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____________________________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
SOUVALL-PAGE AND COMPANY, INC.
a Utah Corporation
AND
ABA ACQUISITION CORP.,
an Indiana Corporation
AND
AMERICAN BASKETBALL ASSOCIATION, INC.,
an Indiana Corporation
_______________________________________________________
AGREEMENT AND PLAN OF MERGER
This Merger Agreement (this "Agreement"), entered into December
18, 2006, by and among Souvall-Page and Company, Inc., a Utah
corporation ("Parent"); ABA Acquisition Corp., Inc., an Indiana
corporation and a subsidiary of Parent ("Sub"); David C. Merrell,
an officer, director and shareholder of Parent ("David C.
Merrell"); and American Basketball Association, Inc., an Indiana
corporation ("Company"). Parent, Sub, David C. Merrell and
Company are referred to collectively as the "Parties."
RECITALS
A.
Parent, Sub and Company intend to effect a Merger of Sub into
Company in accordance with this Agreement and the Indiana General
Corporation Law. Upon consummation of the Merger, the Sub
will cease to exist and Company will continue as a wholly-owned
subsidiary of the Parent.
B.
This Agreement has been approved by the respective boards of
directors of Parent, singly and as sole shareholder of Sub, Sub and
Company and by shareholders owning more than 51% of the outstanding
voting stock of Company.
C.
The Parties intend that the Merger will be treated as a tax free
reorganization as described in Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as
follows:
1.
DEFINITIONS
" Affiliate" has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities Exchange Act.
" Certificate of Merger" has the meaning set forth in
Section 2(c) below.
" Closing" has the meaning set forth in Section 2(b)
below.
" Closing Date" has the meaning set forth in Section 2(b)
below.
" Company" has the meaning set forth in the preface
above.
" Company Share" means any share of the common stock, no
par value per share, of Company.
" Company SPA " has the meaning set forth within Section
2(d) below.
" Company Stockholder" means any Person who or which
holds any Company Shares.
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" Confidential Information" means any information
concerning the businesses and affairs of Company and its
Subsidiaries that is not already generally available to the
public.
" Conversion Ratio" has the meaning set forth in Section
2(d)(iv) below.
" Definitive Company Proxy Materials" means the
definitive proxy materials or equivalent thereof relating to the
Special Company Meeting or the execution and delivery of written
consents in lieu thereof.
" Indiana General Corporation Law" means the General
Corporation Law of the State of Indiana, as amended.
" Disclosure Schedule" has the meaning set forth in
Section 3 below.
" Dissenting Share" means any Company Share held of
record by any stockholder who or which has exercised his, her, or
its appraisal rights, if any, under the applicable sections of the
Indiana General Corporation Law.
" Effective Time" has the meaning set forth in Section
2(d)(i) below.
" Exchange Agent" has the meaning set forth in Section
2(e) below.
" GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently
applied.
" IRS" means the Internal Revenue Service.
" Joint Disclosure Document" means the Company SPA
including the Exhibits and Schedules thereto and the filings made
by Parent with the United States Securities and Exchange Commission
through the date of this Agreement.
" Knowledge" means actual knowledge after reasonable
investigation.
" Lien" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest other than (a) liens for
Taxes not yet due and payable or for taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (b)
purchase money liens and liens securing rental payments under
capital lease arrangements, and (c) other liens arising in the
Ordinary Course of Business and not incurred in connection with the
borrowing of money.
" Material Adverse Effect" or " Material Adverse
Change" means any effect or change that would be materially
adverse to the business, assets, condition (financial or
otherwise), operating results, operations, or business prospects of
Company and its Subsidiaries, taken as a whole, or on the ability
of Company to consummate timely the transactions contemplated
hereby.
" Merger" has the meaning set forth in Section 2(a)
below.
" Most Recent Fiscal Quarter End" has the meaning set
forth in Section 3(f) below.
" Ordinary Course of Business" means the ordinary course
of business consistent with past custom and practice (including
with respect to quantity and frequency) and as to Company shall
also include sales and issuances of securities, contracts,
purchases and
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dispositions of equipment and other transactions referenced or
contemplated by the Company SPA.
" Parent" has the meaning set forth in the preface
above.
" Parent Share" means any share of the common stock, no
par value per share, of Parent.
" Party" has the meaning set forth in the preface
above.
"Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Public Report" has the meaning set forth in Section 3(e)
below.
"Requisite Company Stockholder Approval" means the
affirmative vote of the holders of a majority of Company Shares in
favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
" Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Sub" has the meaning set forth in the preface above.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association,
or business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof
or (ii) if a limited liability company, partnership, association,
or other business entity (other than a corporation), a majority of
partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership
interest in such a business entity (other than a corporation) if
such Person or Persons shall be allocated a majority of such
business entity's gains or losses or shall be or control any
managing director or general partner of such business entity (other
than a corporation). The term " Subsidiary " shall include
all Subsidiaries of such Subsidiary.
"Surviving Corporation" has the meaning set forth in
Section 2(a) below.
2.
REORGANIZATION TRANSACTION
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(a)
The Merger . Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Indiana General Corporation Law, the Sub shall be merged into
Company. At the Effective Time, the separate existence of the
Sub shall cease, and Company shall continue as the surviving
corporation (the "Surviving Corporation").
(b)
The Closing . The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at
the offices designated by Company at 9200 Sunset Boulevard, 9th
Floor, Los Angeles, California 90069 on December 19 2006 or
the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing
itself) or such other date as the parties may mutually determine
(the "Closing Date").
(c)
Actions at the Closing . At the Closing, (i)
Company will deliver to Parent and Sub the various certificates,
instruments, and documents referred to in Section 6(a) below, (ii)
Parent and Sub will deliver to Company the various certificates,
instruments, and documents referred to in Section 6(b) below, (iii)
Parent, Sub and Company will file with the Secretary of State of
the State of Indiana a Certificate of Merger in the form attached
hereto as Exhibit A (the " Certificate of Merger "), and
(iv) Company will deliver to the Exchange Agent in the manner
provided below in this Section 2 the certificate(s) evidencing the
Parent Shares to be issued in the Merger.
(d)
Effect of Merger .
(i)
General. The Merger shall become effective at the time
(the " Effective Time ") Sub and Company file the
Certificate of Merger with the Secretary of State of the State of
Indiana. The Merger shall have the effect set forth in the Indiana
General Corporation Law. The Surviving Corporation may, at any time
after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either Sub or
Company in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii)
Certificate of Incorporation. The Certificate of
Incorporation of Company in effect at and as of the Effective Time
will remain the Certificate of Incorporation of Surviving
Corporation without any modification or amendment in the Merger.
(iii)
By-laws. The By-laws of Company in effect at and as of
the Effective Time will remain the By-laws of Surviving Corporation
without any modification or amendment in the Merger.
(iv)
Conversion of Company Shares. At and as of the Effective
Time, (A) each Company Share (other than any Dissenting Share)
shall be converted into the right to receive one Parent Share (the
ratio of one Parent Share to one Company Share is
referred to herein as the " Conversion Ratio "),
constituting up to 22,536,136
Parent Shares, (inclusive of the sale and issuance of
1,675,000 units and 750,000 shares of common stock
(the "Unit Added Stock") being offered [pursuant to a Stock
Purchase Agreement dated as of the date hereof between the Company
and the purchasers therein listed (the "Company SPA")] and
888,892
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Parent Shares issuable on conversion of the principal of the
Bridge Loans); (B) each outstanding warrant to purchase a Company
Share shall be converted into the right to receive one warrant to
purchase a Parent Share (an aggregate of warrants to purchase up to
(1) 500,000 shares at an exercise price of $.25 per share and (2)
500,000 shares at an exercise price of $.75 per share are
outstanding); (C) each outstanding placement warrant as described
in the Company SPA shall be converted into a warrant to purchase
two Parent Shares and a warrant to purchase a Parent Share
(placement warrants to purchase 184,250 units at an exercise price
of $1.20 per unit, as described in the Company SPA are outstanding)
(collectively (A), (B) and (C) constitute the "Merger
Consideration"); and (D) each Dissenting Share, if any, shall be
converted into the right to receive payment from Parent with
respect thereto in accordance with the provisions of the Indiana
General Corporation Law; provided, however , that the
Conversion Ratio shall be subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split, or
other change in the number of Company Shares outstanding.
(v)
Conversion of Company Options and Warrants. Except for
Warrants issued pursuant to the Company SPA that also include
warrants to purchase units issued to the placement agent and a
finder, as described within the Company SPA and its Schedules
(collectively, all of such warrants issued to investors, the
placement agent and the finder being referred to herein as the "SPA
Warrants") and the warrants described in paragraph 2(d)(iv) above
(the "Extant Company Warrants"), the Merger Consideration gives
effect to all outstanding Company Options, Warrants and other
rights held by any person to acquire Company Shares. At the
Effective Time, each outstanding option to purchase shares of
Company Common Stock (each, a "Company Stock Option") under Company
Option Plans, whether or not vested, shall have been exercised or
otherwise terminated. Other than the SPA Warrants and the
Extant Company Warrants, Parent shall assume no Company Stock
Option by virtue of the Merger. Each of the outstanding SPA
Warrants and each of the outstanding Extant Company Warrants shall
be converted into the right to acquire Parent Shares upon the same
terms and conditions as specified in the SPA Warrants and in the
Extant Company Warrants and at the same Conversion Ratio imposed on
holders of Company Shares pursuant to the transactions contemplated
hereby.
(vi)
Parent Shares . Each Parent Share issued and outstanding
at and as of the Effective Time will remain issued and
outstanding.
(e)
Conversion Procedures .
(i)
Immediately after the Effective Time, (A) Parent and Sub will
furnish to Interwest Transfer Co., Inc., 1981 Murray-Holladay Road,
Salt Lake City, Utah 84117 (the " Exchange Agent ") a stock
certificate (issued in the name of the Exchange Agent or its
nominee) representing that number of Parent Shares equal to the
product of (i) the Conversion Ratio times (ii) the number of
outstanding Company Shares (other than any Dissenting Shares) not
to exceed 22,536,136
Parent Shares after giving effect to (x) the minimum number
of units
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and Unit Added Stock that are offered under the Company SPA (but
subject to increase if more than the minimum number of units are
sold) and (y) conversion of the principal of the Bridge Loans into
Parent Shares (but subject to increase if the holders of the Bridge
Loans elect to have their interest due payable in Parent Shares),
and (B) Parent will cause the Exchange Agent to mail a letter of
transmittal (with instructions for its use) to each record holder
of outstanding Company Shares for the holder to use in surrendering
the certificates which represented his, her, or its Company Shares
in exchange for a certificate representing the number of Parent
Shares to which he, she, or it is entitled.
(ii)
Fractional shares shall not be issued, but cash shall be paid by
the Parent for any such fraction in an amount proportionate to the
fair value of a whole share as determined by the Board of Directors
of Parent.
(iii)
Parent shall pay all charges and expenses of the Exchange
Agent.
3.
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Company represents and warrants to Parent that the statements
contained in this Section 3 and the Company SPA are, to the
Company’s Knowledge, correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section
3), except as set forth in the Company SPA. The Parent and Sub
acknowledge that the following representations and warranties are
made by Company, to the Company’s knowledge and belief, in
conjunction with and with reference to the Company SPA. The
following representations and warranties are qualified in their
entirety by the information set forth within the Company SPA and
the Company Financial Statements defined below.
(a)
O rganization, Good Standing and
Qualification . Company is a corporation duly
incorporated, duly organized, validly existing and in good standing
under the laws of Indiana. Company and has all requisite corporate
power and authority to own and operate its properties and assets,
to execute and deliver this Agreement and to carry on its business
as presently conducted and as presently proposed to be conducted.
Company is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification
necessary and in which failure to so qualify would have a Material
Adverse Effect.
(b)
Capitalization . The authorized capital stock of
Company is 30,000,000 shares of common stock, no par value per
share, of which 22,536,136 (the
"Company Shares") are issued and outstanding as of the Closing. All
of the issued and outstanding Company Shares have been duly
authorized and are (and, as to the SPA Warrants and the Extant
Company Warrants, following payment and proper exercise, will be)
validly issued, fully paid and nonassessable, are free of any
Liens, and were (and, as to the Company Shares issuable on exercise
of the SPA Warrants and the Extant Company Warrants, will be)
issued in compliance with all applicable laws concerning the
offer,
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sale and issuance of securities. Each of the SPA Warrants and
each of the Extant Company Warrants entitles the holder thereof to
acquire one Company Share as described within the Company SPA.
Except as may be described in the Company SPA, the Company Shares
are not subject to any pre-emptive rights or rights of first
refusal created by statute, the Certificate of Incorporation or
Bylaws of Company or any agreement to which Company is a Party or
by which it is bound.
(c)
Authorization; Binding Obligations . Company has
all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby;
provided, however, that completion of the Merger is conditioned on
the Company’s obtaining the necessary shareholder approval.
This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company enforceable
against Company in accordance with its terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.
(d)
No Contravention . Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution,
statute, regulation, rule to which Company is subject or any
provision of the charter or bylaws of Company. Other than in
connection with the provisions of any applicable state law, Company
does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e) Financial Statements .
Company delivered to Parent its audited Statement of Income
and Balance Sheets from inception (April 2004) through the year
ended December 31, 2005 (the "Audited Financial Statements") and
its unaudited Statement of Income and Balance Sheets as of and for
the six-month period ended September 30, 2006 (the "Interim
Financial Statements" and together with the Audited Financial
Statements, the "Company Financial Statements"). The Company
Financial Statements are in accordance with the books and records
of Company, have been derived from the books and records of
Company, (for the periods covered and at September 30, 2006 (the
"Company Statement Date"); provided that that the Interim Financial
Statements are subject to normal recurring year-end adjustments and
may not contain all Notes to Financial Statements required under
GAAP.
(f)
No Undisclosed Liabilities . Except as may be set forth
in the Company SPA or elsewhere in this Agreement, Company to its
Knowledge has no obligations or liabilities that are material and
that are not disclosed or reflected in the Company Financial
Statements, except current liabilities incurred, and obligations
entered into, in the Ordinary Course of Business subsequent to the
Company Statement Date.
(g)
Title to Properties and Assets; Liens .
Except as may be otherwise described in the Company SPA,
Company has good and valid right and title to the personal
property, tangible and intangible (other than intellectual property
licenses described in paragraph (h) below), reflected in the
Company Financial Statements (except
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assets, interests in assets sold or otherwise disposed of since
the Company Statement Date in the Ordinary Course of Business).
(h)
Intellectual Property . Company owns, or is
licensed or otherwise possesses rights to patents, applications for
patents, licenses and other intellectual property (collectively
"Company Intellectual Property") as set forth and described within
the Company SPA.
(i)
Litigation . Except as set forth in the
Company SPA, there is no action, suit, arbitration, audit or other
proceeding or investigation pending, threatened against Company or
any of its properties or any of its officers or directors (in their
capacity as such) before any agency, court or tribunal, foreign or
domestic.
(j)
Employment Matters .
(i)
To the Knowledge of Company, Company is in compliance in all
material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment,
terms and conditions of employment, alien employment and hiring,
and is not engaged in any unfair labor practice.
(ii)
Company has no collective bargaining agreement with any of its
employees. There is no labor union organizing activity
pending or, to Company’s Knowledge, threatened with respect
to Company. Except as set forth in the Company SPA, no employee has
any agreement or contract, written or verbal, regarding such
employee’s continued employment by Company.
(k)
Registration Rights . Except as set forth in the
Company SPA, Company is currently not under any obligation, and has
not granted any rights, to register any of Company’s
presently outstanding securities.
(l)
Compliance with Laws; Governmental Consents; Permits . No
governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the
execution and delivery of this Agreement and the Merger, except for
(A) the filing of the Certificate of Merger, together with the
required officers’ certificates; (B) such governmental
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state
securities laws and the securities laws of any foreign country; and
(C) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Company and would not prevent, or
materially alter or delay any of the transactions contemplated by
this Agreement.
(m)
Information to Company Shareholders . Company
represents and warrants that Company shareholders have been or will
be advised by Company of the following:
The Parent Shares have not been registered under the
Securities Act of 1933, as amended. The Parent Shares will be
acquired for the issuee’s own account and not with a view to
distribute them to the public. The Parent Shares are
"restricted securities" that may not be pledged or hypothecated and
may not be sold or transferred unless they are registered under the
Securities Act of 1933, or unless, in the opinion of Parent’s
counsel or counsel satisfactory to Parent, such registration
is
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not required. A legend confirming the foregoing shall
be prominently affixed to each certificate evidencing the Parent
Shares.
4.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to Company, each to its
Knowledge, that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date
of this Agreement throughout this Section 4), except as set forth
in the various filings made by the Parent with the Securities and
Exchange Commission or except as set forth on any schedule attached
as part of Exhibit C hereto (the "Parent/Sub Disclosure Schedule").
(a)
Organization, Good Standing and Qualification .
Each of Parent and Sub is a corporation duly incorporated,
duly organized, validly existing and in good standing under the
laws of the State of Utah and State of Indiana, respectively.
Each of Parent and Sub has all requisite corporate power and
authority to own and operate its properties and assets, to execute
and deliver this Agreement and to carry on its business as
presently conducted and as presently proposed to be conducted.
Each of Parent and Sub is duly qualified and is authorized to
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification
necessary and in which failure to so qualify might reasonably be
expected, individually, or in the aggregate, to have a Materially
Adverse Effect.
(b)
Capitalization .
(i)
The authorized capital stock of the Parent, immediately prior to
the Closing, is 50,000,000 shares of common stock, no par value per
share, of which [2,723,864] (the "Parent Shares") are issued
and outstanding (without giving effect to 300,000 shares of common
stock to be issued at Closing to David Merrell pursuant to Section
6(a)(viii) and Section 6(b)(x) below) and (B) 10,000,000 shares of
preferred stock, no par value per share, of which none is issued
and outstanding. There are no authorized or outstanding
subscriptions, warrants, options, contracts, rights (pre-emptive or
otherwise), puts, calls, exchangeable or convertible securities,
commitments or demands of any character relating to any authorized
and issued or unissued shares of the capital stock of the Parent or
other instruments convertible into or exchangeable for such stock,
or which obligate the Parent to seek authorization to issue
additional shares of any class of stock or to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of the Parent
or obligating the Parent to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement, other than
created by virtue of this Agreement or the transactions
contemplated hereby.
(ii)
The Merger does not constitute and will not constitute an event
under any capital stock or convertible security or any
anti-dilution or similar
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provision of any agreement to which Parent or Sub is a Party or
by which it is bound or affected, which shall either increase the
number of shares or units of capital stock issuable upon conversion
of any securities or upon exercise of any warrant or right to
subscribe to or purchase any stock or similar security, or decrease
the consideration per share or unit of capital stock to be received
by Parent or by Sub upon such conversion or exercise.
(c)
Authorization; Binding Obligations . Each of the
Parent and Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action
on the part of each of the Parent and Sub. No ratification or
other approval by the shareholders of Parent is required to enter
into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each
of the Parent and Sub and constitutes the valid and binding
obligation of each of the Parent and Sub enforceable against the
Parent and Sub in accordance with its terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.
(d)
No Contravention . Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Parent or Sub
are subject or any provision of the charter or bylaws of Parent or
Sub or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Party
the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Parent or Sub is a party
or by which Parent or Sub is bound or to which any of Parent or
Sub’s assets is subject (or result in the imposition o
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