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SECURITIES PURCHASE AGREEMENT
AMONG
XXXXXX SNOWBOARDS, INC.,
INTERNATIONAL DISPLAYWORKS, INC.,
AND
THE SELLERS
(LISTED ON EXHIBIT A)
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EFFECTIVE JANUARY 31, 2000
TABLE OF CONTENTS
PAGE
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ARTICLE I ACQUISITION OF IDW 2
1.01 Stock of MSI and IDW 2
(a) IDW COMMON STOCK 2
(b) SURRENDER AND EXCHANGE OF IDW COMMON STOCK 2
ARTICLE II STOCKHOLDER APPROVAL, BOARD OF DIRECTORS' RECOMMENDATIONS,
EFFECTIVE TIME. 3
2.01 Stockholder Approvals, Board of Director's Recommendations 3
ARTICLE III REPRESENTATIONS AND WARRANTIES 3
3.01 Representations and Warranties of Seller 3
(a) DUE AUTHORIZATION 3
(b) TITLE TO SECURITIES 4
(c) SECURITIES ACT REPRESENTATIONS 4
(1) COMPLIANCE WITH LAW 4
(2) INFORMATION 5
(d) BROKERS'AND FINDERS'FEES; OTHER COSTS AND ADJUSTMENTS 6
(e) KNOWLEDGE OF SELLER 6
(f) SHAREHOLDERS'AGREEMENT 6
(g) INVESTOR STATUS 6
3.02 Representations and Warranties of IDW 6
(a) SECURITY HOLDERS; CAPITALIZATION 7
(b) FINANCIAL STATEMENTS 7
(c) UNDISCLOSED LIABILITIES; ENVIRONMENTAL MATTERS 7
(d) ABSENCE OF CHANGES 9
(e) LITIGATION AND CLAIMS 10
(f) DUE ORGANIZATION AND QUALIFICATION 11
(g) TAX MATTERS 11
(h) MATERIAL AGREEMENTS AND EMPLOYMENT CONTRACTS 11
(i) TITLE TO PROPERTY AND RELATED MATTERS 12
(j) CORPORATE RECORDS 12
(k) LICENSES, TRADEMARKS AND TRADE NAMES 12
(l) CORPORATE AUTHORITY 13
(m) BINDING OBLIGATION OF IDW 13
(n) XXXXXXXXXXXXXX 00
(x) XXXX XXXXXXXXXX 00
(x) FINDERS OR BROKERS 13
(q) PAYMENTS 13
Page 2--SECURITIES PURCHASE AGREEMENT
(r) SHARE OWNERSHIP 14
(s) APPROVALS REQUIRED 14
(t) SUBSIDIARIES AND AFFILIATES 14
(u) NO CONFLICTS 14
(v) RELATED-PARTY TRANSACTIONS 15
(w) INSURANCE 15
(x) COMPLIANCE WITH LAWS 15
(y) MINUTE BOOKS 15
3.03 Representations and Warranties of MSI 15
(a) SHARES OF MSI COMMON STOCK 16
(b) DUE AUTHORIZATION AND QUALIFICATION 16
(c) FINANCIAL STATEMENTS 16
(d) LITIGATION AND CLAIMS 16
(e) DUE ORGANIZATION AND QUALIFICATION 16
(g) BROKERAGE FEES 17
(h) REGULATORY FILINGS 17
(i) CORPORATE RECORDS 17
(j) CORPORATE AUTHORITY 17
(k) BINDING OBLIGATION OF MSI 17
(l) DISCLOSURE 18
ARTICLE IV COVENANTS 18
4.01 Covenants of IDW 18
(a) CONDUCT OF BUSINESS 18
(b) NO SOLICITATION 18
(c) IDW ACTIONS 19
4.02 Covenants of MSI 19
(a) CONDUCT OF BUSINESS 19
(b) NO SOLICITATION 19
(c) MSI ACTIONS 20
(d) AGREEMENT TO VOTE 20
4.03 Covenants of MSI and IDW 20
(a) ACCESS TO INFORMATION 20
(b) COMMERCIALLY REASONABLE EFFORTS; OTHER EFFORTS 21
(c) PUBLIC ANNOUNCEMENTS 21
(d) NOTIFICATION OF CERTAIN MATTERS 21
(e) EXPENSES 21
(f) FAILURE TO TAKE ACTION 21
(g) EXHIBITS, CLOSING STATEMENTS AND SCHEDULES 22
4.04 Covenants of Sellers 22
(a) STOCK OWNERSHIP 22
(b) SHAREHOLDER ACTION 22
(c) NOTICE 22
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(d) RETENTION OF STOCK 22
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES 22
5.01 Conditions Precedent to Obligations of IDW and Sellers 22
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES 22
(b) COMPLIANCE WITH COVENANTS 23
(c) FORM OF NEW CERTIFICATES 23
(d) APPROVAL BY COUNSEL 23
(e) OPINION OF COUNSEL 23
(f) OFFICERS'CERTIFICATE 24
(g) CLOSING FINANCIAL STATEMENTS 24
5.02 Conditions Precedent to Obligations of MSI 24
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES 24
(b) COMPLIANCE WITH COVENANTS 24
(c) APPROVAL BY COUNSEL 24
(d) OPINION OF COUNSEL 24
(e) OFFICERS'AND SELLERS'CERTIFICATE 24
(f) CLOSING FINANCIAL STATEMENTS 25
(g) COMPLETION OF ACQUISITION OF THE PRC COMPANIES BY
INTERNATIONAL DISPLAYWORKS HONG KONG 25
5.03 Conditions Precedent to Obligations of Sellers, IDW and MSI 25
(a) IDW STOCKHOLDER APPROVAL 25
(b) CERTAIN PROCEEDINGS 25
ARTICLE VI CLOSING 25
6.01 Time and Place 25
6.02 Documents at Closing 26
(a) DOCUMENTS BY IDW 26
(b) DOCUMENTS BY MSI 26
ARTICLE VII TERMINATION AND ABANDONMENT 27
7.01 Termination 27
(a) MUTUAL CONSENT 27
(b) ORDER OF JUDICIAL OR REGULATORY AUTHORITY 27
7.02 Termination by IDW 28
7.03 Termination by MSI 28
7.04 Procedure for Termination 28
7.05 Effect of Termination and Abandonment 28
ARTICLE VIII DISPUTE RESOLUTION 29
8.01 Agreement Disputes 29
8.02 Arbitration in Accordance with American Arbitration
Association Rules 29
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8.03 Final and Binding Awards 29
8.04 Costs of Arbitration 29
8.05 Settlement by Mutual Agreement 29
8.06 Indemnification by Sellers 30
ARTICLE IX OTHER MATTERS 30
9.01 The Closing 30
SCHEDULES
3.02 Disclosure Schedule of IDW
3.03 Disclosure Schedule of MSI
EXHIBITS
A. IDW Common Stock Owned by Stockholders (Pursuant to Section 3.01(b))
and MSI Common Stock to be Issued (Pursuant to Section 1.01(a))
B. Form of Certificate of MSI Common Stock (Pursuant to Section 5.01(b))
C. Form of Opinion of MSI's Counsel (Pursuant to Section 5.01(e))
D. Form of Opinion of IDW's Counsel (Pursuant to Section 5.02(d))
E-1 Form of Officers' Certificate of MSI (Pursuant to Section 5.01(f))
E-2 Form of Officers' Certificate of IDW (Pursuant to Section 5.02(e))
E-3 Form of Certificate of Sellers (Pursuant to Section 5.02(e))
F. List of Definitions and Meaning of Terms
Page 5--SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT
PARTIES:
XXXXXX SNOWBOARDS, INC., an Oregon corporation ("MSI"),
INTERNATIONAL DISPLAYWORKS, INC., a Delaware corporation ("IDW"), and
XXXXXXX XXXXXXXX, a resident of California,
XXXXXX XXXXXXXX, a resident of California,
DELAWARE TRUST FBO XXXXXXX XXXXXXXX XXX, a trust domiciled in Delaware,
EUREKA CAPITAL CORPORATION, LTD., a Hong Kong corporation,
XXXXX XXX, a resident of Taiwan,
CAPITOL BAY SECURITIES, INC., a California corporation,
XXXX XXX, a resident of California, and
XXXXX XXXXXXXXXXX, a resident of California
(constituting all the shareholders of IDW whose share ownership in IDW
is listed on the attached Exhibit A, who have executed this Agreement
and who are referred to herein individually as a "Seller" and
collectively, as the "Sellers")
RECITALS:
A. The respective Boards of Directors of MSI and IDW have approved the
acquisition of IDW by MSI pursuant and subject to the terms and conditions of
this Agreement (the "Reorganization"), whereby each issued and outstanding
share of IDW Common Stock, par value $0.001 per share, at the Effective Time
will be exchanged for 1.32673 shares of MSI Common Stock, no par value;
X. Xxxxxxx own all the issued and outstanding shares of IDW Common
Stock (the "IDW Common Stock" listed on Exhibit A);
Page 6--SECURITIES PURCHASE AGREEMENT
C. MSI desires to acquire from Sellers and each Seller desires to
transfer to MSI, the IDW Common Stock listed in Exhibit A on the terms and
subject to the conditions set forth in this Agreement;
D. MSI and IDW contemplate that the Reorganization will be classified
as a tax-free reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended ("Code");
E. The parties hereto desire to make certain representations,
warranties and agreements in connection with the Reorganization and also to
set forth the various conditions to the Reorganization;
F. The respective Boards of Directors of MSI, IDW and the Shareholders
(where a corporation) have adopted resolutions approving this Agreement, the
Reorganization and the transactions contemplated herein; and
G. The terms used in this Agreement shall have the meanings
respectively ascribed to them in Exhibit F hereto.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and
agree as follows:
AGREEMENTS:
ARTICLE I
ACQUISITION OF IDW
1.01 STOCK OF MSI AND IDW.
(a) IDW COMMON STOCK. At the Effective Time, MSI shall acquire
all of the issued and outstanding shares of IDW. Each outstanding share of
IDW Common Stock, par value $.001 per share, outstanding at the Effective
Time shall be exchanged for 1.32673 shares of MSI Common Stock, no par value
per share. If at the Closing, MSI does not acquire "control" (as such term is
defined in Section 368(c) of the Code) of IDW, and all the outstanding IDW
Common Stock and all rights to acquire IDW securities, MSI may terminate this
Agreement.
(b) SURRENDER AND EXCHANGE OF IDW COMMON STOCK. At the
Closing, each holder of an outstanding certificate or certificates (the "Old
Certificates") theretofore representing shares of IDW Common Stock, upon
surrender thereof to MSI, shall be entitled to receive and exchange therefor
a certificate or certificates (the "New Certificates"), which MSI agrees to
make available at the Effective Time, representing the number of whole shares
of MSI
Page 7--SECURITIES PURCHASE AGREEMENT
Common Stock into and for which the shares of IDW Common Stock theretofore
represented by such surrendered Old Certificates have been converted. No
certificates or scrip for fractional shares of MSI Common Stock will be
issued, no IDW stock split or dividend shall relate to any fractional share
interest and no such fractional share interest shall entitle the owner
thereof to vote or to any rights as a stockholder of MSI.
ARTICLE II
STOCKHOLDER APPROVAL, BOARD OF DIRECTORS
RECOMMENDATIONS, EFFECTIVE TIME.
2.01 STOCKHOLDER APPROVALS, BOARD OF DIRECTORS RECOMMENDATIONS. Each
party hereto which is a corporation agrees to obtain any and all necessary
approvals, consents or votes and give any required notice to its shareholders
regarding the execution or performance of this Agreement and the approval and
completion of the Reorganization and other transactions contemplated hereby.
Subject to their respective fiduciary duty to stockholders, the board of
directors and shareholders of IDW and MSI shall adopt and approve this
Agreement, the Reorganization and the other transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Each Seller, as a
material inducement to MSI to enter into this Agreement and consummate the
transactions contemplated hereby, makes the following representations and
warranties to MSI, which representations and warranties will be true and
correct in all material respects at the Effective Time:
(a) DUE AUTHORIZATION. Seller has full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and, if Seller is other than an individual, the person signing is duly
authorized to sign this Agreement on behalf of such Seller and bind such
Seller. Seller is under no legal or other incapacity and, if other than an
individual, such Seller has taken all action under applicable law to maintain
its existence and authority to contract. Seller is not able to assert any
defense to enforcement of this Agreement under applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally. Seller is not entering into this Agreement under
duress and Seller believes MSI has acted in good faith. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any permit, order,
license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to Seller or (b) result in any breach or violation of, constitute
a default (with or without notice or lapse of time, or both) under, give rise
to a right of termination, cancellation or acceleration of,
Page 8--SECURITIES PURCHASE AGREEMENT
result in the creation of any mortgage, pledge, lien, encumbrance, charge or
other security interest (a "Lien") on any of Seller's IDW Common Stock
pursuant to, or require the consent of any party to any mortgage, indenture,
lease, contract, agreement, instrument, bond, note, concession, franchise or
understanding (collectively, "Undertaking") applicable to Seller or any of
Seller's IDW Common Stock. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality ("Government
Entity") is required by or with respect to Seller in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(b) TITLE TO SECURITIES. Seller has, and will convey at
Closing, good and marketable title to the IDW Common Stock set forth next to
his, her or its name on Exhibit A, free and clear of any restriction on
transfer (other than any restriction on further transfer under United States,
state and foreign securities laws); any private or governmental action, suit,
proceeding, claim, arbitration or investigation (collectively, "Claim"); any
preemptive right, right of first refusal or similar right; and any option,
warrant, put, call, purchase right, equity, claim, demand or other
commitment, right or Undertaking of any nature. Seller represents that there
is no lien on any of the IDW Common Stock set forth next to Seller's name on
Exhibit A. Seller represents that, if there is a lien, encumbrance or Lien on
any of Seller's IDW Common Stock listed on Exhibit A at the Closing, Seller
will deliver that IDW Common Stock free of such lien or encumbrance. Seller
is not a party to any option, warrant, put, call, purchase right or other
commitment or agreement that could require Seller to sell, transfer or
otherwise convey any IDW Common Stock or interest therein, other than
pursuant to this Agreement. If Seller is a natural person, he or she is a
competent adult. Seller is the record and beneficial owner of the IDW Common
Stock so listed in Seller's name, with the sole right to exercise all rights
attached to that IDW Common Stock, including, to the extent applicable, the
right to vote, dispose of and receive dividends or distributions with respect
to that IDW Common Stock. If Seller is a trust, the relevant trustee has the
sole right to exercise all rights attached to Seller's IDW Common Stock on
behalf of the beneficiary. Seller has no other right in or right to acquire
any other securities of IDW.
(c) SECURITIES ACT REPRESENTATIONS.
(1) COMPLIANCE WITH LAW. Seller acknowledges that the
shares of Common Stock of MSI ("MSI Common Stock") to be delivered to Seller
pursuant to this Agreement have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and therefore may
not be resold without compliance with the Securities Act. The MSI Common
Stock to be acquired by Seller pursuant to this Agreement is being acquired
solely for Seller's own account, for investment purposes only and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. Seller will not offer, sell, assign, pledge,
hypothecate, transfer or otherwise dispose of any shares of MSI Common Stock
issued to Seller, except after full compliance with all applicable
Page 9--SECURITIES PURCHASE AGREEMENT
provisions of the Securities Act, the rules and regulations of the Securities
and Exchange Commission ("SEC") and other applicable securities law
(including state and foreign securities laws). Seller acknowledges that all
MSI Common Stock issued to Seller shall bear the following legend, together
with any other legends required under state and foreign securities or
corporate laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OF 1933 AND OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT AND OTHER APPLICABLE SECURITIES LAWS. THE HOLDER MAY BE
REQUIRED TO PROVIDE AN OPINION AT THE HOLDER'S COST TO THE CORPORATION
THAT SUCH TRANSFER IS PERMITTED WITHOUT REGISTRATION UNDER APPLICABLE
STATE SECURITIES LAWS, WHICH OPINION MUST BE ACCEPTABLE TO THE
CORPORATION'S COUNSEL.
(2) INFORMATION. Seller has received the following
information with respect to MSI (collectively, the "Public Filings"):
REGARDING MSI
Annual Report on Form 10-K for the fiscal year ended December 26, 1998, as
filed with the SEC.
Quarterly Report on Form 10-Q as filed with the SEC for the Quarterly Period
Ended September 25, 1999.
Quarterly Report on Form 10-Q as filed with the SEC for the Quarterly Period
Ended June 26, 1999.
Quarterly Report on Form 10-Q as filed with the SEC for the Quarterly Period
Ended March 27, 1999.
Private Placement Memorandum dated December 23, 1999 for MSI's sale of
approximately 5.8 million shares of Common Stock.
Page 10--SECURITIES PURCHASE AGREEMENT
Current Reports on Form 8-K, filed on February 1, March 9, March 22, April 5,
July 13, September 9, October 15, November 15, November 29 and December 10,
1999 and January 11, 2000.
Schedules 13D/A Amended Statements of Beneficial Ownership filed with the SEC
on October 12, 1999 and January 10, 2000.
REGARDING IDW
IDW's Confidential Business Plan dated September 27, 1999.
Seller has also had an adequate opportunity to ask questions of and
receive answers from MSI's officers concerning any and all matters relating
to the transactions contemplated by this Agreement, including, without
limitation, the background and experience of MSI's current and proposed
officers and directors, the business, operations and financial condition of
MSI and any plans for additional acquisitions and the like. Each Seller
originally signing this Agreement acknowledges having met or having had the
opportunity to meet with MSI's Chief Executive Officer to address such
questions.
(d) BROKERS AND FINDERS FEES; OTHER COSTS AND ADJUSTMENTS.
Seller has not incurred, and will not incur, any liability for brokerage or
finders' fees, agents' commissions, investment bankers' fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
(e) KNOWLEDGE OF SELLER. Seller has no knowledge of any
falsity or inaccuracy in any representation or warranty made by another
Seller under Section 3.01 or by IDW pursuant to Section 3.02. For purposes of
this Section 3.01,"knowledge" means the actual knowledge of that Seller,
including in his or her capacity as an officer or director of IDW, and if an
officer or director, his or her knowledge after reasonable inquiry of other
members of senior management and relevant employees of IDW.
(f) SHAREHOLDERS AGREEMENT. By executing this Agreement, each
Seller who is a party to any Shareholders' Agreement or similar agreement or
understanding as to its IDW Common Stock hereby agrees to terminate any such
Shareholders' Agreement effective as of the date prior to Closing and waive
any rights or claims under such agreement.
(g) INVESTOR STATUS. Seller represents that he, she or it is
an"accredited" investor either because (i) the investor, if an individual,
either alone or together with his or her spouse, has a net worth of $1.0
million or more; (ii) each equity owner or settlor/beneficiary of a trust or
corporation that is a Seller is an accredited investor; or (iii) the investor
is a director.
Page 11--SECURITIES PURCHASE AGREEMENT
Further, Seller represents it has only been contacted by MSI from or in the
following jurisdictions: California, Oregon, Hong Kong, Delaware and Taiwan.
3.02 REPRESENTATIONS AND WARRANTIES OF IDW. IDW, as a material
inducement to MSI to enter into this Agreement and consummate the
transactions contemplated hereby, makes the following representations and
warranties to MSI, which representations and warranties will be true and
correct in all material respects at the Effective Time, except as set forth
on Schedule 3.02, the Disclosure Schedule:
(a) SECURITY HOLDERS; CAPITALIZATION. The authorized capital
of IDW consists of Thirty Million (30,000,000) shares divided into one (1)
class of Twenty-Five Million (25,000,000) Common shares ($.001 par value) and
one (1) class of Five Million (5,000,000) Preferred shares ($.001 par value),
of which there are issued and outstanding Two Million Twenty Thousand
(2,020,000) Common shares and no Preferred shares. There are no other
outstanding shares of capital or other securities of IDW and no outstanding
subscriptions, options, warrants, puts, calls, rights, exercisable,
exchangeable or convertible into IDW equity securities or other commitments
of agreements of any nature relating to the capital or other securities of
IDW, or otherwise any obligation IDW to issue, transfer, sell, purchase,
redeem or otherwise acquire such capital or securities. All outstanding IDW
Shares are duly authorized, validly issued, fully paid and non-assessable,
are, to IDW's knowledge without inquiry, free and clear of any Lien and are
not subject to preemptive rights or rights of first refusal created by
statute, by the Company's Articles of Incorporation, as amended, Bylaws, as
amended, and other governing documents ("Governing Documents ") or by any
Undertaking to which IDW is a party or by which it is bound. The list of
security holders of IDW and the number and type of IDW Common Stock held by
each security holder set forth on Exhibit A to this Agreement are complete
and accurate. The stockholders listed on Exhibit A are the only owners, of
record and beneficially, of all of the issued and outstanding shares of IDW
Common Stock.
(b) FINANCIAL STATEMENTS. IDW has delivered pro forma and/or
compiled financial statements of IDW at December 31, 1998 and 1999, including
balance sheets and income statements and statements of cash flows
(collectively the"Financial Statements").
The Financial Statements fairly and accurately present the
financial condition of IDW as of the date thereof and the consolidated
results of its operations for the periods covered; and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, except as otherwise stated therein; and the books and records,
financial and others, of IDW are in all material respects complete and
correct and have been maintained in accordance with good business and
accounting practices.
(c) UNDISCLOSED LIABILITIES; ENVIRONMENTAL MATTERS. Except as
set forth in Schedule 3.02, at the Effective Time: (i) IDW is aware of no
liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, which are not shown or otherwise provided
Page 12--SECURITIES PURCHASE AGREEMENT
for in the Financial Statements except for liabilities and obligations
arising in the ordinary course of business, none of which is materially
adverse; and (ii) to the best of IDW's knowledge and belief, no reserves have
been established by IDW and, therefore, are not set forth in the Financial
Statements.
To its knowledge, IDW has complied with, and is in compliance
with, all Environmental Laws (as defined in Section 3.02(c)) applicable to
its business, properties and assets. IDW has, and IDW has provided to MSI,
true and complete copies of each permit, approval, registration, license and
other authorization required by any Government Entity pursuant to any
Environmental Law applicable to its business, properties and assets, the
absence of which would have a Material Adverse Effect on IDW. To IDW's
knowledge (including external investigation if appropriate), there is no
pending or threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, investigation, inquiry or
information request by any Government Entity relating to any Environmental
Law, to which IDW is a party or, to IDW's knowledge, threatened to be made a
party. There is no pending or outstanding or, to IDW's knowledge, threatened,
notice of defect or noncompliance, work order, pollution abatement order,
remediation order or any other order from any Government Entity applicable to
IDW's business, properties or assets.
For purposes of this Agreement,"Environmental Law" means any
local or foreign (including state and U.S. federal) law, statute, rule or
regulation or the common law relating to the environment or occupational
health and safety, including any statute, regulation or order pertaining to
(i) treatment, storage or disposal, generation and transportation of
industrial, toxic, or hazardous substances or solid or hazardous waste, or
explosive, radioactive materials, asbestos materials, special wastes or
wastes of any kind or dangerous goods; (ii) air, water and noise pollution;
(iii) groundwater and solid contamination; (iv) the release or threatened
release into the environment of industrial, toxic or hazardous substances, or
solid or hazardous waste, or explosives, radioactive materials, asbestos
materials, special wastes or wastes of any kind or dangerous goods,
including, without limitation, emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants, chemicals, explosives,
radioactive materials, asbestos materials, special wastes or wastes of any
kind or dangerous goods; (v) the protection of wildlife, marine sanctuaries,
wetlands and fish, including, without limitation, all endangered and
threatened species and protected species; (vi) storage tanks, vessels and
containers; (vii) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed receptacles;
(viii) health and safety of employees and other persons, including
occupational health and safety laws; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or oil or petroleum products or solid or hazardous waste, or
explosives, radioactive materials, asbestos materials, special wastes or
wastes of any kind or dangerous goods.
To IDW's knowledge (such knowledge being without inquiry),
there has been no
Page 13--SECURITIES PURCHASE AGREEMENT
release of any Material of Environmental Concern (as defined in the next
paragraph) into the environment at any parcel of real property or any
facility presently or formerly owned by IDW, or by IDW at any parcel of real
property or any facility presently or formerly leased, operated or controlled
by IDW or at any parcel of real property or any facility to which IDW has a
right to possession, directly or indirectly, through a Seller or any other
party.
For purposes of this Agreement,"Materials of Environmental
Concern" means any chemicals, pollutants or contaminants, hazardous
substances, solid wastes, hazardous wastes, toxic materials, special wastes
or wastes of any kind as defined under Environmental Law, including oil or
petroleum and petroleum products, whether or not the same at that point have
become waste.
There is no environmental report, investigation or audit in
IDW's possession with respect to the operations of, or real property leased
by, IDW (whether conducted by or on behalf of IDW or a third party and
whether done at the initiative of IDW or directed by a Government Entity or
third party).
(d) ABSENCE OF CHANGES. Except as set forth in Schedule 3.02,
since the date of the Financial Statements, to the best of IDW's knowledge
and belief there has not been:
(i) Any material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings, net worth, business
or prospects of IDW or its subsidiaries for such period, in the aggregate, or
at any time during such period;
(ii) Any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting IDW or its businesses;
(iii) Any declaration, setting aside, or payment of
any dividend or other distribution in respect of any shares of capital stock
of IDW, or any direct or indirect redemption, purchase or other acquisition
of any such stock;
(iv) Any issuance or sale by IDW or agreement to sell
any of its securities or grant of any right to acquire its securities;
(v) Any statute, rule, regulation or order adopted
(including orders of regulatory authorities with jurisdiction over IDW or its
business) which materially adversely affects IDW or its business;
(vi) Any sale, lease or other transfer or disposition
of any property or asset of IDW, except for the sale of inventory or other
assets in the ordinary course of business;
(vii) Any change in any accounting method, practice or
polity
Page 14--SECURITIES PURCHASE AGREEMENT
(including any change in any depreciation or amortization policy or rate) by
IDW or any revaluation by IDW or any of its assets, except as described in
the notes to the Annual Financial Statements;
(viii) Any entering into, amendment or termination of,
or default under, by IDW, of any Undertaking to which IDW is a party or by
which it is bound, other than in the ordinary course of business;
(ix) Any damage, destruction or loss (whether or not
covered by insurance) to any property or asset or the business of IDW having
a Material Adverse Effect on IDW;
(x) Any commitment, transaction or Undertaking, or
amendment thereto (including any capital expenditure, capital financing or
sale of assets), by IDW for any amount that requires or could require
payments in excess of Fifteen Thousand Dollars ($15,000) in the aggregate
with respect to any individual Undertaking or series of related Undertakings;
(xi) Any new lien on any asset allowed to exist by
IDW;
(xii) Any cancellation of any debt or waiver or
release of any right or claim by IDW, other than in the ordinary course of
business;
(xiii) Any payment, discharge or satisfaction of any
claim, liability or obligation by IDW, other than as reflected or reserved
against in the Financial Statements or in the ordinary course of business
consistent with past practice;
(xiv) Any labor dispute, litigation or governmental
investigation affecting IDW's business or financial condition;
(xv) Except as contemplated by this Agreement, any
issuance or sale of capital stock or other securities, exchangeable or
convertible securities, options, warrant, puts, calls or other rights to
acquire capital stock or other securities of IDW;
(xvi) Any indebtedness for borrowed money incurred,
assumed or guaranteed by IDW, other than in the ordinary course of business;
(xvii) Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment) in
accordance with past practice in an aggregate amount less than Two Thousand
Dollars ($2,000)) to any person;
(xviii) Except as disclosed in Schedule 3.02, any
increase in any salary, wage, benefit or other remuneration payable to or to
become payable to any current or former officer, director, employee, agent or
shareholder of IDW; any bonus or severance payment or
Page 15--SECURITIES PURCHASE AGREEMENT
arrangement made to, for or with any officer, director, employee or agent of
IDW; or any supplemental retirement plan or other program or special
remuneration for any officer, director, employee or agent of IDW, except for
normal salary or wage increases relating to periodic performance reviews and
annual bonuses consistent with IDW's past practices;
(xix) Any strike, walkout, labor dispute, slowdown,
work stoppage or organizational effort that has or could have a Material
Adverse Effect on IDW;
(xx) Any disposition or failure to keep in effect any
rights in, to or for the use of any patent, trade xxxx, service xxxx, trade
name or copyright, or any disclosure to any person not an employee or other
disposition of any trade secret, process or know-how; or
(xxi) Any Undertaking by IDW, in writing or otherwise,
to do any of the foregoing.
(e) LITIGATION AND CLAIMS. Except as set forth in Schedule
3.02 or in the Financial Statements; IDW is aware of no actions, suits,
claims, investigations or legal or administrative or arbitration proceedings
pending or threatened against IDW, its assets or business, whether at law or
in equity, or before or by any federal, state, municipal, local, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality; nor does IDW know of a threat of such litigation or any
basis for any such action, suit, claim, investigation or proceeding.
(f) DUE ORGANIZATION AND QUALIFICATION. IDW is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to do business and is in good standing in
California and in each state where it is required to be so qualified and such
qualification is material to its business. IDW has the power to own its
properties and assets and to carry on its business as now presently conducted.
(g) TAX MATTERS. Except as set forth in Schedule 3.02, IDW has
filed all federal, state and local tax or related returns and reports due or
required to be filed, which reports accurately reflect in all material
respects the amount of taxes due. IDW has paid all amounts of taxes or
assessments which would be delinquent if not paid as of the date of this
Agreement, other than taxes or charges being contested in good faith or not
yet finally determined.
(h) MATERIAL AGREEMENTS AND EMPLOYMENT CONTRACTS. Schedule
3.02 contains a true and complete list and brief description of all written
or oral contracts, agreements (including employment agreements), mortgages,
obligations, understandings, arrangements, restrictions, and other
instruments to which IDW is a party or by which IDW or its assets may be
bound. True and correct copies of all such items set forth on Schedule 3.02
have been or will be made available to MSI prior to Closing. Except as set
forth in Schedule 3.02, there are no "employee pension benefit plans" as
defined in Section 3(2) of the Employee Retirement Income
Page 16--SECURITIES PURCHASE AGREEMENT
Security Act of 1974, as amended ("ERISA"), covering employees (or former
employees), maintained or contributed to by IDW or any of its Subsidiaries or
any of their ERISA Affiliates (as hereinafter defined), or to which IDW or
any of its Subsidiaries or any of their ERISA Affiliates contributes or is
obligated to make payments thereunder or otherwise may have any liability
("IDW Pension Benefit Plans"). For purposes of this Agreement, "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that
is a member of any group of persons described in Section 414(b), (c), (m) or
(o) of the Code, which includes the referent person, or its Subsidiaries. No
event has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute a default
under any of the agreements set forth in Schedule 3.02.
The attached Schedule 3.02 contains a complete and accurate
list of all existing employees and all proposed executive officers of IDW,
including each employee's age, term of employment, job description, salary
and benefits to which the employee is entitled. Schedule 3.02 also lists each
employment agreement, expense entitlement, and each pension, bonus,
profit-sharing or other agreement or arrangement providing for employee
remuneration or benefits, present or prospective, to which IDW is a party or
by which it is bound (collectively, "Employee Agreements") and any
Undertaking pursuant to which a party provides services to IDW; each Employee
Agreement is in full force and effect, and neither IDW nor any other party is
in material default under any Employee Agreement. There has been no claim of
default and, to IDW's knowledge, there is no fact or condition which, if
continued, or on notice, will result in a default under any Employee
Agreement. Except as set forth on Schedule 3.02, each individual Employee
Agreement is terminable at will without penalty. There is no pending or, to
IDW's knowledge, threatened, labor dispute, strike or work stoppage that
would have a Material Adverse Effect on IDW. IDW is in compliance in all
respects with all current applicable United States state, territorial, local
and foreign laws and regulations (collectively, "Applicable Laws") respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices.
There is no pending claim against IDW under any workers' compensation plan or
policy or for long-term disability. There is no unfair labor practice
complaint pending or, to IDW's knowledge, threatened, against IDW, and there
is not private Undertaking restricting IDW's ability to relocate, close or
terminate any of IDW's operations.
IDW is not a party to any union, collective bargaining or other
labor agreement with any labor organization, union, group or association with
respect to any of its employees, and there is no organizing drive or
application for certification pending with respect to any such labor
organization or union.
(i) TITLE TO PROPERTY AND RELATED MATTERS. IDW has good and
marketable title to all the properties, interests in properties and assets,
real, personal and mixed, reflected as being owned by it on the Financial
Statements or acquired by it after the date of the Financial Statements, of
any kind or character, free and clear of any liens or encumbrances, except
(i) those
Page 17--SECURITIES PURCHASE AGREEMENT
referred to in the notes to the Financial Statements, (ii) those set forth in
Schedule 3.02, and (iii) liens for current taxes not yet delinquent. Except
as set forth in Schedule 3.02 and except for matters which may arise in the
ordinary course of business, IDW's assets are in good operating condition and
repair. To the best of knowledge of IDW, there does not exist any condition
that materially interferes with the use thereof in the ordinary course of
IDW's business.
(j) CORPORATE RECORDS. The corporate minute books and other
documents and records of IDW are complete and correct. MSI shall have the
right to review all corporate records of IDW prior to the Effective Time.
(k) LICENSES, TRADEMARKS AND TRADE NAMES. Schedule 3.02
contains a true and complete list of all licenses and all trademarks, trade
names, service marks, copyrights, know-how, patents and applications for any
of the foregoing owned by or registered in the name of IDW. There is no
pending or threatened claim or litigation against IDW contesting the right to
use any of the trademarks, trade names and know-how or the validity of any of
the licenses, copyrights and patents listed on Schedule 3.02, or asserting
the misuse of any thereof, nor has there ever been any such claim or
litigation.
To its actual knowledge, IDW has not used and is not using any
intellectual property, including, without limiting the generality of the
foregoing, any patent, trade xxxx or copyright (collectively, "Intellectual
Property"), in a manner that infringes or breaches the rights of any third
party, except to the extent that such use could not reasonably be expected to
have a Material Adverse Effect on IDW.
(l) CORPORATE AUTHORITY. IDW is authorized to enter into this
Agreement and has taken all corporate action necessary to authorize the
execution of this Agreement and consummation of the transactions contemplated
herein. The execution, delivery and performance of this Agreement by IDW and
consummation of the transactions contemplated herein will not be in conflict
with or constitute a default under any provisions of applicable law, IDW's
Certificate of Incorporation or Bylaws, or any agreement or instrument to
which IDW is a party or by which it or its assets are bound.
(m) BINDING OBLIGATION OF IDW. This Agreement constitutes a
valid and binding agreement of IDW, enforceable in accordance with its terms
except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally; and neither the
execution and delivery of this Agreement nor the consummation by IDW of the
transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority, or violate or
conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under) the terms or conditions or
provisions of any note, bond, lease, mortgage, obligation, agreement,
understanding, arrangement or restriction of any
Page 18--SECURITIES PURCHASE AGREEMENT
kind to which IDW is a party or by which IDW or its properties may be bound.
(n) CAPITALIZATION. The authorized capitalization of IDW is as
set forth in the Financial Statements. Except as set forth in Schedule 3.02,
there are no outstanding or presently authorized securities, warrants,
preemptive rights, subscription rights, options or related commitments of any
nature to issue any of IDW's securities which are not reflected in the
Financial Statements or in Schedule 3.02.
(o) FULL DISCLOSURE. IDW has, and at the Effective Time will
have, disclosed to MSI all events, conditions and facts materially affecting
the business and prospects of IDW which are known to IDW has not and will not
have, at the Effective Time, withheld disclosure of any events, conditions,
or facts which it may have knowledge of, or have reasonable grounds to know,
may materially, adversely affect the business and prospects of IDW.
(p) FINDERS OR BROKERS. Neither IDW nor any subsidiary (as
defined below) of IDW has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who
might be entitled to a fee or any commission the receipt of which is
conditioned in whole or part upon consummation of the Reorganization.
(q) PAYMENTS. No director or officer of IDW nor, to IDW's
knowledge after normal review of internal expense records and expense
reimbursements, any agent, employee or other person acting on behalf of IDW
has, directly or indirectly, paid any fee, commission or other sum of money
or delivered any item of property of anything of value, however
characterized, to any finder, agent, customer, government official or other
party, in the United States or any other country, that in any manner is
related to IDW's business or operations, and that has violated any Applicable
Law. Neither IDW nor, to its knowledge, any agent, employee or other person
acting on behalf of IDW or any other party, has accepted, received, made or
given any contribution, payment, gift, expenditure or other thing of value
that is unlawful, outside IDW policies or could reasonably by viewed as
fraudulent as a general business practice, based on normal review of orders
and other relevant IDW documents. Neither IDW nor any officer, director,
agent or employee thereof has participated, directly or indirectly, in any
boycott or similar practice. No violation of FIRPTA involving IDW, its
officers, directors, employees or agents has occurred.
(r) SHARE OWNERSHIP. To the best knowledge of IDW, the shares
of IDW Common Stock are owned, of record and beneficially, as specified on
Exhibit A, free and clear of all liens and encumbrances of any kind and
nature, and have not been sold, pledged, assigned or otherwise transferred
except pursuant to this Agreement.
(s) APPROVALS REQUIRED. To the best knowledge of IDW, no
approval, authorization, consent, order or other action of, or filing with,
any person, firm or corporation or any court is required in connection with
the execution and delivery by IDW of this Agreement or
Page 19--SECURITIES PURCHASE AGREEMENT
the consummation of the transactions described herein, except as disclosed
herein, and except to the extent that the parties are required to obtain
approval by any governmental authority or administrative agency or to file
reports in accordance with relevant regulations under federal and state
securities and tax laws.
(t) SUBSIDIARIES AND AFFILIATES. Except as set forth on the
attached Schedule 3.02, IDW does not own, directly or indirectly, any equity
or similar interest in, or any interest convertible into or exchangeable or
execrable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. For
purposes of this Agreement, the term "Subsidiary" means any entity listed on
Schedule 3.02 and any corporation, partnership, joint venture or other
business association or entity in which any entity listed on Schedule 3.02
owns, directly or indirectly, any equity or similar interest. IDW
beneficially owns the entire equity interest in each Subsidiary. IDW also
hereby represents and warrants that each Subsidiary is duly organized,
validly existing and in good standing under the laws where the Subsidiary was
formed, and as to each Subsidiary, IDW, after due inquiry, makes the
representations and warranties set forth in Section 3.02 with respect to each
Subsidiary and, to the extent applicable, the Schedules referenced in Section
3.02 include relevant information with respect to each Subsidiary.
(u) NO CONFLICTS. Except as set forth on the attached Schedule
3.02, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, (a) violate or
conflict with the Articles of Incorporation or Bylaws of IDW, as amended; (b)
violate or conflict with any permit, order, license, decree, judgment,
statute, law, ordinance, rule or regulation applicable to IDW or IDW's
properties or assets; or (c) result in any breach or violation of, constitute
a default (with or without notice or lapse of time, or both (under, give rise
to a right of termination, cancellation or acceleration of, result in the
creation of any Lien on any of IDW's properties or assets pursuant to, or
require the consent of any party to any Undertaking applicable to IDW or any
of its properties or assets. Except as set forth on Schedule 3.02, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Government Entity is required by or with respect to IDW in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(v) RELATED-PARTY TRANSACTIONS. Except as disclosed on the
attached Schedule 3.02, IDW is not indebted to any shareholder, director,
officer, employee or agent of IDW (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to IDW. No such person has any interest in any property or assets of
IDW or has any contractual or other claim, express or implied, of any kind
against IDW. Schedule 3.02 includes all related party or "affiliate"
transactions that would be required to be disclosed if IDW were a company
subject to the public reporting requirements under the Securities Exchange
Act of 1934, as amended.
Page 20--SECURITIES PURCHASE AGREEMENT
(w) INSURANCE. Except as described on the attached Schedule
3.02, IDW has insurance policies and bonds (collectively, "Insurance
Policies") of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of IDW. Schedule 3.02
contains a complete and accurate list of all Insurance Policies, including in
each case applicable coverage limits, deductibles and policy expiration
dates. There is no material claim pending under any Insurance Policy as to
which IDW has received a denial, or, to IDW's knowledge, which coverage has
been questioned, denied or disputed by the underwriters of the Insurance
Policies. All premiums due and payable under all Insurance Policies have been
paid and IDW is otherwise in compliance in all material respects with the
terms of each Insurance Policy. IDW has no knowledge of any threatened
termination of, or material premium increase with respect to, any Insurance
Policy. To the knowledge of IDW, each Insurance Policy is in full force and
effect and will continue to be in full force and effect following the
consummation of the transactions contemplated hereby.
(x) COMPLIANCE WITH LAWS. IDW, to its knowledge, has complied
with, is not in violation of, and has not received any notices of violation
with respect to, any Applicable Law with respect to the conduct or ownership
of its business, except for such violation or failure to comply as could not
be reasonably expected to have a Material Adverse Effect on IDW.
(y) MINUTE BOOKS. IDW's minute books made available to MSI
contain complete and accurate summaries of all meetings of directors and
shareholders or actions by written consent since incorporation, and reflect
all transactions referred to in those minutes accurately in all material
respects.
3.03 REPRESENTATIONS AND WARRANTIES OF MSI. MSI, as a material
inducement to IDW and the Sellers to enter into this Agreement and consummate
the transactions contemplated hereby, makes the following representations and
warranties to IDW and the Sellers, which representations are true and correct
at this date, and will be true and correct on the Effective Time as though
made on and as of such date:
(a) SHARES OF MSI COMMON STOCK. The New Certificates to be
delivered to the shareholders of IDW at Closing will be valid and legally
issued shares of MSI Common Stock, free and clear of all liens, encumbrances,
and preemptive rights, and will be fully-paid and non-assessable shares.
Further, such shares of MSI Common Stock are not and shall not be the same
shares issued or to be issued by MSI in connection with its Private Placement
Memorandum dated December 23, 1999.
(b) DUE AUTHORIZATION AND QUALIFICATION. This Agreement has
been duly authorized, executed, and delivered by MSI, and constitutes a
legal, valid, and binding obligation of MSI, enforceable in accordance with
its terms; no consent of any federal, state, municipal or other governmental
authority is required by MSI for the execution, delivery or performance of
this Agreement by MSI and all transactions contemplated herein; no consent of
any party to any
Page 21--SECURITIES PURCHASE AGREEMENT
contract or agreement to which MSI is a party or by which any of their
respective property or assets are subject is required for the execution,
delivery or performance of this Agreement by MSI and all transactions
contemplated herein.
(c) FINANCIAL STATEMENTS. MSI has delivered to IDW its audited
financial statements for fiscal 1998 and 1997 and unaudited quarterly reports
for the first three fiscal quarters of fiscal 1999 in the Public Filings (the
"Statements"). Except for the restatement of the Statements due to the
termination of the Westbeach apparel business, the Statements fairly and
accurately reflect the financial condition of MSI as of the dates thereof and
the results of operations for the periods reflected therein. The Statements
have been prepared in accordance with generally accepted accounting
principles, consistently applied, except as otherwise stated therein; and the
books and records, financial and others, of MSI are in all material respects
complete and correct and have been maintained in accordance with good
business and accounting practices.
(d) LITIGATION AND CLAIMS. Except as set forth in its Public
Filings or in the Statements, there are no material actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending
or threatened against MSI, its assets or business, whether at law or in
equity, or before or by any federal, state, municipal, local, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality; nor does MSI know or have any reason to know of a threat of
such litigation or any basis for any such action, suit, claim, investigation
or proceeding which could materially and adversely affect the business or
properties of MSI.
(e) DUE ORGANIZATION AND QUALIFICATION. MSI is a corporation
duly organized and validly existing under the laws of the State of Oregon, is
qualified to do business and in good standing in each state where it is
required to be qualified and such qualification is material, and has the
corporate power to own its property and to carry on its business as now being
conducted. The Articles and Bylaws of MSI, as in effect at the Effective
Time, have been delivered to MSI and are made a part hereof.
(f) CAPITALIZATION. The authorized capitalization of MSI is as
set forth in the Statements and Schedule 3.03. Except as set forth in the
Statements or in Schedule 3.03, there are no outstanding or presently
authorized securities, warrants, preemptive rights, subscription rights,
options or related commitments of any nature to issue any of MSI's securities
which are not reflected in the Statements or in Schedule 3.03. All
outstanding shares of capital stock have been duly authorized, validly
issued, and are fully-paid and non-assessable, and all such shares were
issued in compliance with all applicable federal and state securities laws.
Except as set forth in the statements or in Schedule 3.03 and except for the
issuances of securities referred to in this Agreement between MSI and IDW
with respect to the Reorganization, there are no outstanding or presently
authorized securities, warrants, preemptive rights, subscription rights,
options or related commitments of any nature to issue any of MSI's securities.
Page 22--SECURITIES PURCHASE AGREEMENT
(g) BROKERAGE FEES. MSI has not incurred, nor will it incur,
any liability for brokerage or finder's fees or similar charges in connection
with this Agreement or any of the transactions contemplated hereby.
(h) REGULATORY FILINGS. MSI will deliver to IDW's management,
with a copy to its counsel (at the addresses set forth herein), all reports,
registration statements and other documents, as filed with the SEC or the
National Association of Securities Dealers, Inc. ("NASD").
(i) CORPORATE RECORDS. The corporate minute books and other
documents and records of MSI are complete and correct. IDW shall have the
right to review all corporate records of MSI prior to the Effective Time.
(j) CORPORATE AUTHORITY. MSI is authorized to enter into this
Agreement and has taken all corporate action necessary to authorize the
execution of this Agreement and consummation of the transactions contemplated
herein. The execution, delivery and performance of this Agreement by MSI will
not be in conflict with or constitute a default under any provisions of
applicable law, MSI's Articles of Incorporation or Bylaws, or any agreement
or instrument to which MSI is a party or by which it or its assets are bound.
(k) BINDING OBLIGATION OF MSI. This Agreement constitutes a
valid and binding agreement of MSI, enforceable in accordance with its terms
except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally; and neither the
execution and delivery of this Agreement nor the consummation by MSI of the
transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority, or violate or
conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under) the terms or conditions or
provisions of any note, bond, lease, mortgage, obligation, agreement,
understanding, arrangement or restriction of any kind to which MSI is a party
or by which MSI or its properties may be bound. No consent or approval by any
governmental authority is required in connection with the execution and
delivery by MSI of this Agreement or the consummation of the transactions
contemplated hereby.
(l) DISCLOSURE. The representations and warranties by MSI
herein, including any Schedules referenced in Section 3.03 or in any
certificate furnished by MSI pursuant to this Agreement, and the information
and documents provided by MSI and listed in Section 3.03, when all such
documents are read together in their entirety, do not contain and will not
contain at the Closing Date (as defined below) any untrue statement of a
material fact, and do not omit and will not omit at the Closing Date any
material fact necessary in order to make the statements
Page 23--SECURITIES PURCHASE AGREEMENT
contained herein or therein, in the light of the circumstances under which
made, not misleading; provided, however, that MSI has relied on IDW with
respect to any IDW information contained in the Private Placement Memorandum
dated December 23, 1999. MSI has delivered or made available true and
complete copies of each document that has been requested by Sellers, IDW or
their respective counsel in connection with their legal and accounting review
of MSI.
ARTICLE IV
COVENANTS
4.01 COVENANTS OF IDW. IDW, as a material inducement to MSI to enter
into this Agreement and consummate the transactions contemplated hereby,
covenants and agrees as follows:
(a) CONDUCT OF BUSINESS. Except as contemplated by this
Agreement or as expressly agreed to in writing by MSI, during the period from
the date of this Agreement to the Effective Time, IDW will conduct its
operations according to its ordinary and usual course of business consistent
with past practice, and will use all commercially reasonable efforts to
preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
registered representatives, suppliers, customers and others having business
relationships with it and will take no action which would adversely affect
its ability to consummate the Reorganization or the other transactions
contemplated hereby.
(b) NO SOLICITATION. IDW agrees that subsequent to the
execution date hereof, it shall not, and shall not authorize or permit any of
its directors, officers, employees, agents or representatives to, directly or
indirectly, solicit, initiate, facilitate or encourage (including by way of
furnishing or disclosing information) any merger, consolidation, other
business combination involving IDW, acquisition of all or any substantial
portion of the assets or capital stock of IDW, or inquiries or proposals
concerning or which may reasonably be expected to lead to, any of the
foregoing (an "IDW Transaction") or negotiate, explore or otherwise
communicate in any way with any third party (other than MSI or its
affiliates) with respect to any IDW Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Reorganization or any other transactions contemplated by this
Agreement. IDW shall be obligated to advise MSI immediately of any inquiries
or proposals relating to an IDW Transaction.
(c) IDW ACTIONS. IDW shall not take or omit to take any action
within its reasonable control which would (i) cause a breach of any
representation or warranty of IDW contained in this Agreement such that the
closing conditions set forth in Section 5.02(a) would not be satisfied, or
(ii) prevent fulfillment of the conditions in Article V.
4.02 COVENANTS OF MSI. MSI, as a material inducement to IDW to enter
into this
Page 24--SECURITIES PURCHASE AGREEMENT
Agreement and consummate the transactions contemplated hereby, covenants and
agrees as follows:
(a) CONDUCT OF BUSINESS. Except as contemplated by this
Agreement or as expressly agreed to in writing by IDW, during the period from
the date of this Agreement to the Effective Time, MSI will conduct its
operations according to its ordinary and usual course of business consistent
with past practice, and will use all commercially reasonable efforts to
preserve intact its initial capital, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
existing and prospective suppliers, customers, registered representatives,
clearing firms and others having existing or prospective business
relationships with MSI, and will take no action which would adversely affect
its ability to consummate the Reorganization or the other transactions
contemplated hereby.
(b) NO SOLICITATION.
(i) MSI agrees that subsequent to the execution date
hereof and subject to subsection (ii) below, it shall not, and shall not
authorize or permit any of its Subsidiaries or any of its or its
Subsidiaries' directors, officers, employees, agents or representatives to,
directly or indirectly, solicit, initiate, facilitate or encourage (including
by way of furnishing or disclosing information) any merger, consolidation,
other business combination involving MSI or its Subsidiaries, an acquisition
primarily relating to all or a substantial portion of the assets or of the
capital stock of MSI or its Subsidiaries or inquiries or proposals concerning
or which may reasonably be expected to lead to, any of the foregoing (an "MSI
Transaction") or negotiate, explore or otherwise communicate in any way with
any third party (other than MSI or its affiliates) with respect to any MSI
Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Reorganization
or any other transactions contemplated by this Agreement. MSI shall be
obligated to immediately advise IDW of any inquiries or proposals relating to
a MSI Transaction.
(ii) Notwithstanding the foregoing, in the event that
there is an unsolicited written proposal for any merger, consolidation or
other business combination primarily involving the securities brokerage
business or inquiries or proposals concerning which or may reasonably be
expected to lead to, any of the foregoing (a "Broker-Dealer Transaction")
from a bona fide financially capable third party or member of the NASD, MSI
may furnish non-public information to, and negotiate with, such third party
only if (A) MSI shall have provided two business days' written notice to IDW
of such proposal and IDW approves the proposed Broker-Dealer Transaction, or
(B) MSI's Board of Directors, after having received advice from its
investment banker or bankers and outside counsel to MSI, shall have
determined that failure to take the proposed action, furnish such information
or to commence negotiations would be inconsistent with such Board of
Directors' fiduciary duties.
(c) MSI ACTIONS. MSI shall not take or omit to take, and shall
not cause or
Page 25--SECURITIES PURCHASE AGREEMENT
permit any of its Subsidiaries to take or omit to take, any action within its
reasonable control which would (i) cause a breach of any representation or
warranty of MSI contained in this Agreement such that the Closing conditions
set forth in Section 5.01(a) would not be satisfied, or (ii) prevent
fulfillment of the conditions in Article V.
(d) AGREEMENT TO VOTE. The owners of all of the shares of MSI
Common Stock have agreed, if a shareholder vote is required by applicable
state law or the Bylaws, to vote their shares of MSI Common Stock in favor of
approving this Agreement and the transactions contemplated hereby and, except
as may be required by subsection (b) of this Section 4.02, not to approve or
support any competing transaction.
4.03 COVENANTS OF MSI AND IDW. MSI and IDW, as a material inducement
to enter into this Agreement and consummate the transactions contemplated
hereby, covenant and agree, with each other as follows:
(a) ACCESS TO INFORMATION. From the date of this Agreement
until the Effective Time, IDW will give MSI and its authorized
representatives (including counsel, consultants, accountants, auditors, and
broker-dealer regulatory counsel and agents) reasonable access in light of
the terms of this Agreement during normal business hours to all facilities,
personnel and operations and to all books and records of IDW, will permit MSI
to make such inspections as it may reasonably require (including, without
limitation, any agreements for the issuance of securities or agreements with
potential registered representatives deemed necessary by it) and will cause
its officers and counsel and those of its Subsidiaries to furnish MSI with
such financial and operating data and other information with respect to the
business carried on and proposed to be carried on by IDW as MSI may from time
to time reasonably request.
From the date of this Agreement until the Effective Time, MSI
will give IDW, the Sellers and their authorized representatives (including
counsel, consultants, accountants, auditors, and agents) reasonable access in
light of the terms of this Agreement during normal business hours to all
facilities, personnel and operations and to all books and records of MSI,
will permit IDW and the Sellers to make such inspections as it may reasonably
require (including, without limitation, agreements with registered
representatives, registered investment advisors, affinity groups and clearing
firms) and will cause its officers and counsel and those of its Subsidiaries
to furnish IDW with such financial and operating data and other information
with respect to the businesses and properties of MSI as IDW and the Sellers
may from time to time reasonably request.
(b) COMMERCIALLY REASONABLE EFFORTS; OTHER EFFORTS. Subject to
the terms and conditions provided in this Agreement, IDW and MSI shall use
all commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, the obtaining of all necessary third-party consents, approvals or
waivers which are required in order
Page 26--SECURITIES PURCHASE AGREEMENT
to consummate the Reorganization and the other transactions contemplated
hereby. To such party's knowledge Schedules 3.02 and 3.03 list all such
material consents, approvals or waivers that must be obtained by that party,
IDW and MSI, respectively. IDW shall not take any action that would cause MSI
to fail to perform its obligations hereunder. IDW shall not take any action
that would cause MSI to fail to perform its obligations hereunder.
(c) PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statement with respect to the Reorganization, or
any of the other transactions contemplated hereby, IDW and MSI will consult
with, and obtain the consent of, each other as to its form and substance and
shall not issue any such press release or make any such public statement
prior to obtaining such consent, except as may be required by law or pursuant
to any order of any court or governmental agency, tribunal or regulatory
authority. MSI will deliver to IDW's management any public documents which
report the completion of this transaction so that IDW's management can review
and comment on the descriptions contained therein of IDW and the terms of the
transactions accomplished by this Agreement.
(d) NOTIFICATION OF CERTAIN MATTERS. Each of IDW and MSI shall
give prompt notice to the other party of any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by IDW or MSI subsequent to
the date of this Agreement and prior to the Effective Time, which could be
reasonably expected to have a material adverse effect upon IDW or a material
adverse effect upon MSI. Each of IDW and MSI shall give prompt notice to the
other party of (a) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the Reorganization or any other transactions contemplated by
this Agreement, or (b) any notice or other communication from any third party
alleging and act or thing which could be reasonably expected to have a
material adverse effect upon IDW or a material adverse effect upon MSI.
(e) EXPENSES. Except as set forth in Sections 3.02 or 3.03 by
that party, IDW and MSI, respectively, shall each bear its own expenses
incurred in connection with the Reorganization, including, without
limitation, the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants.
(f) FAILURE TO TAKE ACTION. Neither IDW nor MSI will take any
action, or fail to take any action, if such action (or failure to act) would
reasonably be expected to cause the Reorganization to fail to qualify as a
reorganization within the meaning of Section 368(a)1)(B) of the Code.
(g) EXHIBITS, CLOSING STATEMENTS AND SCHEDULES. IDW and MSI
agree that as promptly as possible upon the execution of this Agreement they
will negotiate in good faith, finalize and attach all necessary exhibits to
this Agreement.
Page 27--SECURITIES PURCHASE AGREEMENT
4.04 COVENANTS OF SELLERS. The Sellers, as a material inducement to
MSI to enter into this Agreement and consummate the transactions contemplated
hereby, covenant and agree, with each other as follows:
(a) STOCK OWNERSHIP. To maintain their IDW Common Stock free
and clear of any and all liens and to not transfer, option, or grant any
other rights in such shares to any other party.
(b) SHAREHOLDER ACTION. Subject to the fulfillment of the
obligations of MSI hereunder, to take all corporate action necessary to
approve the Reorganization and all transactions contemplated hereby and to
refrain from taking any action which would prevent or cause IDW to be unable
to fulfill its obligations hereunder.
(c) NOTICE. To notify IDW and MSI of any event as to the
Seller, for which IDW or MSI would have to give notice under Sections 4.01,
4.02 or 4.03 and, if applicable, take all action IDW or MSI are required to
take under Sections 4.01, 4.02 or 4.03.
(d) RETENTION OF STOCK. To retain the MSI Common Stock they
receive under this Agreement for such period as necessary to ensure that the
transactions contemplated under this Agreement are treated as a tax-free
reorganization, as determined by MSI's board of directors and independent
auditors.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
5.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF IDW AND SELLERS. All
obligations of IDW and Sellers under this Agreement are subject to the
fulfillment, prior to or at the Effective Time, of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties by MSI contained in this Agreement or in any
certificate or document delivered to IDW and Sellers pursuant to the
provisions hereof shall be true in all material respects at and as of the
Effective Time as though such representations and warranties were made at and
as of such time.
(b) COMPLIANCE WITH COVENANTS. MSI shall have performed and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Effective
Time.
(c) FORM OF NEW CERTIFICATES. The New Certificates delivered
to the Sellers and their respective counsel shall conform in all material
respects to the form of such New
Page 28--SECURITIES PURCHASE AGREEMENT
Certificates attached as Exhibit B.
(d) APPROVAL BY COUNSEL. MSI shall have delivered all of the
exhibits and schedules required herein to IDW or the Sellers, as the case may
be, and such exhibits and schedules shall have been reasonably acceptable to
IDW and the Sellers and their respective counsel.
(e) OPINION OF COUNSEL. MSI shall have delivered to IDW and
the Sellers an opinion of MSI's counsel in the form of Exhibit C, dated the
Effective Time, to the effect that:
(i) MSI is a corporation duly organized and validly
existing under the laws of the State of Oregon;
(ii) MSI has the corporate power to carry on its
businesses as now being conducted;
(iii) This Agreement has been duly authorized,
executed and delivered by MSI and is a valid and binding obligation of MSI,
enforceable in accordance with its terms, except to the extent that
enforcement is limited by applicable bankruptcy, reorganization, insolvency,
moratorium, or similar laws affecting creditors' rights and remedies
generally or by general equitable principles (and excepting specific
performance as a remedy);
(iv) MSI has taken all corporate action necessary for
its due performance under this Agreement;
(v) The execution and delivery by MSI of this
Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach of any provisions of, MSI's
Certificate of Incorporation or Bylaws or, to such counsel's knowledge after
inquiry and based upon information provided by MSI, constitute a default
under or give rise to a right of termination, acceleration, or cancellation
by any agreement under which MSI or any of its properties are bound or
violate any court order, writ or decree of injunction applicable to MSI;
(vi) Such counsel does not know, after inquiry of
MSI, of any actions, suits or other legal proceedings or investigations
pending or threatened against, relating to or materially adversely affecting
MSI, except as disclosed in the Public Filings;
(vii) The authorized and, to such counsel's best
knowledge after inquiry, outstanding capitalization of MSI is as set forth in
Schedule 3.03 of the Agreement. All of the outstanding shares of MSI's
capital stock are validly issued, fully-paid and non-assessable, without
preemptive rights, and to the best of our knowledge after inquiry, there are
no outstanding subscriptions, options, rights, warrants or other transfer
agreements (whether oral or
Page 29--SECURITIES PURCHASE AGREEMENT
written), other than as set forth in Schedule 3.03 of this Agreement.
(f) OFFICERS' CERTIFICATE. There shall have been delivered to
IDW and Sellers a certificate, signed by the president and secretary of MSI,
to the effect that all of the representations and warranties of MSI set forth
herein are true and complete in all material respects as of the Effective
Time, and that MSI has complied in all material respects with its covenants
and agreements set forth herein required to be complied with by the Effective
Time substantially in the form of Exhibit E-1 hereto.
(g) CLOSING FINANCIAL STATEMENTS. There shall have been
delivered to IDW and Sellers unaudited financial statements (the "Closing
Statements") dated no earlier than five days prior to the Effective Time. The
Closing Statements shall fairly and accurately reflect the consolidated
financial condition of MSI as of the dates thereof and the results of
operations for the period reflected therein and shall reflect no material
adverse change in the financial condition or results of operations from the
Statements. The Closing Statements shall be prepared in accordance with
generally accepting accounting principles, consistently applied, except as
otherwise stated therein.
5.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF MSI. All obligations of
MSI under this Agreement are subject to the fulfillment, prior to or at the
Effective Time, of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties by IDW and Sellers contained in this Agreement
or in any certificate or document delivered to MSI pursuant to the provisions
hereof shall be true in all material respects at and as of the Effective Time
as though such representations and warranties were made at and as of such
time.
(b) COMPLIANCE WITH COVENANTS. IDW and Sellers shall have
performed and complied with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by each of them
prior to or at the Effective Time.
(c) APPROVAL BY COUNSEL. IDW and Sellers shall have delivered
all of the exhibits and schedules required herein to MSI and such exhibits
and schedules shall have been reasonably acceptable to MSI and its counsel.
(d) OPINION OF COUNSEL. IDW shall have delivered to MSI an
opinion of IDW's counsel, in the form of Exhibit D hereto, dated the
Effective Time.
(e) OFFICERS' AND SELLERS' CERTIFICATE. There shall have been
delivered to MSI a certificate executed by the president and secretary of IDW
and certificates executed by Sellers, to the effect that all of the
representations and warranties of IDW and Sellers, respectively, set
Page 30--SECURITIES PURCHASE AGREEMENT
forth herein are true and complete in all material respects as of the
Effective Time, and that IDW has complied in all material respects with its
covenants and agreements set forth therein required to be complied with by
the Effective Time substantially in the form of Exhibits E-2 and E-3 hereto.
(f) CLOSING FINANCIAL STATEMENTS. There shall have been
delivered to MSI unaudited financial statements (the "Closing Financial
Statements") dated no earlier than five days prior to the Effective Time. The
Closing Financial Statements shall fairly and accurately reflect the
consolidated financial condition of IDW as of the date thereof and the
results of operations for the period reflected therein and shall reflect no
material adverse change in the financial condition or results of operations
from the Financial Statements. The Closing Statements shall be prepared in
accordance with generally accepting accounting principles, consistently
applied, except as otherwise stated therein.
(g) COMPLETION OF ACQUISITION OF THE PRC COMPANIES BY
INTERNATIONAL DISPLAYWORKS HONG KONG. IDW's wholly owned Hong Kong
subsidiary, International DisplayWorks (Hong Kong) LTD., shall have completed
the acquisition of the two PRC Companies as described in IDW's Confidential
Business Plan dated September 27, 1999, on terms and conditions satisfactory
to MSI in its sole discretion.
5.03 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS, IDW AND MSI.
The respective obligations of each party to effect the Reorganization shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions:
(a) IDW STOCKHOLDER APPROVAL. If required by Delaware law, the
approval of the Reorganization, including the execution and performance of
this Agreement and all of the transactions contemplated hereby, by a majority
of the outstanding shares of IDW Common Stock shall have been obtained.
(b) CERTAIN PROCEEDINGS. No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered against MSI which, and no proceedings therefor shall have been
threatened or commenced by any governmental entity which seek to, prohibit or
restrict the consummation of the Reorganization.
ARTICLE VI
CLOSING
6.01 TIME AND PLACE. Subject to the provisions of Articles V and
VII, the closing of the Reorganization (the "Closing") shall take place at
the offices of Xxxxxxxxxxx and Xxxxxx, Inc., or such other place as the
parties may agree upon, as soon as practicable but in no event later than
9:30 a.m., local time, on the second business day after the date on which
each of the
Page 31--SECURITIES PURCHASE AGREEMENT
conditions set forth in Article V have been satisfied or waived by the party
or parties entitled to the benefit of such conditions; or at such other
place, at such other time, or on such other date as IDW and MSI may mutually
agree. The date on which the Closing actually occurs is herein referred to as
the "Closing Date."
6.02 DOCUMENTS AT CLOSING. At the Closing, the following
transactions shall occur, all of such transactions being deemed to occur
simultaneously:
(a) DOCUMENTS BY IDW. IDW (and the Sellers, where appropriate)
will deliver, or cause to be delivered, to MSI the following:
(i) stock certificates for the shares of IDW Common
Stock being exchanged hereunder, duly endorsed or with stock powers attached
in blank but subject to a customary restrictive stock legend;
(ii) a certificate of the president and secretary of
IDW and each Seller to the effect that all representations and warranties
made by IDW and each Seller, respectively, under this Agreement are true and
correct as of the Effective Time, as though originally given to MSI on said
date attaching thereto the following:
(A) certified copy of resolutions of IDW
authorizing this Agreement;
(B) Certificate of Incorporation of IDW as
amended to the Closing Time;
(C) Bylaws of IDW as amended to the Closing
Time;
(D) a certificate from the Secretary of State
of Delaware dated at or about the date of
Closing that IDW is in good standing under
the laws of said state;
(iii) the opinions of IDW's counsel set forth herein;
and
(iv) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the
provisions of this Agreement or which may be reasonably requested in
furtherance of the provisions of this Agreement.
(b) DOCUMENTS BY MSI. MSI will deliver or cause to be
delivered to IDW:
(i) the New Certificates, in the form of Exhibit B
hereto, representing the shares of MSI Common Stock which MSI has agreed to
deliver pursuant to Section 1.01(a);
Page 32--SECURITIES PURCHASE AGREEMENT
(ii) a certificate of the president and secretary of
MSI, to the effect that all representations and warranties of MSI made under
this Agreement are reaffirmed at the Effective Time, as though originally
given to Stockholder and MSI on said date attaching thereto the following:
(A) certified copy of resolutions of MSI
authorizing this Agreement;
(B) Articles of Incorporation of MSI as amended
to the Closing Time;
(C) Bylaws of MSI as amended to the Closing
Time;
(D) a certificate from the Secretary of State
of Oregon dated at or about the date of
Closing that MSI is validly existing under
the laws of that state;
(iii) the opinions of MSI's counsel set forth herein;
(iv) unaudited financial statements of MSI; and
(v) such other instruments and documents, if any, as
are required to be delivered pursuant to the provisions of this Agreement, or
which may be reasonably requested in furtherance of the provisions of this
Agreement.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.01 TERMINATION. This Agreement may be terminated and the
Reorganization may be abandoned any time prior to the Effective Time, whether
before or after approval by the stockholders of IDW or MSI, as follows:
(a) MUTUAL CONSENT. The Reorganization may be abandoned any
time prior to the Effective Time by mutual consent of the Boards of Directors
of IDW and MSI; or
(b) ORDER OF JUDICIAL OR REGULATORY AUTHORITY. The
Reorganization may be abandoned any time prior to the Effective Time by
either IDW or MSI, if any court of competent jurisdiction in the United
States or other governmental body in the United States, other than at the
request of the parties, or any affiliate thereof, seeking to terminate this
Agreement pursuant to this clause (b), shall have issued an order (other than
a temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the
Page 33--SECURITIES PURCHASE AGREEMENT
Reorganization, and such order, decree, ruling or other action shall have
become final and nonappealable.
7.02 TERMINATION BY IDW. This Agreement may be terminated and the
Reorganization may be abandoned by action of the Board of Directors of IDW,
at any time prior to the Effective Time, before or after the approval by the
stockholders of IDW, if (a) MSI shall have failed to comply in any material
respect with any of the covenants or agreements contained in Articles IV and
V of this Agreement to be complied with or performed by MSI at or prior to
such date of termination, or (b) there exists a breach or breaches of any
representation or warranty of MSI contained in this Agreement or any of the
closing conditions set forth in Section 5.01 are not satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to
the Effective Time, such breaches shall not have been cured within 15
calendar days of delivery to MSI of written notice of such breach or breaches.
7.03 TERMINATION BY MSI. This Agreement may be terminated and the
Reorganization may be abandoned at any time prior to the Effective Time,
before or after the approval by the stockholders of MSI, by action of the
Board of the Directors of MSI, if: (a) IDW or any Seller shall have failed to
comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by IDW or any
Seller at or prior to such date of termination; (b) there exists a breach or
breaches of any representation or warranty of IDW or any Seller contained in
this Agreement such that the closing conditions set forth in Section 5.02
would not be satisfied; provided, however, that if such breach or breaches
are capable of being cured prior to the Effective Time, such breaches shall
not have been cured within 15 calendar days of delivery to IDW of written
notice of such breach or breaches; or (c) if the closing condition set forth
in Section 5.02(g) regarding completion of the acquisition of the two PRC
Companies has not been satisfied.
7.04 PROCEDURE FOR TERMINATION. In the event of termination and
abandonment of the Reorganization by IDW or MSI pursuant to this Article VII,
written notice thereof shall forthwith be given to the other.
7.05 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and abandonment of the Reorganization pursuant
to this Article VII, no party hereto (or any of its directors or officers)
shall have any liability or further obligation to any other party to this
Agreement, except as otherwise provided in Section 4.03, and except that: (a)
nothing herein shall relieve any party from liability for any breach of this
Agreement and (b) upon termination, IDW shall use its best efforts to procure
the return of the funds in the amount of approximately $4,271,729.46 advanced
by MSI and deposited in the trust account of KPMG Peat Marwick LLP in
Singapore. In the event of termination, each party hereto shall be
responsible for its own costs and expenses incurred in all activities related
hereto prior to such termination.
Page 34--SECURITIES PURCHASE AGREEMENT
ARTICLE VIII
DISPUTE RESOLUTION
8.01 AGREEMENT DISPUTES. In the event of a controversy, dispute or
claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this
Agreement, including, without limitation, any claim based on contract, tort,
statute or constitution (singly, an "Agreement Dispute" and collectively,
"Agreement Disputes"), the party asserting the Agreement Dispute shall give
written notice to the other party of the existence and nature of such
Agreement Dispute. Thereafter, the general counsels (or other designated
representatives) of the respective parties shall negotiate in good faith for
a period no less than 60 days after the date of the notice in an attempt to
settle such Agreement Dispute. If after such 60 calendar day period such
representatives are unable to settle such Agreement Dispute, any party hereto
may commence arbitration by giving written notice to all other party that
such Agreement Dispute has been referred to the American Arbitration
Association for arbitration in accordance with the provisions of this Article.
8.02 ARBITRATION IN ACCORDANCE WITH AMERICAN ARBITRATION ASSOCIATION
RULES. All Agreement Disputes shall be settled by arbitration in Sacramento,
California, before a single arbitrator in accordance with the rules of the
American Arbitration Association (the "Rules"). The arbitrator shall be
selected by the mutual agreement of all parties, but if they do not so agree
within 20 days after the date of the notice of arbitration referred to above,
the selection shall be made pursuant to the Rules from the panels of
arbitrators maintained by the American Arbitration Association. The
arbitrator shall be an individual with substantial professional experience
with regard to resolving or settling sophisticated commercial disputes.
8.03 FINAL AND BINDING AWARDS. Any award rendered by the arbitrator
shall be conclusive and binding upon the parties hereto; provided, however,
that any such award shall be accompanied by a written opinion of the
arbitrator giving the reasons for the award. This provision for arbitration
shall be specifically enforceable by the parties and the decision of the
arbitrator in accordance therewith shall be final and binding, and there
shall be no right of appeal therefrom. The parties agree to comply with any
award made in any such arbitration proceedings that has become final in
accordance with the Rules, and agree to the entry of a judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules.
8.04 COSTS OF ARBITRATION. In the award the arbitrator shall
allocate, in his or her discretion, among the parties to the arbitration all
costs of the arbitration, including, without limitation, the fees and
expenses of the arbitrator and reasonable attorneys' fees, costs and expert
witness expenses of the parties. Absent such an allocation by the arbitrator,
each party shall pay its own expenses of arbitration, and the expenses of the
arbitrator shall be equally shared.
8.05 SETTLEMENT BY MUTUAL AGREEMENT. Nothing contained in this
Article shall
Page 35--SECURITIES PURCHASE AGREEMENT
prevent the parties from settling any Agreement Dispute by mutual agreement
at any time.
8.06 INDEMNIFICATION BY SELLERS. Each Seller agrees to indemnify and
hold MSI harmless for any falsity in the representations and warranties by
that Seller as set forth in Section 3.01. Such indemnity obligations shall
survive indefinitely, to indemnify and hold MSI harmless for any falsity in
any representation or warranty which the Seller knew was false when made,
provided, such latter indemnity shall survive for a period of three (3)
years. Such indemnity shall extend to MSI, its respective officers,
directors, employees and agents, from and against any and all Losses (as
defined below) incurred by such party arising out of a breach or inaccuracy
of any representation or warranty made by the Seller or IDW for which
indemnity is provided herein. For purposes of this Agreement, "Losses" means
(i) all losses, liabilities, damages, actions, demands, claims, fines and
penalties; and (ii) all out-of-pocket costs, including, without limitation,
reasonable expenses of investigation, remediation and the response costs,
reasonable attorneys' and paralegals' fees (at trial, on appeal, and in
connection with any petition for review in any agency proceeding) and
reasonable consulting, expert and accounting fees incurred in investigating,
defending and prosecuting any claim.
ARTICLE IX
OTHER MATTERS
9.01 THE CLOSING. The Closing shall take place upon such date (the
"Effective Time") as the parties hereto may mutually agree upon, but shall be
no later than January 31, 2000. The Closing shall take place at such place as
may be mutually agreed upon by the parties.
9.02 SURVIVABILITY AND INVESTIGATIONS. The respective
representations and warranties of IDW and MSI contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto and shall not survive the Closing.
9.03 NATURE OF REPRESENTATIONS AND WARRANTIES. All of the parties
hereto are executing and carrying out the provisions of this Agreement in
reliance on the representations, warranties, covenants and agreements
contained in this Agreement or at the Closing of the transactions herein
provided for, and any investigation which they might have made or any other
representations, warranties, agreements promises or information, written or
oral, made by the other party or any other person shall not be deemed a
waiver of any breach of any such representation, warranty, covenant or
agreement.
9.04 FURTHER ASSURANCES. At any time, and from time to time, after
the Closing, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
Page 36--SECURITIES PURCHASE AGREEMENT
9.05 WAIVER OF COMPLIANCE AND CONSENTS. Any failure of IDW and the
Sellers, on the one hand, or MSI, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by IDW and
the Sellers or MSI, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 9.06.
9.06 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if delivered in person
or sent by prepaid first class registered or certified mail, return receipt
requested, to the following addresses, or such other addresses as are given
to other parties in the manner set forth herein:
MSI: Xxxxxx Snowboards, Inc.
Attn: P. Xxxxx Xxxxxx, President
0000 Xxxxxxx Xxxx XX
Xxxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxx, Esq.
Hershner, Hunter, Xxxxxxx, Xxxxx & Xxxxx, LLP
000 Xxxx 00xx Xxxxxx
XX Xxx 0000
Xxxxxx, XX 00000
IDW: International DisplayWorks, Inc.
Attn: Xxxxxxx X. Xxxxxxxx, President
c/o 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
With a copy to: Xxxxx X. Xxxxxxxxxxx, Esq.
Xxxxxxxxxxx and Xxxxxx, Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Sellers: Addresses shown on the corporate records
9.07 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an association, a company, an unincorporated
organization, a government or
Page 37--SECURITIES PURCHASE AGREEMENT
any department, political subdivision or agency thereof; and (ii) the term
"Subsidiary" of any specified corporation shall mean any corporation of which
a majority of the outstanding securities having ordinary voting power to
elect a majority of the board of directors is directly or indirectly
beneficially owned by such specified corporation or any other person of which
a majority of the equity interests therein is, directly or indirectly, owned
by such specified corporation.
9.08 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.09 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Oregon.
9.10 BINDING EFFECT. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors and assigns.
9.11 ENTIRE AGREEMENT. This Agreement is the entire agreement of the
parties covering everything agreed upon or understood in the transaction.
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
9.12 SEVERABILITY. If any part of this Agreement is determined by a
court of competent jurisdiction to be unenforceable, the balance of the
Agreement shall remain in full force and effect.
9.13 DEFAULT COSTS. In the event any party hereto has to resort to
legal action to enforce any of the terms hereof, such party shall be entitled
to collect attorneys' fees and other costs from the party in default at trial
and upon any appeal.
[Remainder of page intentionally left blank]
Page 38--SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
Attest: XXXXXX SNOWBOARDS, INC.
By: By: /s/ P. XXXXX XXXXXX
------------------------------------------
Secretary P. Xxxxx Xxxxxx, President
INTERNATIONAL DISPLAYWORKS, INC.
By: /s/ XXXXXXX XXXXXXXX
------------------------------------------
Xxxxxxx Xxxxxxxx, Chairman & CEO
/s/ XXXXXXX XXXXXXXX
---------------------------------------------
Xxxxxxx Xxxxxxxx
/s/ XXXXXX XXXXXXXX
---------------------------------------------
Xxxxxx Xxxxxxxx
DELAWARE TRUST FBO XXXXXXX XXXXXXXX
XXX
By: /s/ XXXXXXX XXXXXXXX
------------------------------------------
Its: TRUSTOR
------------------------------------------
EUREKA CAPITAL CORPORATION, LTD.
By: /s/ XXXXX XXXXXXXXXXX
------------------------------------------
Its: ATTORNEY-IN-FACT
------------------------------------------
---------------------------------------------
Xxxxx Xxx
CAPITOL BAY SECURITIES, INC.
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------------
Its: CHIEF EXECUTIVE OFFICER
------------------------------------------
---------------------------------------------
Xxxx Xxx
/s/ XXXXX XXXXXXXXXXX
---------------------------------------------
Xxxxx Xxxxxxxxxxx
Page 39--SECURITIES PURCHASE AGREEMENT
SCHEDULE 3.02
DISCLOSURE SCHEDULE OF IDW
(h) IDW is the tenant under a commercial lease agreement for office and
warehouse space in Rocklin, California.
(t) IDW's only directly owned subsidiary is International DisplayWorks
(Hong Kong) LTD.
SCHEDULE 3.03
DISCLOSURE SCHEDULE OF MSI
Security Authorized Outstanding
-------- ---------- -----------
Common Stock 50,000,000 14,976,566(1)
Preferred Stock(2) 10,000,000
(1) Includes 9,176,566 outstanding at 12-31-99 and 5,800,000 shares issued
thereafter in private placement, but excludes 2,680,000 shares expected to be
issued in the Reorganization.
(2) The rights, privileges and preferences of the Preferred Stock as to
voting, election of directors, approval of corporate action, dividend and
liquidation preferences, and other matters may be established by the MSI
Board without shareholder approval.
EXHIBIT A
IDW COMMON STOCK OWNED BY STOCKHOLDERS
PURSUANT TO SECTION 3.01(b)
Name Number of
Shares
------------------------------------------------- ----------
Xxxxxxx and Xxxxxx Xxxxxxxx, 505,000
as joint tenants with right of survivorship
0000 Xxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Delaware Trust FBO 505,000
Xxxxxxx Xxxxxxxx XXX
0000 Xxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Eureka Capital Corporation, Ltd. 376,871
0xx Xxxxx, Xxxxxx Xxxxx
000 Xxxxxx Xxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Xxxxx Xxx 301,485
5F, No. 16, Sec. 0 Xxxxx Xxxx X. Xxxx
Xxxxxx 00
Xxxxxx, Xxxxxx
Capitol Bay Securities, Inc. 241,189
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxx Xxx 75,366
00000 Xxxxxxxxxx Xxxxx
Xxxxx, XX 00000
Xxxxx Xxxxxxxxxxx 15,089
0000 Xxxxxxx Xxxx., Xxxxx 000 ------
Xxxxxxxxx, XX 00000
Total: 2,020,000
EXHIBIT A (CONTINUED)
MSI COMMON STOCK TO BE ISSUED
PURSUANT TO SECTION 1.01(a)
Name Number of Percent of Total Issued &
Shares Outstanding Shares
------------------------------------------------- ---------- -------------------------
Xxxxxxx and Xxxxxx Xxxxxxxx, 670,000 3.8%
as joint tenants with right of survivorship
0000 Xxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Delaware Trust FBO 670,000 3.8%
Xxxxxxx Xxxxxxxx XXX
0000 Xxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Eureka Capital Corporation, Ltd. 500,007 2.8%
0xx Xxxxx, Xxxxxx Xxxxx
000 Xxxxxx Xxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Xxxxx Xxx 399,990 2.3%
5F, No. 16, Sec. 0 Xxxxx Xxxx X. Xxxx
Xxxxxx 00
Xxxxxx, Xxxxxx
Capitol Bay Securities, Inc. 319,992 1.8%
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxx Xxx 99,991 0.6%
00000 Xxxxxxxxxx Xxxxx
Xxxxx, XX 00000
Xxxxx Xxxxxxxxxxx 20,020 0.1%
0000 Xxxxxxx Xxxx., Xxxxx 000 ------
Xxxxxxxxx, XX 00000
Total: 2,680,000
EXHIBIT B
FORM OF CERTIFICATE OF MSI COMMON STOCK
EXHIBIT C
FORM OF OPINION OF MSI'S COUNSEL
PURSUANT TO SECTION 5.01(e)
_____________, 2000
International DisplayWorks, Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
We are acting as counsel to Xxxxxx Snowboards, Inc., an Oregon
corporation ("MSI"), in connection with the transactions contemplated by the
Securities Purchase Agreement dated January 27, 2000 (the "Agreement") among
MSI; International DisplayWorks, Inc., a Delaware corporation (IDW); and
certain stockholders of IDW.
In our examination we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. As to any facts material to
this opinion which we did not independently establish or verify, we have
relied upon statements and representations of MSI and its officers and other
representatives and of public officials.
In rendering the opinions set forth herein, we have examined
and relied on originals or copies, certified or otherwise identified to our
satisfaction, of the following:
(i) the Agreement;
(ii) the certificate of the officers of MSI, dated
the date hereof (the "Officers' Certificate");
(iii) certified copies of the Articles of
Incorporation and Bylaws, as amended, of MSI;
(iv) a certified copy of certain resolutions of the
Board of Directors of MSI, each adopted on ___, 2000; and
(v) such other documents as we have deemed necessary
or appropriate as a basis for the opinion set forth below.
Members of this Firm are admitted to practice in the State of
Oregon. We express
no opinion as to the laws of any jurisdiction other than (i) the laws of the
State of Oregon; (ii) the General Corporation Law of the State of Delaware;
and (iii) the federal laws of the United States of America to the extent
specifically referred to herein.
As to factual matters, we have relied, without investigation,
on the Officers' Certificate provided by MSI and the representations and
warranties contained in the Agreement.
Based on the foregoing, we are of the opinion that:
(i) MSI is a corporation duly organized and validly
existing under the laws of the State of Oregon;
(ii) MSI has the corporate power to carry on its
businesses as now being conducted;
(iii) The Agreement has been duly authorized, executed
and delivered by MSI and is a valid and binding obligation of MSI,
enforceable in accordance with its terms, except to the extent that
enforcement is limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights and remedies generally
or by general equitable principles (and excepting specific performance as a
remedy);
(iv) MSI has taken all corporate action necessary for
its due performance under the Agreement;
(v) The execution and delivery by MSI of the
Agreement and the consummation of the transactions contemplated thereby will
not conflict with or result in a breach of any provisions of, MSI's Articles
of Incorporation or Bylaws or, to the best of our knowledge after inquiry and
based upon information provided by MSI, constitute a default under or give
rise to a right of termination, acceleration, or cancellation under any
agreement by which MSI or any of its properties are bound or violate any
court order, writ or decree of injunction applicable to MSI;
(vi) We have no knowledge, after inquiry of MSI, of
any actions, suits or other legal proceedings or investigations pending or
threatened against, relating to or materially adversely affecting MSI, except
as disclosed in MSI's filings under the Securities Exchange Act of 1934, as
amended; and
(vii) The authorized and, to our best knowledge after
inquiry, outstanding capitalization of MSI is as set forth in Schedule 3.03
to the Agreement All of the outstanding shares of MSI's capital stock are
validly issued, fully-paid and non-assessable, without preemptive rights, and
to the best of our knowledge after inquiry, there are no outstanding
subscriptions, options, rights, warrants or other transfer agreements
(whether oral or written), other than as set forth in Section 3.03 of the
Agreement.
This opinion is being furnished only to you and is solely for your
benefit and is not to be used, circulated, quoted, relied upon or otherwise
referred to for any purpose without our prior written consent.
Yours very truly,
HERSHNER, HUNTER, XXXXXXX,
XXXXX & XXXXX, LLP
EXHIBIT D
OPINION OF IDW'S COUNSEL
PURSUANT TO SECTION 5.02(d)
_____________, 2000
Xxxxxx Snowboards, Inc.
0000 Xxxxxxx Xxxx XX
Xxxxx, XX 00000
Ladies and Gentlemen:
We are acting as counsel to International DisplayWorks, Inc., a
Delaware corporation ("IDW"), and certain stockholders of IDW (the
"Stockholders") in connection with the transaction contemplated by the
Securities Purchase Agreement dated January 27, 2000 (the "Agreement") among
Xxxxxx Snowboards, Inc., an Oregon corporation, IDW and the Stockholders.
In our examination we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of
all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such copies. As to any facts
material to this opinion, which we did not independently establish or verify,
we have relied upon statements and representations of MSI and its officers
and Stockholders and their representatives and of public officials.
In rendering the opinions set forth herein, we have examined
and relied on originals or copies, certified or otherwise identified to our
satisfaction, of the following:
(i) the Agreement;
(ii) the certificate of the officers of IDW, dated
the date hereof (the "Officers' Certificate");
(iii) the certificate of the Stockholders (the
"Stockholders' Certificates");
(iv) certified copies of the Certificate of
Incorporation and Bylaws, as amended, of IDW;
(v) certified copy of certain resolutions of the
Board of Directors of IDW adopted on________, 2000; and
(vi) such other documents as we have deemed necessary
or appropriate as a basis for the opinion set forth below.
Members of this firm are admitted to practice in the State of
California. We express no opinion as to the laws of any jurisdiction other
than (i) the laws of the State of Delaware; and (ii) the federal laws of the
United States of America to the extent specifically referred to herein.
As to factual matters, we have relied, without investigation,
on the Officers' and Stockholders' Certificates provided by IDW and the
representations and warranties contained in the Agreement.
Based on the foregoing, we are of the opinion that:
(i) IDW is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business in any jurisdiction where so required;
(ii) IDW has the corporate power to carry on its
business as now being conducted;
(iii) The Agreement has been duly authorized, executed
and delivered by IDW, and is a valid and binding obligation of IDW,
enforceable in accordance with its terms, except to the extent that
enforcement is limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights and remedies generally
or by general equitable principles (and excluding specific performance as a
remedy), including limitations on enforcement by reason of fraudulent
conveyance and corporate and other laws restricting indemnification by
corporations, shareholders of a corporation, or its affiliates;
(iv) Except as referred to herein, we know, after
inquiry, of no actions, suit or other legal proceedings or investigations
pending or threatened against, relating to or materially adversely affecting
IDW or its properties or business;
(v) The execution and delivery by IDW of the
Agreement and the consummation of the transactions contemplated thereby will
not conflict with or result in a breach of any provisions of IDW's
Certificate of Incorporation or Bylaws or, to the best of our knowledge after
inquiry and based upon information provided by IDW and its officers and
directors, constitute a default under or give rise to a right of termination,
acceleration or cancellation under any agreement by which IDW or any of its
properties are bound or violate any court order, writ or decree of injunction
applicable to IDW; and
(vi) The authorized capitalization of IDW is as set
forth in Section 3.02 of the Agreement. All of the outstanding shares of
IDW's capital stock are validly issued,
fully-paid and non-assessable, without preemptive rights, and to the best of
our knowledge after inquiry, there are no outstanding subscriptions, options,
rights, warrants or other transfer agreements (whether oral or written)
obligating IDW to issue or transfer from treasury any of its securities
except as set forth in Section 3.02 of the Agreement. When duly transferred
to MSI as provided therein, to the best of our knowledge after inquiry, MSI
will own all of the issued and outstanding common stock of IDW.
This opinion is being furnished only to you and is solely for
your benefit and is not to be used, circulated, quoted, relied upon or
otherwise referred to for any purpose without our prior written consent.
Yours very truly,
______________________
EXHIBIT E-1
FORM OF OFFICERS' CERTIFICATE OF MSI CONCERNING ACCURACY
PURSUANT TO SECTION 5.01(f)
THE UNDERSIGNED HEREBY CERTIFY, on behalf of Xxxxxx Snowboards, Inc., an
Oregon corporation ("MSI"), and pursuant to Section 5.01(f) of the Securities
Purchase Agreement (the "Agreement") dated January 27, 2000 among MSI,
International DisplayWorks, Inc., a Delaware corporation ("IDW"), and certain
stockholders of IDW, that we are the duly elected and qualified president and
chief executive officer and the duly elected and qualified secretary of MSI,
and that all representations and warranties of MSI contained in the Agreement
were accurate when made and, in addition, are accurate as of the Closing (as
defined in the Agreement) as though such representations and warranties were
made as of the Closing in exactly the same language by MSI and regardless of
knowledge or lack thereof on the part of MSI or any stockholder or changes
beyond its or his control, and as of the Closing, MSI has performed and
complied with all covenants and agreements and satisfied all conditions
required to be performed and complied with by any of them at or before such
time by the Agreement.
IN WITNESS WHEREOF, we have hereunto set our hands and the seal of MSI
this _____ day of ___________, 2000.
, President
, Secretary
EXHIBIT E-2
FORM OF OFFICERS' CERTIFICATE OF IDW CONCERNING ACCURACY
PURSUANT TO SECTION 5.02(e)
THE UNDERSIGNED HEREBY CERTIFY, on behalf of International DisplayWorks,
Inc., a Delaware corporation ("IDW"), and pursuant to Section 5.02(e) of the
Securities Purchase Agreement (the "Agreement") dated January 27, 2000 among
Xxxxxx Snowboards, Inc., an Oregon corporation, IDW and certain stockholders
of IDW, that we are the duly elected and qualified president and chief
executive officer and the duly elected and qualified secretary of IDW, and
that all representations and warranties of IDW contained in the Agreement
were accurate when made and, in addition, are accurate as of the Closing (as
defined in the Agreement) as though such representations and warranties were
made as of the Closing in exactly the same language by IDW and regardless of
knowledge or lack thereof on the part of IDW or any stockholder or changes
beyond its or his control, and as of the Closing, IDW has performed and
complied with all covenants and agreements and satisfied all conditions
required to be performed and complied with by any of them at or before such
time by the Agreement.
IN WITNESS WHEREOF, we have hereunto set our hands and the seal of IDW
this _____ day of ________, 2000.
, President
, Secretary
[corporate seal]
EXHIBIT E-3
FORM OF CERTIFICATE OF SELLERS CONCERNING ACCURACY
PURSUANT TO SECTION 5.02(e)
THE UNDERSIGNED HEREBY CERTIFIES, pursuant to Section 5.02(e) of the
Securities Purchase Agreement (the "Agreement") dated January 27, 2000 among
Xxxxxx Snowboards, Inc., an Oregon corporation, International DisplayWorks,
Inc., a Delaware corporation ("IDW"), and certain stockholders of IDW,
including the undersigned, that all of my representations and warranties
contained in the Agreement were accurate when made and, in addition, are
accurate as of the Closing (as defined in the Agreement) as though such
representations and warranties were made as of the Closing in exactly the
same language and regardless of knowledge or lack thereof on my part or
changes beyond my control, and as of the Closing, I have performed and
complied with all covenants and agreements and satisfied all conditions
required to be performed and complied with by me at or before such time by
the Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
________, 2000.
EXHIBIT F
LIST OF DEFINITIONS AND MEANING OF TERMS
Broker 19
Closing 25
Closing Financial Statements 25
Closing Statements 24
Code 2
Effective Time 30
ERISA 11
FIRPTA 14
Governing Documents 7
Government Entity 4
IDW 1
IDW Benefit Plans 00
XXX Xxxxxx Xxxxx 0
XXX Transaction 18
MSI 1
MSI Common Stock 4
MSI Transaction 19
NASD 17
New Certificates 2
Old Certificates 2
Person 31
Reorganization 1
SEC 4
Statements 16
Subsidiary 31
