STOCK & LOAN PURCHASE AGREEMENT -

EXHIBIT 2.2

 

Execution Copy

 

STOCK AND LOAN PURCHASE AGREEMENT

 

between

 

 

and

 

 

(each of Cleven and Norfin a “ Seller ”,

and collectively the “ Sellers ”)

 

and

 

 

and

 

 

(“Luxco”)

 

and

 

CAVOMA LP , c/o Paget-Brown & Company Ltd., West Wind Building, Fourth Floor, P.O. Box 1111, Grand Cayman, Cayman Islands

 

(“Cayco”)

 

(each of Luxco and Cayco, a “ Purchaser ”,

and collectively the “ Purchasers ”)

 

and

 

K2 Inc., 2051 Palomar Airport Road, Suite 100, Carlsbad, California, 92009, USA

 

(“K2”)

 

with respect to

 

Table of Contents

 

 

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Execution Copy

 

THIS STOCK AND LOAN PURCHASE AGREEMENT (together with the Schedules hereto, the “ Agreement ”) is made as of June 15, 2004.

 

WHEREAS—:

 

A.	CTS is a Swiss corporation ( Aktiengesellschaft ) incorporated in Baar, Zug, with a share capital of CHF 5,000,000, divided into 5,000 registered shares with a par value of CHF 1,000 each (each, individually a “ Share ”, and collectively, the “ Shares ”).

 

B.	CTS, through various subsidiaries, is active in the manufacturing, development, distribution, marketing and sale of winter sports goods as well as related accessories and apparel under the Marker and other trademarks (the “ Business ”).

 

C.	Sellers legally and beneficially own all of the Shares as set out in Schedule C and have the right to transfer full ownership in the Shares.

 

D.

Cleven granted to CTS and certain of its subsidiaries loans (the “ Cleven Loans ”) and Norfin granted to CTS and certain of its subsidiaries loans (the “ Norfin Loans ” and together with the Cleven Loans, the “ Loans ”). Details of the partially subordinated Loans (in particular the outstanding amounts as of March 31, 2004 and the interest rate on such loans) are attached hereto as Schedule D .

 

E.

K2 is a corporation incorporated in the State of Delaware (USA) with shares listed on the New York Stock Exchange (“ NYSE ”). As of the date hereof, K2’s authorized capital stock consists of (i) 110,000,000 common shares, USD 1.00 par value, of which 35,683,066 shares (including associated preferred rights to purchase further K2 shares pursuant to K2’s shareholders’ rights plan) are issued and outstanding, 747,234 shares are issued and held in treasury and 2,898,651 shares are reserved for issuance pursuant to stock plans for employees and directors of K2 and its subsidiaries and (ii) 12,500,000 preferred shares, USD 1.00 par value, none of which are issued and outstanding.

 

F.	Cayco, a wholly owned subsidiary and Affiliate of K2, is a limited partnership duly organized and existing under the laws of Cayman Island having a share capital of 1,000 units.

 

G.	Luxco, a wholly owned subsidiary of Cayco and Affiliate of K2, is a private limited company ( société à responsabilité limitée ), duly organized and existing under the laws of Luxembourg having a share capital of EUR 12,500.

 

H.	Sellers intend to sell the Shares to Luxco and the Loans to Cayco and Luxco intends

to purchase from Sellers the Shares and Cayco intends to purchase the Loans from Sellers pursuant to the terms and conditions set forth herein.

 

I.

Simultaneously, and as conditions of the transaction contemplated herein, the shareholders of Völkl Sports Holding AG, a Swiss corporation ( Aktiengesellschaft ) incorporated in Baar (Switzerland), intend to sell all shares in Völkl Sports Holding AG to Luxco, and to assign certain shareholder loans extended to Völkl Sports Holding AG and its subsidiaries, to Cayco.

 

J.

Purchasers, in a due diligence review, have analyzed the Due Diligence Material (as hereinafter defined) enabling Purchasers to undertake an assessment of the Business and the financial situation of the Marker Group Companies (as hereinafter defined). Such due diligence shall be completed as further set out in this Agreement.

 

NOW, THEREFORE , the Parties have come to the following agreement:

 

I.	Definitions

 

As used in this Agreement, the following terms have the following meaning unless the context requires otherwise:

 

“ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person, through the ownership of all or part of any Person.

 

“ Agreement ” shall have the meaning defined in the preamble of this Agreement.

 

“ Amendment ” shall have the meaning defined in art. VIII.I of this Agreement.

 

“ Ancillary Documents ” shall mean the Escrow Agreement, the Non-Competition Agreement, the Eschenlohe Lease Amendment Agreement, the Norfin Hold-Back Agreement and the Bronder Employment Agreement.

 

“ Applicable Law ” shall mean, with respect to any Person, any domestic or foreign, federal, state, cantonal or local statute, law, ordinance, code, administrative interpretation, regulation, authorization, permit, approval, consent order, writ, injunction, decree, demand, judgment, award or other requirement or, any agreement or ruling with, any Governmental Entity binding upon or applicable to such Person or any of its respective properties, assets, officers, directors, employees, consultants or agents.

 

“ AthleticSkiing Agreement ” shall have the meaning defined in art. VIII.I of this Agreement.

 

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“ Broker Slate ” shall have the meaning defined in art. X.B of this Agreement.

 

“ Bronder Employment Agreement ” shall mean that certain Employment Agreement by and between Völkl (International) AG and Dr. Christoph Bronder (with the consent of Marker International GmbH and K2) of even date hereof.

 

“ Business ” shall have the meaning defined in recital B of this Agreement.

 

“ Business Day ” shall mean a day on which the NYSE is open for trading.

 

“ Cash Consideration Amount ” shall have the meaning defined in art. II.B.2 of this Agreement.

 

“ Cayco ” shall have the meaning defined on page 1 of this Agreement.

 

“ CHF ” shall mean Swiss Francs, being the lawful currency of Switzerland.

 

“ Cleven ” shall have the meaning defined on page 1 of this Agreement.

 

“ Cleven Loans ” shall have the meaning defined in recital D of this Agreement.

 

“ Closing ” shall mean the consummation of the transactions described in art. III.C of this Agreement.

 

“ Closing Date ” shall mean the date defined in art. III.A of this Agreement.

 

“ Competing Transaction ” shall have the meaning defined in art. IX.C of this Agreement.

 

“ CTS ” shall have the meaning defined on page 1 of this Agreement.

 

“ Current Period ” shall mean (a) any period that commences before and ends after the date of this Agreement, and (b) any period ending prior to the date of this Agreement, but only if the due date for the Tax Return for such period is not prior to the date of this Agreement.

 

“ Disclosure Letter ” shall have the meaning defined in art. VI.D.3(c) of this Agreement.

 

“ Due Diligence Material ” shall mean the material set forth in Schedule 1.1 which has been submitted to Purchasers for the due diligence review undertaken by the Purchasers before the date hereof. It is understood, for the avoidance of doubt, that the Due Diligence Material shall not operate as an exception or limitation of Sellers’

 

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representations and warranties made under art. IV of this Agreement.

 

“ Environmental Costs ” shall mean any Losses of any Marker Group Company or the Purchasers’ through the Purchasers’ ownership of the Marker Group Companies’ (i) in connection with any necessary investigating, delineating, treating, clean-up, elimination, reduction, limiting, containing or any other securing measures, removing or disposing of any Relevant Pollution (or any effects thereof or therefrom), including the transportation, storage, disposal and treatment of polluted soil, water and building materials, or (ii) incurred in order to comply with, or related to the failure to comply with the requirements of any Environmental Laws in whole or in part, or (iii) in connection with measures to eliminate, reduce or otherwise remedy an imminent danger to well-being or human health or the environment relating to any Relevant Pollution, or (iv) which either the Purchasers or any Marker Group Company is held liable by any employee or third party in connection with any Relevant Pollution or the compliance with Environmental Laws, or (v) which arise in future construction projects on any real estate in order to dispose of contaminated soil and/or other contaminated items ( kontaminationsbedingter Mehraufwand ) or to respond to governmental directives regarding Environmental Pollution.

 

“ Environmental Law(s) ” shall mean any and all applicable statutes, laws, regulations, ordinances, other legally binding rules as well as generally accepted technical standards and codes of conduct, including administrative orders ( Verwaltungsakte ) as well as contracts under public law ( öffentlich-rechtliche Verträge ), as in effect at the Closing Date concerning (i) Environmental Pollution, or (ii) Hazardous Substances, or (iii) protection of human health and safety (including fire protection) and the environment or the protection of other living organisms.

 

“ Environmental Pollution ” shall mean (i) any pollution or contamination of air, land, soil gas ( Bodenluft ), ground or surface water, buildings, constructions or installations by any pollutants, contaminants or hazardous, toxic or dangerous substances or any substances regulated by Environmental Laws, including, but not limited to oil, asbestos, hazardous materials as well as noise and odors, or any impact on human health or other living organisms resulting from such pollution or contamination, and (ii) storages, landfills and other sites or installations used for the disposal of hazardous wastes.

 

“ Eschenlohe Lease Amendment Agreement ” shall mean the agreement between Marker Deutschland GmbH, Eschenlohe, and TERTIO Grundstücks-Vermietungs GmbH, relating to the lease of the premises in Eschenlohe, Bavaria, Germany substantially in the form set forth in Schedule 1.2 .

 

“ Escrow Agent ” shall have the meaning defined in art. VI.F of this Agreement.

 

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“ Escrow Agreement ” shall have the meaning defined in art. VI.F of this Agreement.

 

“ EUR ” shall mean Euro, being the lawful currency in the European Union.

 

“ Failing Party ” shall have the meaning defined in art. XIII.I of this Agreement.

 

“ Financial Debt ” shall mean all interest bearing indebtedness, both short and long term (including, for the avoidance of doubt, silent partnerships ( stille Gesellschaften ), but not the Loans), owed by any of the Marker Group Companies to any third parties, as determined pursuant to Swiss GAAP FER applied on a basis consistent with past practice and pursuant to the principles further set out in Schedule 1.3 .

 

“ Financial Statements ” shall have the meaning defined in art. IV.F of this Agreement.

 

“ Governmental Entity ” shall mean any Swiss, German or other federal, territorial, state, local or municipal governmental or quasi-governmental authority, instrumentality, court, government commission, tribunal or organization, or any regulatory, administrative, judicial, police, taxing or other agency or authority, or any political or other subdivision, department or branch of any of the foregoing.

 

“ Hazardous Substance(s) ” shall mean all substances, materials or wastes that are listed, classified or regulated pursuant to any Environmental Law or which are the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law.

 

“ Hold-Back Agent ” shall have the meaning defined art. II.B.2 of this Agreement.

 

“IP Rights ” shall have the meaning defined in art. IV.M of this Agreement.

 

“ K2 ” shall have the meaning defined on page 1 of this Agreement.

 

“ K2 Shares ” shall mean 426,209 validly issued and fully paid common shares, par value $1.00, of K2, to be delivered to Sellers at Closing.

 

“ Liability ” or “ Liabilities ” shall mean, with respect to any Person, any liability or obligation of any kind, whether known or unknown, absolute or contingent, accrued or unaccrued, secured or unsecured, joint or several, due or to become due, with respect to any Person, regardless of whether or not the same is required to be recorded or accrued on the financial statements of that Person.

 

“ Lien ” shall mean any charge, encumbrance, pledge or security interest arising from

 

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options, pledges, mortgages, security agreements, or third party rights of any nature (whether in rem or in personam ), irrespective of whether such Lien arises under any agreement, the operation of law or by means of a judgment or order of any court or administrative authority.

 

“ Loans ” shall have the meaning defined in recital D of this Agreement.

 

“ Losses ” shall mean any and all Liabilities, claims made, losses incurred (including lost profits), damages payable (including judgments and penalties), all together with interest, costs and expenses (including reasonable advisers’ fees and reasonable expenses, and any expenses incurred in connection with investigating, defending against or settling any claims or related causes of action).

 

“ Luxco ” shall have the meaning defined on page 1 of this Agreement.

 

“ Marker Group Companies ” shall mean CTS and the Subsidiaries.

 

“ Material Adverse Effect ” shall mean a change in the assets, liabilities, financial position, results of operations or prospects of the Marker Group Companies that impairs or is reasonably likely to impair the value of the Marker Group Companies as a whole in an amount of EUR or more, which has not been, cannot be, or is not reasonably likely to be remedied before the Closing Date; for the avoidance of doubt, the term “Material Adverse Effect” shall not include (i) any changes in the global economy, local markets, general industry conditions in the ski/binding industry (in each case that are not unique to any of the Marker Group Companies but also affect the other Persons who participate or are engaged in the ski/binding industry), (ii) a terrorist attack unless such attack directly harms the physical assets or operations of the Marker Group Companies or (iii) an adverse market reaction to the announcement of the transactions set forth in this Agreement.

 

“ Non-Competition Agreement ” shall mean that certain Non-Competition Agreement by and between K2 and Cleven, substantially in the form set forth in Schedule 1.4 .

 

“ Norfin ” shall have the meaning defined on page 1 of this Agreement.

 

“ Norfin Hold-Back Account ” shall mean the account established pursuant to the Norfin Hold-Back Agreement.

 

“ Norfin Hold-Back Agreement ” shall mean the agreement among the Purchasers, Norfin and the Hold-Back Agent governing the Norfin Hold-Back Account, substantially in the form set forth in Schedule 1.5 .

 

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“ Norfin Loans ” shall have the meaning defined in recital D of this Agreement.

 

“ Norfin Shares ” shall mean 500 Shares in CTS, representing 10% of the issued and outstanding share capital of CTS.

 

“ Norfin Share Consideration ” shall have the meaning defined in art. II.B.2 of this Agreement.

 

“ NYSE” shall have the meaning defined in recital E of this Agreement.

 

“ Party ” or “ Parties ” shall mean the parties to this Agreement.

 

“ Patent Applications ” shall have the meaning defined in art. VIII.I of this Agreement.

 

“ Person ” shall mean an individual, corporation, partnership, limited liability company, joint venture, association, trust, estate or other entity or organization, including a Governmental Entity.

 

“ Post-Closing Transaction ” shall have the meaning defined in art. X.B of this Agreement.

 

“ Purchase Price ” shall mean the consideration for the Shares and the Loans as set out in art. II.B.1 of this Agreement.

 

“ Purchasers ” shall have the meaning defined on page 1 of this Agreement.

 

“ Purchaser Indemnified Parties ” shall have the meaning defined in art. VI.C of this Agreement.

 

“ Relevant Pollution ” shall mean any Environmental Pollution resulting from actions or omissions of or relating to the Marker Group Companies prior to the Closing Date (i) existing on or before the Closing Date, (ii) arising on or before the Closing Date, (iii) caused before the Closing Date, but migrating before or after the Closing Date from any real property ever owned, occupied or used by any Marker Group Company or any real property that has been owned, occupied or used by any Marker Group Company on or before the Closing Date, (iv) caused by any Marker Group Company or its legal predecessors on or before the Closing Date, or (v) caused by any events and/or incidents on or before the Closing Date (irrespective of whether the Environmental Pollution in question occurs before, on or after the Closing Date) for which any Marker Group Company or the Purchasers is responsible under Environmental Laws.

 

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“ Schedules ” shall mean the schedules to this Agreement as amended from time to time pursuant to art. XIII.F of this Agreement.

 

“ Second Closing ” shall have the meaning defined in art. III.D.1 of this Agreement.

 

“ Second ClosingDate ” shall have the meaning defined in art. III.D.1 of this Agreement.

 

“ Seller Party ” shall have the meaning defined in art. IX.C of this Agreement.

 

“ Sellers ” shall have the meaning defined on page 1 of this Agreement.

 

“ Sellers’ Knowledge ” shall mean the actual knowledge of any of Sellers, and the knowledge that would have been acquired if the Sellers had inquired the matter in question in a manner that a diligent and reasonable third party in the same context would have done.

 

“ Shares ” shall have the meaning defined in recital A of this Agreement.

 

“ Straddle Period ” shall mean any taxable period beginning before and ending after the Closing Date.

 

“ Subsidiaries ” shall mean the companies set forth in Schedule 1.6 .

 

“ Swiss GAAP FER ” shall mean the Swiss accounting standards issued by the commission for accounting and reporting recommendations ( Fachkommission für Empfehlungen zur Rechnungslegung ) as in effect from time to time, applied by CTS and the Subsidiaries on a basis consistent with past practice.

 

“ Tax Credit ” means a credit against, relief of remission for, or repayment of any Tax, and includes specifically but without limitation VAT inputs that may be set off against VAT liability or otherwise refunded.

 

“ Taxes ” shall mean all tax Liabilities and claims whether actual or deferred, including, without limitation, income taxes (personal or corporate), capital taxes, sales taxes, VAT, any turnover or cost related taxes, withholding taxes, stamp duties and any other transfer duties, payroll taxes, social security taxes, property taxes and all other levies, customs, fees, charges, imposts, taxes and public duties of any kind payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any competent Governmental Entity in any jurisdiction, as well as any interest, penalties, costs and expenses related thereto and any losses arising out of, relating to, or resulting from the denial of corresponding adjustments or the making of secondary adjustments.

 

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“ Tax Return ” shall mean all returns (including information returns and joint returns), declarations, rulings, reports, estimates, computations and statements regarding Taxes, required to be filed with, or issued by, any tax authority, including any claims for refunds of Taxes, any amendments or supplements of any of the foregoing, any annexes, documents, schedules, and information required to be filed therewith.

 

“ Tecnica ” shall have the meaning defined on page 1 of this Agreement.

 

“ Tecnica Distribution Agreements ” shall have the meaning defined in art. VIII.H of this Agreement.

 

“ USD ” shall mean U.S. dollar, being the lawful currency in the United States of America.

 

“ VSH Stock and Loan Purchase Agreement ” shall mean that certain Stock and Loan Purchase Agreement by and between Cleven, Gregor Furrer, Dr. Christoph Bronder on the one hand and the Purchasers and K2 on the other hand regarding the shares in VSH and certain shareholder loans of even date hereof.

 

“ VSH ” shall mean Völkl Sports Holding AG, Ruessenstrasse 6, 6341 Baar, Schweiz.

 

II.	SALE AND PURCHASE OF SHARES AND LOANS, PURCHASE PRICE

 

A.	Sale and Purchase of Shares and Loans

 

Subject to the terms and conditions of this Agreement:

 

(a)

Save as otherwise provided in art. III.D of this Agreement, at the Closing Date, Sellers hereby agree to sell and to transfer to Luxco, and Luxco hereby agrees to purchase from Sellers, the Shares;

 

(b)

Cleven hereby agrees to assign at the Closing Date, to Cayco, and Cayco hereby agrees to purchase from Cleven, the Cleven Loans; and

 

(c)

Norfin hereby agrees to assign, at the Closing Date, to Cayco, and Cayco hereby agrees to purchase from Norfin, the Norfin Loans.

 

It is understood, for the avoidance of doubt, that the Cleven Loans and Norfin Loans shall be sold and assigned in the principal amounts set forth in Schedule D . Any interest on the Cleven Loans and the Norfin Loans accruing prior to the Closing Date shall be paid to Cleven and Norfin, respectively, by the relevant Marker Group Companies on or by the Closing Date without any adjustment of the Purchase Price;

 

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it being understood that if further shareholder loans exist which are not correctly listed in Schedule D, such loans shall be deemed Loans for the purposes of this Agreement and shall be assigned to Cayco on or after the Closing, as Cayco at its discretion may elect, for no consideration and without any adjustment to the Purchase Price.

 

B.	Purchase Price

 

1.

General

 

The consideration for all of the Shares amounts to EUR 10,653,036 (ten million six hundred fifty-three thousand and thirty-six euros) payable by Luxco to Sellers in cash and in K2 Shares as set out in art. II.B.2 below.

 

The consideration for the Norfin Loans amounts to EUR 7,354,283 (seven million three hundred fifty-four thousand two hundred eighty-three euros), and the consideration for the Cleven Loans amounts to EUR 7,354,283 (seven million three hundred fifty-four thousand two hundred eighty-three euros) payable by Cayco to each of Cleven and Norfin, respectively in cash on the Closing Date.

 

2.	Cash Payment and Delivery of K2 Shares

 

(a)

On the Closing Date:

 

(i)

Luxco shall pay to Sellers in cash an amount equal to EUR 2,663,259 (two million six hundred sixty-three thousand two hundred fifty-nine euros) to Cleven, and EUR 2,130,608 (two million one hundred thirty thousand six hundred and eight euros) to Norfin (collectively, the “ Cash Consideration Amount ”), by wire transfer on an account designated by each of Sellers;

 

(ii)

Luxco shall pay in cash an amount equal to EUR 532,651 (five hundred thirty-two thousand six hundred fifty-one euros) and shall deliver 42,621 K2 Shares (the “ Norfin Share Consideration ”) in certificated form with the applicable legends thereon to the independent third party designated in the Norfin Hold-Back Agreement (the “ Hold-Back Agent ”);

 

(ii)

Luxco shall deliver 88,018 K2 Shares for the account of Sellers (44,009 K2 Shares for each of Cleven and Norfin) in certificated form with the applicable legends thereon to the Escrow Agent; and

 

(iii)

Luxco shall deliver the remaining K2 Shares to Sellers in certificated form with the applicable legends thereon as follows: 169,095 K2 Shares to Cleven and 126,475 K2 Shares to Norfin.

 

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(b)

On the Closing Date: In respect of the Loans, Cayco shall pay to each of Cleven and Norfin an amount equal to EUR 7,354,283 (seven million three hundred and fifty-four thousand two hundred eighty-three euros) by wire transfer on an account designated by each of Cleven and Norfin, respectively.

 

(c)

The Purchase Price does not include any VAT or transfer Taxes, which shall be paid and reimbursed as set forth in art. XII.

 

C.	Assumption of Financial Debt

 

On the Closing Date, Purchasers shall cause the assumption by the Marker Group Companies or permit the continuing effect of all Financial Debt of the Business or the Marker Group Companies outstanding as of the Closing Date, including accrued and unpaid interest. Purchasers shall procure that Sellers are released from any and all obligations with respect to such Financial Debt.

 

For the purposes of the foregoing, Sellers shall provide to Purchasers, no later than five Business Days prior to the Closing Date, complete and accurate details of the Financial Debt projected to be owed by the Business or the Marker Group Companies upon Closing.

 

D.	Transfer of Management Responsibility/Risks and Benefits

 

Immediately after the Closing, Purchasers shall take over full responsibility for the Marker Group Companies’ management and operations. The risks and benefits of the Shares, the Marker Group Companies and the Business shall pass from the Sellers to Purchasers as of the Closing Date. Other than the interest and dividend payments explicitly permitted by this Agreement, the Sellers shall not be entitled to cause any payments and distributions for any time periods prior to the Closing Date and shall not benefit from any profits or bear any losses resulting in the interim period from April 1, 2004 until the Closing Date save as otherwise provided for in this Agreement.

 

III.

CLOSING

 

A.	Closing Date

 

Save as otherwise provided in art. III.D of this Agreement, the transaction described in this Agreement shall be consummated at the offices of Homburger Rechtsanwälte, Weinbergstrasse 56/58, 8035 Zurich, 5 calendar days after the conditions precedent set forth in art. III.B of this Agreement have been met or waived, or on such other date the Parties hereto may agree (“ Closing Date ”).

 

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B.	Conditions Precedent to Closing

 

1.	Conditions to Obligations of all Parties

 

The obligations of the Parties to close the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver by all Parties, on or by the date six months after the date of this Agreement, of the following conditions:

 

(a)

All approvals required under the merger control law in Germany shall have been obtained, and any waiting periods under the applicable merger control law shall have expired or been terminated by the competent authorities, in each case without there being imposed on Purchasers, K2 or the Business any material condition, commitment or requirement.

 

The Parties agree that restrictions or conditions, if any, imposed by any jurisdictions other than Germany as a requirement for granting the above authorizations shall not affect the transactions carried out hereunder, and Purchasers will comply in good faith with all such restrictions or conditions including but not limited to any required divestiture to third parties with a view to ensuring that such authorizations are obtained as soon as possible. Purchasers expressly agree that any such compliance required by the competent authorities shall be effected at Purchasers’ sole risk and expense.

 

(b)

No judgment, injunction or order shall have been issued by any competent governmental, administrative or judicial authority on behalf of any private party, and no proceeding shall have been instituted, be pending or threatened by any competent governmental, regulatory, administrative or judicial authority, which:

 

(i)

would challenge or prohibit the consummation of the transactions contemplated under this Agreement; or

 

(ii)

would impose or seek to impose any substantial limitation on the ability of Purchasers to acquire or hold the Shares, or to operate the Business or any material portion thereof as a going concern for their own account.

 

(c)

All closing conditions provided for in the VSH Stock and Loan Purchase Agreement shall have been met or waived by the relevant parties entitled thereto and the parties to the VSH Stock and Loan Purchase Agreement shall have agreed to close the VSH Stock and Loan Purchase Agreement on the same day this Agreement is to close.

 

2.	Conditions to Obligations of Purchasers

 

The obligations of Purchasers to consummate the transactions contemplated by this Agreement are further subject to the satisfaction, or waiver by Purchasers of the following conditions:

 

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(a)

The representations and warranties of Sellers contained in art. IV.A (Capacity), IV.B (Organization and Qualification), IV.C (Capital Structure, but only as to the ownership structure in CTS and the Subsidiaries), IV.D (Ownership), IV.M (Intellectual Property/Know-How, but only with respect to title to the Marker trademarks and patents free and clear of any Liens, except for any Liens disclosed in this Agreement) and IV.P (Environmental Matters, but only if an environmental problem could reasonably result in a forced closure of any manufacturing facilities) of this Agreement shall be true and correct as of the Closing Date;

 

(b)

the representations and warranties of Sellers contained in art. IV other than those set out in sub-clause (a) above shall be true and correct as of the Closing Date, except in any case where the failure to be true and correct would not, in the aggregate, constitute a Material Adverse Effect;

 

(c)

there shall not have occurred (other than primarily as a result of the Purchasers’ actions) any events giving rise to any causes of action (whether asserted or unasserted in litigation and including any claims or causes of action by or available to Sellers) which materially and adversely affect the ability of the Sellers (and/or the parties to the Ancillary Documents which Sellers are in a position to control) to consummate the transactions contemplated hereby or by any of the Ancillary Documents;

 

(d)

there shall not have occurred after the date of this Agreement a Material Adverse Effect on the Marker Group Companies taken as a whole;

 

(e)

Sellers shall have performed, and shall have caused the Marker Group Companies to perform, in all material respects all actions, obligations and covenants under this Agreement required to be performed by them on or by the Closing Date;

 

(f)

Sellers shall have obtained the third party consents set out in Schedule III.B.2 ;

 

(g)

Purchasers shall have procured the necessary funds for financing the cash portion of the Purchase Price and the transactions contemplated by this Agreement and such financing is not subject to any future conditions beyond the control of K2 or Purchasers (it being understood that any condition precedent under K2’s or Purchasers’ financing arrangements shall be deemed a condition precedent to Purchasers’ obligations under this Agreement); and

 

(h)

Cleven shall have released from pledge any and all IP Rights which have been pledged in favor of Cleven as security for the Loans or otherwise.

 

3.	Conditions to Obligations of Sellers

 

The obligations of Sellers to perform the transactions contemplated under this Agreement shall be subject to the satisfaction, or joint waiver by Sellers, of the following conditions:

 

(a)

Purchasers and K2 shall have performed, and shall have caused their Affiliates

 

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to perform, in all material respects all actions, obligations and covenants under this Agreement required to be performed by it on or by the Closing Date;

 

(b)

the representations and warranties of Purchasers contained in art. V of this Agreement shall be true and correct as of the Closing Date, except in any case where the failure to be true and correct would not, in the aggregate, have a Material Adverse Effect on K2 affecting the ability of Purchasers to fulfill their obligations under this Agreement;

 

(c)

there shall not have occurred a Material Adverse Effect on K2 and its subsidiaries taken as a whole.

 

For purposes of this art. III.B.3 and otherwise where the context so requires, the term “Material Adverse Effect on K2” shall mean a change in facts or circumstances which is materially adverse to the present or future business, shareholders’ equity or results of operations of K2 and its subsidiaries taken as a whole. For the avoidance of doubt, the term “Material Adverse Effect on K2” shall not include any changes in the global economy, local markets, general industry conditions, changes in analysts’ perceptions causing a reduction in price of the shares in K2, or an adverse market reaction to the announcement of the transactions contemplated by this Agreement.

 

C.	Closing Actions

 

1.	Actions by Sellers

 

At the Closing, Sellers shall deliver or cause to be delivered or made available to Purchasers the following:

 

(a)

certificates representing the Shares (other than the Norfin Shares, which shall be delivered to the Hold-Back Agent pursuant to the Norfin Hold-Back Agreement), duly endorsed in blank where necessary (or, to the extent the Shares are uncertificated, valid assignments in writing relating to the Shares), together with all transfer certificates, board resolutions and any other documents which are required for Luxco to become an unrestricted shareholder in respect of the Shares;

 

(b)

all qualifying shares ( Pflichtaktien ) in the Subsidiaries (including, without limitation, the minority shares in Marker International GmbH) that are held by or to the order or on the instructions of CTS, or that are held by any of the Sellers or any Persons acting on their behalf or related to them, to Persons designated by Luxco;

 

(c)

letters of resignation duly executed by all members of the boards of directors of the Marker Group Companies pursuant to art. VII;

 

(d)

validly executed Ancillary Documents, duly executed by the relevant parties thereto;

 

(e)

validly executed agreements transferring or terminating any commitments,

 

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guarantees or similar third party undertakings pursuant to art. VIII.C, if any;

 

(f)

a deed of assignment executed by Cleven and Norfin, respectively substantially in the form attached hereto as Schedule III.C.1 , transferring the Loans to Cayco;

 

(g)

a deed of release relating to the matters set forth in art. III.B.2(h);

 

(h)

releases executed by each Seller irrevocably and unconditionally releasing and acquitting, as of the Closing Date, the Marker Group Companies from any and all obligations to Sellers (other than obligations pursuant to the Tecnica Distribution Agreements and the AthleticSkiing Agreement substantially in the form attached hereto as Schedule III.C.1.

 

In addition to the above, at the Closing Date, Norfin shall deliver or cause to be delivered the Norfin Shares to the Hold-Back Agent, duly endorsed in blank where necessary (or, to the extent the Norfin Shares are uncertificated, valid assignments in writing relating to the Norfin Shares), it being understood that the Norfin Shares shall continue to be held for the account of Norfin until the Second Closing Date.

 

2.	Actions by Purchasers

 

At the Closing, Purchasers shall deliver or cause to be delivered or made available to or to the order of Sellers or the Escrow Agent or the Hold-Back Agent the following:

 

(a)

the Cash Consideration Amount;

 

(b)

the Norfin Share Consideration;

 

(c)

the K2 Shares referred to in article II.B.2, with all documents which are required for Sellers to become unrestricted shareholders (except for the restrictions pursuant to the Escrow Agreement and the US securities laws and regulations applicable to such K2 Shares) in respect of the K2 Shares (but excluding the K2 Shares to be delivered to the Hold-Back Account);

 

(d)

the consideration for the Loans referred to in article II.B.2; and

 

(e)

counterparts of each of the applicable Ancillary Documents, duly executed by Purchasers or Purchasers’ Affiliates, as applicable.

 

D.	Second Closing

 

1.	Date of Second Closing

 

The release of the Norfin Shares to Luxco, and the release of the Norfin Share Consideration to Norfin (the “Second Closing”), shall be consummated at the offices of Homburger Rechtsanwälte, Weinbergstrasse 56/58, 8035 Zurich, on September 30, 2004 or on such other date as Luxco and Norfin may agree (“Second Closing Date”).

 

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2.	Second Closing Conditions

 

The obligation of Luxco and Norfin to proceed to the Second Closing shall be conditional upon the following:

 

(a)

the Closing shall have occurred.

 

(b)

No judgment, injunction or order shall have been issued by any competent governmental, administrative or judicial authority on behalf of any private party, and no proceeding shall have been instituted, be pending or threatened by any competent governmental, regulatory or administrative authority, which:

 

(i)

would challenge or prohibit the consummation of transactions contemplated under art. III.D.3 of this Agreement; or

 

(ii)

would impose or seek to impose any substantial limitation on the ability of Luxco to acquire or hold the Norfin Shares after the Second Closing.

 

3.	Second Closing Actions

 

At the Second Closing, Luxco and Norfin shall jointly direct the Hold-Back Agent to do the following:

 

(a)

release all certificates representing the Norfin Shares to Luxco, (duly endorsed in blank where necessary (or, to the extent the Shares are uncertificated, valid assignments in writing relating to the Norfin Shares), together with all transfer certificates, board resolutions and any other documents which are required for Luxco to become an unrestricted shareholder in respect of the Norfin Shares;

 

(b)

release the Norfin Share Consideration to Norfin; and

 

(c)

release the K2 Shares held by the Hold-Back Agent to Norfin, together with all documents which are required for Norfin to become an unrestricted shareholder in respect of the K2 Shares.

 

IV.	REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Sellers hereby severally but not jointly represent and warrant to Purchasers the following matters, as of the date hereof and as of the Closing Date, except for representations and warranties made as of a specific date which shall be true and correct only as of such date, with respect to all of the Shares, the Marker Group Companies and the Business:

 

A.

Capacity

 

Each of Sellers has the necessary capacity and authority to enter into this Agreement, and to the extent applicable, the Ancillary Documents, and to perform his or its obligations hereby and thereby.

 

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B.	Organization and Qualification

 

Each of the Marker Group Companies is duly organized and validly existing under the laws under which it has been incorporated and has full right and authority to own and to operate its properties and to engage in the business in which it is now engaged. Schedule IV.B contains the articles of incorporation and by-laws of the Marker Group Companies as in force on the date of this Agreement.

 

C.	Capital Structure

 

As of the Closing Date, the Marker Group Companies have the capital structure set forth in Schedule IV.C . No further capital, non-voting stock, convertible securities, option rights or similar rights in the Marker Group Companies have been or will by the Closing Date be created or issued or agreed to be issued. All the Shares sold pursuant to art. II.A(a) of this Agreement have been validly issued and are fully paid in and non-assessable ( nicht nachschusspflichtig ). There are no restrictions of whatever nature on any of the Marker Group Companies to make any declaration, setting aside or payment of any dividend or any other distribution of profit, other than with respect to any applicable corporate law and except as disclosed in Schedule IV.C .

 

CTS owns the shares of the Subsidiaries as set forth in Schedule IV.C , free and clear of any Liens. The transfer of control in the shares of the Subsidiaries in Schedule IV.C does not require any governmental, administrative or third party filing, approval or consent of any nature except for the approvals provided for in art. III.B.1 of this Agreement.

 

The list of Subsidiaries in Schedule IV.C is complete and correct. CTS owns no shares, equity or silent partnership interests or any right to profits, or has any obligation to bear losses in any business association other than with respect to the Subsidiaries.

 

There are no subsidies or other state aids granted to any of the Marker Group Companies which could be revoked, terminated or otherwise repayment sought due to the change of control contemplated by this Agreement.

 

D.

Ownership

 

Each of Sellers has full legal and beneficial ownership to all of the Shares as indicated in Schedule IV.C , and has the right and capacity to transfer and sell complete title to the Shares. The Shares are held in their entirety by Sellers, and are free and clear of any Liens and will constitute, as of the Closing, all of the equity securities of CTS. Cleven and Norfin have full legal and beneficial ownership to the Cleven Loans and the Norfin Loans, respectively, and have the right and capacity to sell and assign the Cleven Loans and the Norfin Loans. The Cleven Loans and the Norfin

 

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Loans are free and clear of any Liens; for the avoidance of doubt, Purchasers confirm that they are aware that some of the Loans are subordinated to some obligations resulting of the Financial Debt as disclosed in Schedule D . Sellers do not, however, make any representation or warranty regarding the ability of the Marker Group Companies to repay the Loans.

 

Upon the delivery of the Shares provided for in art II.A(a), Luxco will receive good and valid title to the Shares, free and clear of any Liens. Upon assignment of the Cleven Loans and the Norfin Loans provided for in art. II.A(b) and (c), Cayco will receive good and valid title to each of the Loans, free and clear of any Liens subject to the subordination agreements listed in Schedule D .

 

E.

No Breach

 

The execution of this Agreement, and to the extent applicable, of any of the Ancillary Documents, by each Seller, and the performance by each Seller of his or its obligations under this Agreement, and to the extent applicable under any of the Ancillary Documents, does not (i) violate, conflict with or result in a breach, termination or default of any agreement by which any Seller or any of his or its assets are bound or subject, (ii) violate any applicable law, enforceable court or administrative order or ruling binding on any of Sellers or (iii) violate the articles of incorporation or by-laws of CTS or any other Marker Group Company, or (iv) violate any agreements with third parties relating to the direct or indirect ownership or transfer of the Shares or any shares in the Subsidiaries.

 

F.	Financial Statements

 

Schedule IV.F.1 contains the audited (i) consolidated balance sheets, (ii) consolidated profit and loss statements and (iii) consolidated cash flow statements of CTS as of March 31, 2003 and March 31, 2004 together with the accompanying notes to the financial statements and an auditor’s report without any qualifications (collectively, the “ Financial Statements ”). The Financial Statements:

 

(a)

have been drafted in accordance with Swiss GAAP FER (as in effect on the dates as of which such Financial Statements were rendered), applied on a consistent basis, as further described in Schedule 1.2 ;

 

(b)

are correct and complete in all material respects; and

 

(c)

present a true and fair view of the financial position, the results of operations and the changes in shareholders’ equity at the date thereof and for the periods ended on such date in conformity with Swiss GAAP FER (as in effect on the dates as of which such Financial Statements were rendered).

 

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Schedule IV.F.2 also contains the audited financial statements (consisting of (i) balance sheets and (ii) profit and loss statements) for the financial years 2003 and 2004 together with the accompanying notes to the financial statements of Marker Deutschland GmbH . The financial statements of such Subsidiary:

 

(a)

have been drafted in accordance with the accounting standards used by such Subsidiary (as set out in Schedule IV.F.2);

 

(b)

are correct and complete in all material respects; and

 

(c)

present a true and fair view of the financial position, the results of operations and the changes in shareholders’ equity at the date thereof and for the periods ended on the respective record date in conformity with the used accounting standards.

 

Except as set forth in Schedule IV.F.3 , no Marker Group Company has as of March 31, 2004 any Liability, indebtedness (including for the avoidance of doubt any note, bond or other debt instrument), expense, claim, deficiency, guaranty or endorsement of any type in connection with the Shares, the Marker Group Companies or the Business, in excess of EUR 15,000 (fifteen thousand euros) individually or EUR 60,000 (sixty thousand euros) in the aggregate (whether accrued, absolute, contingent, matured, unmatured or otherwise and whether or not required to be reflected in the financial statements in accordance with the applicable accounting and valuation principles) that are not reflected, in reasonable detail, in the Financial Statements as of March 31, 2004. The Marker Group Companies have no Liabilities to Sellers or Sellers’ Affiliates that have been incurred outside the ordinary course of business on or by March 31, 2004.

 

Schedule D correctly and completely states the lender name, loan principal, expiration date, applicable interests rates and accrued but not paid interest as of March 31, 2004 in relation to the Cleven Loans and the Norfin Loans.

 

G.	Absence of Adverse Changes

 

In the period between March 31, 2004, and the Closing Date the Marker Group Companies (other than as contemplated in this Agreement and other than as contemplated in the Marker Group Companies’ budgets which are attached as Schedule IV.G.1 ):

 

(a)

have conducted their business in the ordinary course and consistent with past practice;

 

(b)

have not assigned or transferred any tangible or intangible assets, and have not assumed or incurred any Liabilities (actual or contingent) other than in the ordinary course of business or as permitted under this Agreement or any of the Ancillary Documents;

 

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(c)

have not incurred any capital expenditure or capital commitment, and have not incurred any additional Financial Debt, in excess of EUR 50,000 (fifty thousand euros) individually or EUR 100,000 (hundred thousand euros) in the aggregate;

 

(d)

have not suffered any damage, destruction or loss by fire or other casualty which is not covered by insurance;

 

(e)

have not made any change in the accounting methods or practices compared to those applied to the Financial Statements as of March 31, 2004 or any restatement of financial statements or revaluation of any of their assets, properties or rights;

 

(f)

have not been adversely affected by the loss of any contract, customer, distributor or source of supply which has in the past or is expected in 2004 to represent more than 3% of the net sales of the Business taken as a whole;

 

(g)

have not been subject to any other adverse change or development reasonably likely to involve a prospective adverse change (other than changes in the ordinary course of business), whether or not foreseeable, affecting the business, management, consolidated financial condition, shareholders’ equity, results of operations or prospects of the Marker Group Companies taken as a whole or the Business taken as a whole;

 

(h)

have not made any declaration or setting aside or payment of any dividend or any other distribution of profit or any direct or indirect redemption, purchase or other acquisition of any shares of the Marker Group Companies, other than (i) any payments of dividends by the Subsidiaries to CTS and (ii) interest payments on the Loans as permitted under this Agreement earned and unpaid as of the Closing Date;

 

(i)

have not been the subject of any labor disputes or claims of wrongful termination or other unlawful labor practice or action with a litigious value of EUR 40,000 or more;

 

(j)

other than as disclosed in Schedule IV.G.2 , have not increased the total compensation payable to their employees (other than in accordance with existing agreements, collective bargaining arrangements or practice existing prior to March 31, 2004), have neither adopted any new profit sharing plan, bonus plan, pension or benefit plan nor changed any existing plans, other than as permitted under this Agreement, have not agreed to any shop agreement ( Betriebsvereinbarung) or similar arrangements with any works council of the Marker Group Companies or otherwise;

 

(k)

have not granted any severance or termination pay to any shareholder, director, employee or independent contractor, or adopted any severance, termination, indemnification or other agreement (save as set forth in the existing employment agreements between Völkl (International) AG and Dr. Christoph Bronder and between Marker International GmbH and Dr. Christoph Bronder), the benefits of which are contingent upon the occurrence of a transaction involving any of the Marker Group Companies, including the transactions

 

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contemplated hereby or by any of the Ancillary Documents;

 

(l)

other than in the ordinary course of business, diligently and prudently conducted, have not made on or after April 1, 2004 any payment of, or reserve or provision for, Taxes, and there is no need make any payment of, or reserve or provision for, Taxes, which have been or will be finally levied by the competent taxing authorities with respect to any taxable period ending on or before Closing, any Straddle Period or any event, transaction or activity occurring in or with respect to any taxable period ending on or before Closing or any Straddle Period;

 

(m)

other than in the ordinary course of business, diligently and prudently conducted, have not made on or after April 1, 2004 any repayment of, or reserve or provision for the repayment of, any Tax Credit directly or indirectly claimed, and have not omitted to timely reclaim any Tax Credit pursuant to Applicable Law, and there is no need to make any repayment of, or reserve or provision for, (i) the repayment of any Tax Credit directly or indirectly claimed, or (ii) as a result of the time-barring of any Tax Credits, in or with respect to any taxable period ending on or before Closing, any Straddle Period or any event, transaction or activity occurring in or with respect to any taxable period ending on or before Closing or any Straddle Period;

 

(n)

have not made any new Tax election or ruling, or change of any existing Tax election or ruling, nor any settlement or compromise of any Tax liability;

 

(o)

have not granted any loan to any Person (other than the advancement or reimbursement of business expenses to employees in immaterial amounts in the ordinary course of business consistent with past practices), or incurred or guaranteed any indebtedness, issued any debt securities or any guarantee or acted as a surety with respect to any payment obligations or debt securities of any Person;

 

(p)

have not waived or released any material right or claim of or in favor of any of the Marker Group Companies or any Affiliates of VSH, including any write-off or other compromise of any accounts receivable of, or debt owed by, any of the Marker Group Companies or any Affiliates of VSH or any compromise or settlement of any claim, litigation or other cause of action brought by any of the Marker Group Companies or any Affiliates of VSH against any third party other than in the ordinary course of business consistent with past practices;

 

(q)

have not incurred, performed on, paid or discharged any obligation or Liability, except for current obligations and Liabilities (in particular with regard to Sellers and Sellers’ Affiliates) incurred in the ordinary course of business consistent with past practices;

 

(r)

have not (i) changed the terms and conditions of any material agreement (whether oral or written) that a Marker Group Company is a party to, other than in transactions which were at arms’ length or (ii) entered into contracts, other than contracts consistent with past practices, in which total payments by the Marker Group Companies exceed EUR 100,000 on an annual basis;

 

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(s)

have not been subject to any event or circumstance, whether or not foreseeable that is reasonably likely to make a provision necessary in the accounts of any Marker Group Company exceeding EUR 200,000 (two hundred thousand euros) in the aggregate outside the ordinary course of business; or

 

(t)

have not entered into any negotiation or agreement to do any of the foregoing.

 

H.	Transferred Assets

 

CTS is and will on the Closing Date (other than with respect to any assets which have been sold by the Marker Group Companies in the ordinary course of business since March 31, 2004, the proceeds of which have been collected and used in the ordinary course of business by the relevant Marker Group Company) be the direct or indirect owner of (i) all assets of any kind reflected in the Financial Statements, (ii) any assets reflected in the books of any of the Marker Group Companies as being owned by such company as of the date of the respective Financial Statements, and (iii) all other assets which any of the Marker Group Companies has acquired since the date of the respective Financial Statements, free and clear of any Liens except for customary retentions of title or similar rights. In particular, and without limitation to the foregoing:

 

(a)

all such assets can be used by and for the business of the Marker Group Companies as the same is presently being conducted;

 

(b)

all inventories ( fertige Erzeugnisse und Waren ) and other movable property are properly valued in the Financial Statements at no more than their fair market value, and all depreciations and write-downs (including depreciations and write-downs for low margin sales) on such inventories and movable property have been made in accordance with the applicable accounting and valuation principles and (with respect to low margin sales) in line with the budgets attached as Schedule IV.G.1 ;

 

(c)

all inventories are usable of the kind and quality regularly used or produced in the business of the Marker Group Companies, all inventories are saleable in the ordinary course of business of the Marker Group Companies (except for slow moving inventory which has been written off in line with the applicable accounting and valuation principles applied to the financial statements and consistent with past practice) and the inventories will at the Closing Date be related to the normal requirements of the Business at such time;

 

(d)

all production equipment used by the Marker Group Companies in the ordinary course of business is in good repair and working condition;

 

(e)

all intangible assets held by or on behalf of the Marker Group Companies have been valued in line with Swiss GAAP FER or the applicable accounting and valuation rules in force as of March 31, 2004 on a going concern basis;

 

(f)

any inventory previously sold is to Sellers’ Knowledge not subject to refunds materially in excess of those historically experienced by the relevant Group Companies.

 

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All accounts receivable which arose in the ordinary course of business, are carried on the Financial Statements as of March 31, 2004 at values determined in accordance with the applicable accounting and valuation principles and are collectible in the full amount in accordance with their payment terms other than bad debt reserve reflected in the Financial Statements. Since March 31, 2004, the Marker Group Companies have not incurred any accounts receivable outside the ordinary course of business, have not experienced any material change in the collection or collectability of the accounts receivable and have not changed their policies as to the collection of accounts receivable. To Sellers’ Knowledge there is no account receivable in excess of EUR 50,000 (or several accounts which in the aggregate exceed EUR 100,000) which collectability is in question. No Person has given any of the Marker Group Companies notice of any disputes regarding, and no Person has any Lien on or resulting from, any of such accounts receivable and no request or agreement for material deduction or discount has been made with respect to any of such accounts receivable, nor in each case is there any reasonable basis therefor.

 

There are no return, markdown, promotion, co-op advertising and other similar programs or allowances currently offered generally by any of the Marker Group Companies to any customer which are not reflected in the budgets attached as Schedule IV.G.1 .

 

I.	Permits and Authorizations

 

The Marker Group Companies have all the permits and authorizations which are necessary to carry on their business after Closing as presently conducted.

 

None of the Marker Group Companies is in breach of any laws, material breach of any regulations, or in material breach of any reporting or licensing requirements and orders applicable to it or its employees and representatives, nor will any such breach have occurred as a result of the consummation of the transaction contemplated under this Agreement or any of the Ancillary Documents.

 

No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to any of the Marker Group Companies in connection with the execution and delivery of this Agreement or any Ancillary Documents or the consummation of the transactions contemplated hereby or thereby except for the approval provided for in art. III.B.1. of this Agreement.

 

J.	Claims and Litigation

 

Except as set forth in Schedule IV.J as of the Closing Date, there are no actions,

 

23

suits or proceedings with a litigious value in excess of EUR 50,000 (fifty thousand euros) each pending or threatened in writing against the Marker Group Companies or otherwise known to any Seller either in court or before any administrative board, agency or commission.

 

Except as set forth in Schedule IV.J , none of the matters identified in Schedule IV.J , will, if adversely determined, have a material adverse effect on any of the Marker Group Companies. Except as set forth in Schedule IV.J , during the past three years, no governmental entity or certifying organization has challenged the legal right of any of the Marker Group Companies to design, develop, promote, sell, license, manufacture, import, export, use, distribute or provide any of its products.

 

K.

Taxes

 

All Tax Returns required to be filed by Applicable Law prior to or on the Closing Date with respect to Taxes payable by, or Tax Credits reimbursable to, or repayable by, any of the Marker Group Companies pursuant to Applicable Law for all taxable periods ending on or prior to the Closing Date have been timely filed.

 

All such Tax Returns filed by the Marker Group Companies are complete, true, and accurate and reflect the Taxes payable by, the Tax Credits reimbursable to, and the Tax Credits repayable by, the Marker Group Companies for the respective periods. All Tax payments that have become due or payable have been timely paid by the Marker Group Companies (whether or not shown on a Tax Return). The financial statements of March 31, 2004 (both on a separate basis for each of the Marker Group Companies and on a consolidated basis, i.e. including, without limitation, the Financial Statements) contain specific provisions or reserves to cover fully all Taxes of the Marker Group Companies that have accrued as of that date but were not due or payable as of that date. The Marker Group Companies have no present or contingent Liability for Taxes that is not reflected in the financial statements as referred to in the preceding sentence, other than Taxes incurred in the ordinary course of business, diligently and prudently conducted, since March 31, 2004, in amounts consistent with prior years adjusted to reflect changes in operating results of the Marker Group Companies. It is understood, for the avoidance of doubt, that the creation of inventory reserves ( Warenlagerrückstellungen ) and reserves for guarantee payments ( Garantierückstellungen ) for Swiss Tax purposes consistent with Applicable Law and past practice shall be permitted, it further being understood that, pursuant to such practice, p