable standard terms and conditions of sale,
which are set forth on Section 2.12 of the Disclosure Schedule. Section 2.12 of
the Disclosure Schedule sets forth the aggregate expenses incurred by the
Company in fulfilling its product warranty obligations relating to the Business
during 1998. The Company has no reason to believe that warranty expense of the
Business as a percentage of sales will increase materially in the future.
2.13 LABOR AND EMPLOYMENT MATTERS. If required under the Workers
Adjustment and Retraining Notification Act or other applicable state law
regulating plant closing or mass layoffs, the Company has timely caused there to
be filed or distributed, or will timely cause there to be filed or distributed,
as appropriate, all required filings and notices with respect to employment
losses occurring or expected to occur in connection with the consummation of the
transactions contemplated by this Agreement. The Company has complied and is
currently complying, in respect of all employees of the Company, with all
applicable Laws respecting employment and employment practices and the
protection of the health and safety of employees, from whatever source such Law
may be derived, including, without limitation, statutes, ordinances, laws,
rules, regulations, policies, standards, judicial or administrative precedents,
judgments, orders, decrees, awards, citations, licenses, official
interpretations and guidelines.
2.14 NO MISREPRESENTATION. Neither this Agreement (including the
schedules and exhibits hereto) or any information supplied by or on behalf of
the Company or any of its affiliates to Purchaser in connection with this
Agreement or the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading. Except as publicly
disclosed in filings made by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (the "1934 Act") or
as otherwise disclosed directly to Purchaser, neither the Company nor any of its
affiliates knows of any facts which are reasonably likely to cause a Business
Material Adverse Effect after the date hereof (including after giving effect to
the consummation of the transactions contemplated pursuant to this Agreement).
ARTICLE III.
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MISCELLANEOUS COVENANTS OF THE COMPANY
3.1 CONFIDENTIALITY. From and after the Closing, the
Company shall, and shall use its best efforts to cause each of its respective
representatives and affiliates to, (a) hold, in strict confidence, all
confidential, proprietary or other non-public information or trade secrets
relating to the Business or the Assets (the "Business Confidential
Information"), unless compelled to disclose by judicial or administrative
process or, by other requirements of law, and (b) not, directly or indirectly,
except at the request of Purchaser, use for their own benefit or purposes, or
release or disclose to any other person or entity, any such Business
Confidential Information (except, to the extent reasonably required, for
disclosure to those of the Company's advisors, attorneys and other
representatives who agree to be bound by the provisions of this Section 3.2).
Notwithstanding the foregoing, the term "Business Confidential Information"
shall not include information (x) which is or becomes generally available to the
public (other than as a result of the disclosure of such information by the
Company or its directors, officers and employees or any of their respective
representatives and affiliates), or (y) becomes available to the recipient of
such information on a non-confidential basis from a source which is not, to the
recipient's knowledge, bound by a confidentiality or other similar agreement, or
by any other legal, contractual or fiduciary obligation which prohibits
disclosure of such information.
3.2 RIGHT OF FIRST REFUSAL
(a) OFFER NOTICE. The Company agrees that, prior to
entering into, soliciting offers for, or accepting any offers for, a proposed
Corporate Event (a "Proposed Event"), the Company will provide Purchaser with a
written offer to engage in such Proposed Event (an "Offer Notice"), specifying
the terms and conditions of the Proposed Event, including the proposed selling
price for the Company, its capital stock or assets, as applicable (the "Proposed
Selling Price"), the proposed structure of the transaction, when the Proposed
Event involves an acquisition of assets, a description of the assets to be sold
(the "Sale Assets"), when the Proposed Event involves a sale of stock or other
equity interests, a description of such stock or equity interests (the "Stock")
and the other material terms and conditions of the Proposed Event. In the event
that the Company proposes to enter into, solicit offers for or accept an offer
for, a Proposed Event on terms and conditions that are not substantially the
same as the terms and conditions specified in the last Offer Notice, the Company
agrees to provide Purchaser with a new Offer Notice pursuant to this Section
3.2. Without limiting the generality of the foregoing, a purchase price that is
ninety-five percent (95%) or less of the purchase price in the last Offer Notice
received by Purchaser shall be deemed not to be substantially the same terms and
conditions as specified in the last Offer Notice and shall require the Company
to deliver to Purchaser a new Offer Notice. Purchaser shall have twenty-one (21)
days from the date of receipt of each Offer Notice to conduct any due diligence
with respect to the Proposed Event and to deliver written notice to the Company
agreeing in writing to purchase the Company, the Stock or the Sale Assets, as
the case may be, at the Proposed Selling Price and on substantially the same
terms and conditions specified in such Offer Notice, which agreement shall call
for the closing of such purchase within 180 days from the date of delivery of
such notice to the Company (such 180-day period subject to extensions for
regulatory compliance). If Purchaser fails to so agree in writing within such
twenty-one (21) day period, for a period of sixty (60) days thereafter, the
Company
15
shall have the right to enter into a binding agreement with any party listed in
such Offer Notice substantially on the same terms and conditions as those
described in such Offer Notice, which agreement calls for the completion of the
Corporate Event within six (6) months of the date of such agreement (such six
month period subject to extensions for regulatory compliance), provided that the
selling price for the Company, the Stock or the Sale Assets, as the case may be,
is ninety-five percent (95%) of, or greater than, the Proposed Selling Price
specified in the last Offer Notice. The rights of the Purchaser pursuant to this
Section 3.2 shall expire on December 31, 1999, unless an Offer Notice shall have
been sent to Purchaser prior to such date, in which event, the rights of
Purchaser pursuant to this Section 3.2 shall expire at such time as Purchaser's
rights with respect to such Offer Notice expire pursuant to this Section 3.2.
(b) CORPORATE EVENT DEFINED. For the purposes of this
Section 3.2, "Corporate Event" shall mean any of the following, whether
accomplished through one or a series of related transactions: (i) the
acquisition of all or substantially all the assets of the Company or all or
substantially all of the assets of the Company used in the operation of its
Westbeach clothing or retail business (the "Westbeach Business'), (ii) an
acquisition of the Company by consolidation, merger, share purchase or exchange,
or other reorganization or transaction in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
and (iii) any acquisition of the trademarks or the retail stores associated with
the Westbeach Business. The Company agrees that it will provide the Purchaser
with detailed written notice of any offer from a third party for a proposed
Corporate Event within one (1) business day of the date the Company first
becomes aware of such offer or proposed Corporate Event. In addition, the
Company agrees that it will provide the Purchaser, within twenty-four (24) hours
of the Company's becoming aware thereof, with detailed written notice of any
offer from a third party to acquire fifty percent (50%) or more of the Company's
outstanding voting securities.
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
4.1 ORGANIZATION, STANDING AND POWER. Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of the
state of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
4.2 AUTHORITY. Purchaser has all requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform fully its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Purchaser. This Agreement and the
Ancillary Agreements to which Purchaser is a party have each been duly executed
and delivered by Purchaser and, assuming this Agreement and the Ancillary
Agreements constitute
16
the valid and binding agreement of the other parties hereto, this Agreement and
the Ancillary Agreements constitute the legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and remedies generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
4.3 NO VIOLATIONS RESULTING FROM TRANSACTIONS. Except for those
matters which in the aggregate would not result in a Purchaser Material Adverse
Effect, the execution and delivery by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby by Purchaser will not (a) conflict
with or violate any provision of the certificate of incorporation, articles of
association or other organizational documents of Purchaser, (b) require any
consent, waiver, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, (c) result in or constitute a default,
or require any consent or approval of or notice to any person or entity, or
result in the creation of an Encumbrance, under or pursuant to any loan or
credit agreement, note, mortgage, indenture or other material agreement,
obligation or instrument to which Purchaser is a party or by which any of its
assets are bound, or (d) violate any Law applicable to Purchaser or by which any
of its assets are bound. For purposes of this Agreement, the term "Purchaser
Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business, assets, prospects, results of operations, value
or financial or other condition of Purchaser and its subsidiaries (taken as a
whole), or any event or circumstance which would likely prevent, hinder or
materially delay the consummation of any of the transactions contemplated by
this Agreement or the Ancillary Agreements.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 ADDITIONAL AGREEMENTS.
(a) FURTHER ASSURANCES. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement or the Ancillary Agreements, each party hereto shall use its
respective commercially reasonable efforts to take or cause to be taken all such
necessary action. Without limiting the generality of the foregoing, at any time
and from time to time after the Closing Date, at the request of and reasonable
expense of Purchaser, each of the parties hereto shall execute and deliver such
other instruments of assignment and transfer, and shall take such action as
Purchaser may reasonably deem necessary or appropriate, in order to more
effectively transfer, convey and assign to Purchaser and to confirm Purchaser's
right, title and interest in, all of the Assets to be transferred pursuant to
this Agreement, to put Purchaser and its affiliates in actual possession and
operating control thereof and to permit Purchaser and its affiliates to exercise
all rights with respect thereto including, without limitation, rights under any
Non-Assignable Agreements (as defined below). In furtherance thereof, the
Company agrees, from and after the Closing Date, to provide Purchaser with
cooperation and assistance in connection with the transfer of the Assets to
Purchaser, including, without limitation, by (i) forwarding to Purchaser all
telephone inquiries relating to
17
"Xxxxxx" branded products and (ii) forwarding to Purchaser all purchase orders
for "Xxxxxx" branded products.
(b) NON-ASSIGNABLE AGREEMENTS. In the event and to the
extent that the Company is unable to obtain any required consent to the transfer
at Closing to Purchaser of any Assigned Contract (any such contract, the
"Non-Assignable Agreement"), then (i) the Company shall remain a party to and
shall continue to be bound by such Non-Assignable Agreement, (ii) Purchaser
shall pay, perform and discharge fully all of the obligations of the Company
thereunder from and after the Closing Date, upon the terms and subject to the
conditions of such Non-Assignable Agreement, (iii) the Company shall, without
further consideration therefor, pay, assign and remit to Purchaser promptly all
monies, rights and other consideration received in respect of such
Non-Assignable Agreement on and after the Closing Date, and (iv) the Company
shall, without further consideration therefor, exercise and exploit its rights
and options under such Non-Assignable Agreement in the manner and only to the
extent directed by Purchaser and at Purchaser's sole expense. If and when any
consent shall be obtained following the Closing Date with respect to the
transfer by the Company to Purchaser of any such Non-Assignable Agreement or
such Non-Assignable Agreement shall otherwise become assignable following the
Closing Date, the Company shall promptly assign all of its rights and
obligations thereunder to Purchaser, without further consideration therefor, and
Purchaser shall, without further consideration therefor, assume such rights and
obligations, to the fullest extent permitted. The existence of the provisions of
this Section 5.1(b) shall not reduce or otherwise adversely affect any party's
ability to enforce any of its rights under this Agreement.
5.2 PUBLICITY. Purchaser and the Company will consult with each
other and will mutually agree upon any press release or public announcement
pertaining to this Agreement or the Ancillary Agreements and shall not issue any
such press release or make any such public announcement prior to such
consultation and agreement, except that either party may issue any such release
or make any such public announcement as it determines, in its sole discretion,
may be required by applicable Law (including the 0000 Xxx) or by obligations
pursuant to any listing agreement with any national securities exchange, in
which case the parties shall use reasonable efforts to consult in good faith
with each other (but shall not be required to obtain the agreement of either
party) before issuing any such press release or making any such public
announcement. The Company will include in any press release relating to the
transaction a statement that it has exited the snowboard business, closed its
manufacturing plant, laid off its snowboard business employees and sold the
"Xxxxxx" and "Xxxxxx Snowboards" brand names to an affiliate of K2, Inc.
5.3 CEASING USE OF THE NAME OF THE BUSINESS. Immediately after the
Closing, the Company shall cease using any of the Transferred Trademarks and, as
promptly as practicable after the Closing (and in any event by no later than
July 15, 1999), the Company shall amend its Certificate of Incorporation to
adopt a name that does not include the word "Xxxxxx." If the Company does not
obtain the requisite vote of its shareholders to approve an amendment to its
Certificate of Incorporation to change its name at the first meeting of
shareholders convened to vote on the amendment, the Company will convene a
subsequent meeting of its shareholders to vote on the amendment within three (3)
months thereafter and will resubmit the matter to the
18
vote of its shareholders in successive three (3) month intervals thereafter
until such time as the amendment is approved. Pending the Company's receipt of
shareholder approval to change its name as required by the preceding sentence,
the Company shall operate exclusively under a "dba" name that does not include
the word "Xxxxxx." Notwithstanding the foregoing, the Purchaser hereby grants to
the Company a non-exclusive royalty-free license to use the "Xxxxxx" and "Xxxxxx
Snowboards" trademarks for a period not to exceed three (3) months following the
Closing Date solely in connection with the sale by the Company pursuant to
Section 5.4 of any remaining inventory of finished goods not purchased by
Purchaser pursuant to this Agreement.
5.4 SALE OF EXCESS INVENTORY. The Company agrees that, following
the Closing Date, it will sell any remaining Xxxxxx branded finished goods not
acquired by Purchaser pursuant to this Agreement in a manner that will not
disrupt the market for, or in any way damage, the "Xxxxxx" brand. Without
limiting the foregoing, the Company agrees that it will sell such finished goods
following the Closing Date only to retailers that have purchased product
directly from the Company during the twelve (12) month period preceding the
Closing Date. The Company agrees to provide the Purchaser with two (2) days
advance written notice of any proposed sale of such finished goods at a price
below the Company's actual cost for such goods; and the Purchaser shall have the
right to acquire such finished goods from the Company at such price by providing
the Company with written notice of its election to acquire the goods within five
(5) days after receipt of such notice from the Company.
5.5 ACCESS TO PREMISES. The Company grants Purchaser and its
personnel a license expiring twenty-one (21) days following the Closing Date to
enter the Company's premises at which the Owned Equipment and Leased Equipment
is located for the purpose of removing such equipment. Pending the removal of
the Owned Equipment and Leased Equipment by Purchaser, the Company agrees to
refrain from using such equipment and to maintain such equipment in a safe,
secure and locked environment on its premises.
5.6. TERMINATION OF XXXXXX SALES REPRESENTATIVES. On the Closing
Date or as soon thereafter as possible after compliance by the Company with any
advance notice requirements under existing contracts or applicable Law, the
Company shall terminate its relationships with all sales representatives with
respect to sales of "Xxxxxx" branded products. In connection with the
termination of such sales representatives, the Company and Purchaser shall each
provide the terminated sales representatives with written notification, in form
and substance satisfactory to Purchaser, that the Purchaser intends to continue
to pay such sales representatives at their stated commission rate under their
terminated contracts for sales of "Xxxxxx" branded products for the 1999/2000
season.
5.7 PROVISION OF REPLACEMENT SNOWBOARDS. The Purchaser agrees
that, for a period of eighteen (18) months following the Closing Date, it will
sell snowboards to the Company at Purchaser's cost in quantities sufficient to
enable the Company to fulfill its obligations to provide replacement snowboards
under customer warranties granted by the Company.
ARTICLE VI.
19
SURVIVAL; INDEMNIFICATION
6.1 GENERAL SURVIVAL. The parties hereto agree that regardless of
any investigation made by the parties hereto, (a) the representations and
warranties of the parties hereto contained in this Agreement shall survive the
execution and delivery of this Agreement for a period beginning on the date
hereof and ending on the eighteen month anniversary of the Closing Date, and (b)
each covenant and agreement set forth in this Agreement which by its terms is to
be performed after the Closing Date shall survive the execution and delivery of
this Agreement and shall continue until the expiration of the applicable statute
of limitations period, unless otherwise expressly provided for herein (all of
the time periods set forth above, collectively referred to as the "Survival
Period"). Notwithstanding anything to the contrary contained herein, no claim,
suit or proceeding for breach of any representation or warranty of any party set
forth in this Agreement may be brought by any person unless written notice of
such claim shall have been given on or prior to the last day of the applicable
Survival Period (in which event each such representation or warranty shall, with
respect to the specific claim made, survive the applicable Survival Period until
such claim is finally resolved and all obligations with respect thereto are
fully satisfied).
6.2 INDEMNIFICATION.
(a) INDEMNIFICATION PROVISIONS IN GENERAL. Subject to the
provisions of Section 6.1, the Company hereby agrees to indemnify, defend and
hold harmless Purchaser and each of its officers, directors, shareholders and
affiliates (each, an "Indemnified Person") from and against and in respect of
any and all Losses (as defined below) resulting from, arising out of, relating
to, imposed upon or incurred by an Indemnified Person by reason of:
(i) any inaccuracy in or breach of any of the
Company's representations, warranties, covenants or agreements contained in this
Agreement, or in any other agreement or document entered into or delivered on or
after the date hereof in connection with this Agreement or any of the
transactions contemplated hereby and thereby;
(ii) any non-compliance with any notice
requirement, if any, which may be contained in the Workers Adjustment and
Retraining Notification Act;
(iii) the non-performance, partial or total, of
any agreement of the Company contained in this Agreement or any of the Ancillary
Agreements;
(iv) any liability or obligation whatsoever of
the Company, whether arising before or after the Closing Date and whether or not
related to the Business (other than those specifically assumed by Purchaser
pursuant to Section 1.1(c)); including, without limitation, those arising out of
(A) any injury to or sustained by any person whether before or after the Closing
relating to or arising from the use of products manufactured by the Company
prior to the Closing, (B) any claims that may arise (whether or not meritorious)
asserted against, by or on behalf of the Company or any creditor of the Company
based upon bulk sales, fraudulent conveyance or other similar loss for the
protection of creditors, (C) any claims that
20
may arise (whether or not meritorious) asserted against, by or on behalf of the
Company or any shareholder or creditor of the Company on the basis that, or the
theory that, this Agreement and the transactions contemplated hereby required
the consent or approval of shareholders of the Company, (D) any claims (whether
or not meritorious) asserted by persons or entities with which the Company had
engaged in discussions regarding a sale of all or a portion of its business
alleging any rights to any of the Assets, (E) any warranty claims (whether or
not meritorious) relating to products manufactured by the Company prior to the
Closing, (F) any liability or obligation of the Company to its employees or
independent contractors by contract or under applicable Law, (G) any obligation
of the Company for the payment of federal, state or local taxes (other than
those required to be paid by Purchaser pursuant to Section 7.11), (H) any claims
(whether or not meritorious) that any actions taken by the Company in connection
with the operation of the Business prior to the Closing Date infringed upon the
intellectual property rights of any third party, or (I) any liability or
obligation of the Company, whether currently in existence or arising hereafter,
which arise under or relate to any Environmental Law; and
(v) the failure of the Company to transfer to
Purchaser good, valid and marketable title to the Assets free of any
Encumbrances;
PROVIDED that in no event shall the Company be liable for any Losses arising
under clause (i) above until the amount of all such Losses incurred by the
Indemnified Person, in the aggregate, exceeds $100,000, in which event the
Company shall be responsible for all such Losses in excess of $100,000. For
purposes of this Agreement, the term "Losses" means any and all deficiencies,
judgments, settlements, demands, claims, actions or causes of action,
assessments, liabilities, losses, damages (whether direct, indirect, incidental
or consequential), interest, fines, penalties, costs and expenses (including,
without limitation, reasonable legal, accounting and other costs and expenses
incurred in connection with investigating, defending, settling or satisfying any
and all demands, claims, actions, causes of action, suits, proceedings,
assessments, judgments or appeals, and in seeking indemnification therefor).
(b) DISREGARDING SPECIFIC MATERIALITY EXCEPTIONS. For
purposes of the indemnification obligations hereunder and the calculation of
Losses, any inaccuracy in or breach of a representation of warranty shall be
deemed to constitute a breach of such representation or warranty,
notwithstanding any limitation or qualification as to materiality set forth in
such representation or warranty as to the scope, accuracy or completeness
thereof, it being the intention of the parties that Purchaser and the other
indemnitees shall be indemnified and held harmless from and against any and all
Losses arising out of or based upon or with respect to the failure of any such
representation or warranty to be true, correct and complete in any respect.
6.3 NOTICE. If any claims in respect of Losses shall be asserted
against and Indemnified Person or any of their respective successors in respect
of which such Indemnified Person proposes to demand indemnification from the
Company under Section 6.2 hereof, such Indemnified Person shall notify the
Company in a reasonably prompt manner; PROVIDED that failure to give such
reasonably prompt notice shall not release, waive or otherwise affect any
party's obligations with respect thereto except to the extent such party can
reasonably demonstrate it was actually and materially prejudiced as a result
thereof.
21
ARTICLE VII.
GENERAL PROVISIONS
7.1 NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied or
sent by overnight courier, or by certified or registered mail, postage prepaid,
and shall be deemed to be given, dated and received when so delivered personally
or by courier or telecopied, or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a) if to Purchaser, to:
K2 Acquisitions Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. XxXxxxxxx
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
(b) if to the Company, to:
Xxxxxx Snowboards, Inc.
0000 Xxxxxxx Xxxx, X.X.
Xxxxx, Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: P. Xxxxx Xxxxxx
with a copy to:
Herschner, Hunter, Andrews, Neill & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxxxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
22
7.2 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original and all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
7.3 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof. This Agreement is not intended to confer upon
any person, other than the parties hereto, any rights or remedies hereunder.
7.4 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of California, without giving effect to
the principles of conflicts of law thereof.
7.5 ARBITRATION. Any controversy, dispute or claim arising out of
or relating to this Agreement or the breach hereof which cannot be settled by
mutual agreement (except for actions by any party seeking equitable, injunctive
or other relief under Section 7.9) shall be finally settled by arbitration as
follows: Any party who is aggrieved shall deliver a notice to other party
setting forth the specific points in dispute. Any points remaining in dispute
twenty (20) days after the giving of such notice shall be submitted to
arbitration in Los Angeles, California to the American Arbitration Association
("AAA"), before a single arbitrator appointed in accordance with the AAA's
Commercial Arbitration Rules, modified only as herein expressly provided. The
arbitrator may enter a default decision against any party who fails to
participate in the arbitration proceedings. The decision of the arbitrator on
the points in dispute will be final, unappealable and binding and judgment on
the award may be entered in any court having jurisdiction thereof. The
arbitrator will be authorized to apportion its fees and expenses and the
reasonable attorney's fees and expenses of the parties as the arbitrator deems
appropriate. In the absence of any such apportionment, the fees and expense of
the arbitrator will be borne equally by each party, and each party will bear the
fees and expenses of its own attorney. The parties agree that this clause has
been included to rapidly and inexpensively resolve any disputes between them
with respect to this Agreement, and that this clause shall be grounds for
dismissal of any court action commenced by either party with respect to this
Agreement, other than post-arbitration actions seeking to enforce an arbitration
award and other than any actions contemplated pursuant to Section 7.9 below. The
parties shall keep confidential, and shall not disclose to any person, except as
may be required by law, the existence of any controversy hereunder, the referral
of any such controversy to arbitration or the status or resolution thereof.
7.6 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
adverse to any party. In the event that the enforceability of any
non-competition or similar covenants contained herein is called into question as
the result of time,
23
geographical or other applicable limitations specified in such covenants, such
time, geographical or other applicable limitations shall be deemed modified to
the minimum extent necessary to render the applicable provisions of such
covenants enforceable.
7.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; PROVIDED that Purchaser may assign its rights and
obligations to any affiliate. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
7.8 SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise. The Company acknowledges that its
failure (and the failure of any of its directors, officers, employees, agents or
representatives) to comply with any of the provisions of Sections 3.1, 3.2, 5.2
and 5.3 hereof will result in irreparable harm for which there is no adequate
remedy at law and that Purchaser shall be entitled, without the necessity of
proving actual damages, to injunctive relief in addition to damages and all
other remedies which may otherwise be available to Purchaser.
7.9 AMENDMENT. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of Purchaser and the
Company and each party hereto agrees to be bound by any such amendment,
modification or supplement.
7.10 FEES AND EXPENSES. All costs and expenses, including all fees
and expenses of attorneys, investment bankers, lenders, financial advisers and
accountants, in connection with the negotiation, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby, shall be paid by the party incurring such costs and expenses.
7.11 SALES AND USE TAXES. All sales, use and transfer imposed by
any state or local jurisdiction in the State of Oregon applicable to the
transactions contemplated hereby will be paid by the Company; and all sales, use
and transfer taxes imposed by any state or local jurisdiction in any state other
than the State of Oregon applicable hereby will be paid by Purchaser.
7.12 INTERPRETATION. The parties hereto agree that, whenever any
matter is stated in this Agreement to be to the "knowledge of the Company" (or
any other similar phrase or reference), such reference shall be deemed to be the
knowledge of the Company and each of the directors, officers and key employees
of the Company, in each case after reasonable investigation by such persons as
to such matter.
24
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by or on behalf of each of the parties hereto as of the date first above
written.
K2 ACQUISITIONS INC.
By:
Name:
Title:
XXXXXX SNOWBOARDS, INC.
By:
Name:
Title:
25
EXHIBITS
Exhibit A Xxxx of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Assignment of Patents and Trademarks
Exhibit D Internet Domain Name Assignment
26
EXHIBIT A
XXXX OF SALE
This Xxxx of Sale (this "Xxxx of Sale") is made by Xxxxxx Snowboards,
Inc., an Oregon corporation (the "Company"), and given to K2 Acquisitions Inc.,
a Delaware corporation ("Purchaser").
For the consideration set forth in Section 1.2 of that certain
Acquisition Agreement dated as of March __, 1999 (the "Acquisition Agreement")
by and among the Company and Purchaser, the Company hereby sells, conveys,
transfers, assigns and delivers to Purchaser all right, title and interest in
and to the Assets, as defined in Section 1.1(b) of the Acquisition Agreement.
The Company agrees that it has made certain representations and
warranties with respect to the ownership of the Assets as more fully described
in Section 2.4 of the Acquisition Agreement. Further, the Company agrees that it
has represented and warranted in Section 2.4 of the Acquisition Agreement that
each item of tangible personal property included in the Assets is in reasonably
good working condition and repair, except for normal wear and tear.
Subject to the terms and conditions of the Acquisition Agreement, the
Company hereby constitutes and appoints Purchaser and its successors and assigns
as the Company's true and lawful attorney and stead, on behalf of and for the
benefit of the Company, its successors and assigns, to demand and receive any
and all of the Assets and to give receipts and releases for and in respect to
the same and any part thereof, and from time to time to institute and prosecute
in the Company's name or otherwise for the benefit of Purchaser, its successor
and assigns any and all proceedings at law, in equity or otherwise, which
Purchaser, its successors and assigns may deem
Exhibit A
1
proper for the collection or reduction to possession of any of the Assets or for
the collection and enforcement of any claim or right of any kind hereby sold,
conveyed, transferred, assigned and delivered, or intended so to be, and to do
all acts and things in relation to the Assets which Purchaser, its successors
and assigns, shall deem desirable. The Company hereby declares that the
foregoing powers are coupled with an interest and are not and shall not be
revocable by the Company in any manner for any reason whatsoever.
After the date hereof, the Company shall promptly forward to Purchaser
all mail, telegrams and other communications, and all express or other packages,
addressed to the Company or its agents to the extent the same relate to the
Assets.
From time to time after the date hereof, at the request of Purchaser,
the Company shall, without consideration, deliver such further instruments of
transfer and shall take such other action as Purchaser may reasonably request in
order to convey more effectively any of the Assets transferred hereunder to
Purchaser.
This Xxxx of Sale is being executed and delivered by the Company as of
the date set forth below pursuant to the terms of the Acquisition Agreement.
Executed at ______________, ___________, this ___ day of March, 1999.
XXXXXX SNOWBOARDS, INC.,
an Oregon corporation
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
Exhibit A
2
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement is dated as of March __, 1999
(the "Agreement"), by and between K2 Acquisitions Inc., a Delaware corporation
("Purchaser"), and Xxxxxx Snowboards, Inc., an Oregon corporation (the
"Company").
R E C I T A L S
A. The parties have entered into an Acquisition Agreement dated as of
March __, 1999 (the "Acquisition Agreement"), pursuant to which, on the date
hereof, the Company will sell, assign, transfer and convey to Purchaser, and
Purchaser will purchase and accept from the Company, all of the Company's right,
title and interest in and to the Assets. Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Acquisition Agreement.
B. As part of the consideration for the sale by the Company to
Purchaser of the Assets as contemplated by the Acquisition Agreement, the
Company has agreed to assign to Purchaser all of its rights under, and Purchaser
has agreed to assume the obligations of the Company under, the Assigned
Contracts.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. ASSIGNMENT OF ASSETS. The Company hereby assigns to Purchaser all of
its right, title, claim and interest in, to and under the Assigned Contracts.
2. ASSUMPTION OF OBLIGATIONS. Purchaser, for itself and its successors
and assigns, hereby assumes and agrees to perform and discharge all of the
obligations of the Company under the Assigned Contracts.
3. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, excluding the laws
pertaining to conflicts or choice of law.
Exhibit B
1
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the first date written above.
XXXXXX SNOWBOARDS, INC., an Oregon
corporation
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
K2 ACQUISITIONS INC., a Delaware
corporation
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
Exhibit B
2
EXHIBIT C
ASSIGNMENT OF PATENTS AND TRADEMARKS
This Assignment of Patents and Trademarks is dated March __, 1999 (the
"Assignment") and is by and among Xxxxxx Snowboards, Inc., an Oregon corporation
(the "Company"), and K2 Acquisitions Inc, a Delaware corporation (the
"Purchaser").
WHEREAS, the Company has adopted, used, is using, intends to use and is
the owner of certain patents and trademarks and applications for registered
patents and trademarks, a list of which is attached hereto as Exhibit A (the
"Patents" and "Trademarks," respectively); and
WHEREAS, as a part of the Acquisition Agreement entered into by the
parties on even date herewith, the Purchaser desires to acquire all of the
Company's right, title and interest in and to the Patents and the Trademarks and
Assignor is willing to sell the same to the Purchaser;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Company does hereby assign to the Purchaser
all right, title and interest in and to the Patents and the Trademarks, together
with the whole goodwill of the business symbolized by the Trademarks, and all
causes of action for past infringement of the Patents and the Trademarks.
Assignor hereby authorizes and requests the firm of Xxxxxx, Xxxx &
Xxxxxxxx LLP to correct any errors in this Assignment or to insert any further
identification or other information necessary or desirable to make this
Assignment suitable for recording in the United States Patent & Trademark Office
when such identification or information becomes known.
Exhibit C
1
IN WITNESS WHEREOF, this Assignment has been duly executed and
delivered by or on behalf of each of the undersigned as of the date first above
written.
XXXXXX SNOWBOARDS INC.
By:
------------------------------------
Name:
Title:
Exhibit C
2
EXHIBIT A
LIST OF ASSIGNED PATENTS AND TRADEMARKS
AND PATENT AND TRADEMARK APPLICATIONS
PATENTS REGISTRATION NUMBER REGISTRATION DATE COUNTRY
[insert to follow]
TRADEMARKS REGISTRATION NUMBER REGISTRATION DATE COUNTRY
[insert to follow]
and the following applications now pending:
PATENT APPLICATIONS APPLICATION NUMBER] DATE OF APPLICATION COUNTRY
[insert to follow]
TRADEMARK APPLICATIONS SERIAL NUMBER DATE OF APPLICATION COUNTRY
[insert to follow]
EXHIBIT D
INTERNET DOMAIN NAME ASSIGNMENT
THIS ASSIGNMENT, dated as of March __, 1999 (this "Assignment"), is by
and between XXXXXX SNOWBOARDS, INC., an Oregon corporation ("the Company"), and
K2 ACQUISITIONS INC., a Delaware corporation (the "Purchaser").
WHEREAS, the Company is the sole owner of all right, title and interest
in and to the Domain Names, as defined below; and
WHEREAS, as a part an Acquisition Agreement entered into by the parties
on even date herewith, the Company desires to acquire all of Assignor's right,
title and interest in and to the Domain Names, and Assignor is willing to sell
the same to the Purchaser;
THEREFORE, in consideration of the payment and other obligations set
forth in the Acquisition Agreement, the parties hereto agree as follows:
1. DEFINITION OF DOMAIN NAMES.
As used in this Assignment, "Domain Names" shall mean the top-level
internet domain name "xxxxxxxxxxxxxxxx.xxx" including all lower-level internet
domain names for which "xxxxxxxxxxxxxxxx.xxx" is a root or parent, whether in
the form of an address for use in electronic mail transfer, a Universal Resource
Locator (or URL), a file transfer protocol (or FTP) location, or other form
suitable for specifying the location of an electronic data file over a
distributed computer network.
2. DOMAIN NAME ASSIGNMENT.
The Company hereby, assigns, sells, quitclaims and transfers to the
Purchaser all rights of license, assignment, ownership, title or other interest
in and to the Domain Names. The Company covenants to promptly take whatever
actions are reasonably necessary, including, but not limited to, executing
additional assignments as requested by the Company, to assist the Purchaser in
perfecting the Purchaser's rights to the Domain Names. In particular, the
Company hereby covenants to fully cooperate with and assist the Company in the
submission of any electronic mail messages required by Network Solutions, Inc.
("NSI") (or any other entity responsible for maintaining records of ownership of
Internet domain names) to transfer the assignment of the Domain Names from the
Company to the Purchaser, in accordance with NSI's (or such other entity's)
procedures and policies.
3. RIGHT TO ASSIGN.
The Company represents and warrants to the Purchaser that the Company
is the sole owner of all right, title and interest in and to the Domain Names,
free and clear of any liens, material restrictions or adverse claims, and that
Assignor has neither transferred nor caused to be
Exhibit D
1
transferred any right, title or interest in any of the Domain Names to any
person not a party to this Assignment.
4. GOVERNING LAW.
This Assignment shall be governed by and construed in accordance with
the laws of the State of California without giving effect to choice of law
principles.
5. INTEGRATION CLAUSE.
This Assignment, and the Acquisition Agreement, constitute the entire
agreement between the parties with respect to the assignment of the Domain Names
and supersede all prior oral and written, and all contemporaneous oral,
agreements and understandings.
6. NO WAIVER.
Without waiving the applicable statutes of limitations, the parties
understand and agree that no forbearance by any party to enforce any provisions
hereof or any rights existing hereunder shall constitute a waiver of such
provisions or rights, or be deemed to affect an amendment or modification of
this Assignment.
7. MODIFICATION.
This Assignment shall not be amended or modified except in writing
signed by both parties hereto.
8. PROOF OF ASSIGNMENT.
This Assignment may be executed in one or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Assignment to produce or account for more than one such counterpart.
XXXXXX SNOWBOARDS, INC.
By: ________________________________
Its:
K2 ACQUISITIONS INC.
By: ________________________________
Its:
Exhibit D
2
