1
EXHIBIT 2.1
-------------------------------------
AGREEMENT AND PLAN OF MERGER
-------------------------------------
AMONG
TWEETER HOME ENTERTAINMENT GROUP, INC.,
TWT ACQUISITION CORP.
AND
SOUND ADVICE, INC.
JUNE 1, 2001
2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of June
1, 2001, among Tweeter Home Entertainment Group, Inc., a Delaware corporation
("BUYER"), TWT Acquisition Corp., a Florida corporation and a wholly owned
subsidiary of Buyer ("ACQUISITION SUB"), and Sound Advice, Inc., a Florida
corporation (the "COMPANY").
WHEREAS the respective Boards of Directors of Buyer, Acquisition Sub
and the Company have approved the acquisition of the Company by Buyer on the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS the respective Boards of Directors of Buyer, Acquisition Sub
and the Company have each approved the merger of Acquisition Sub into the
Company (the "MERGER"), upon the terms and subject to the conditions set forth
in this Agreement, whereby each outstanding share (collectively, the "SHARES")
of common stock, par value $0.01 per share, of the Company (the "COMPANY COMMON
STOCK"), other than those Shares of Company Common Stock owned directly or
indirectly by Buyer, will be converted into the right to receive that number of
shares of common stock, par value $.01 per share, of Buyer ("BUYER COMMON
STOCK") equal to the Exchange Number (as defined below); and
WHEREAS Buyer, Acquisition Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Buyer, Acquisition Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Florida Business
Corporation Act (the "CORPORATION LAW"), Acquisition Sub shall be merged with
and into the Company at the Effective Time (as defined in Section 1.03).
Following the Effective Time, the separate corporate existence of Acquisition
Sub shall cease and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION") and shall succeed to and assume all the rights and
obligations of Acquisition Sub in accordance with the Corporation Law.
SECTION 1.02. CLOSING. The closing of the Merger will take place at
10:00 a.m. (Miami time) on a date to be selected by the parties, at the offices
of Greenberg, Traurig, P.A., counsel to the Company, provided, however, that
unless otherwise agreed to in writing by the parties, the closing shall take
place within three days of the satisfaction or waiver of the conditions set
forth in Article VII (the "CLOSING DATE").
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, on the Closing Date, the parties shall file Articles of Merger or
other appropriate documents (in any such case, the "ARTICLES OF MERGER")
executed in accordance with the relevant provisions of the Corporation Law and
shall make all other filings or recordings required under the Corporation Law.
The Merger shall become effective at such time as the Articles of Merger is duly
filed with the Florida Secretary of State, or at such other time as Acquisition
Sub and the Company shall agree should be specified in the Articles of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"EFFECTIVE TIME").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the Corporation Law.
3
SECTION 1.05. ARTICLES OF INCORPORATION AND BYLAWS.
(a) The Articles of Incorporation of Acquisition Sub as in
effect immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law; provided that Article I thereof shall
be amended to provide that the corporate name of the Surviving Corporation is
"Sound Advice, Inc.".
(b) The bylaws of Acquisition Sub as in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law;
provided that Article I thereof shall be amended to provide that the corporate
name of the Surviving Corporation is "Sound Advice, Inc.".
SECTION 1.06. DIRECTORS. The directors of Acquisition Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of Acquisition Sub immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or any shares of capital stock of Acquisition Sub:
(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and
outstanding share of capital stock of Acquisition Sub shall be converted into
and become one fully paid and nonassessable share of Common Stock, par value
$.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF BUYER OWNED STOCK. Each share of Company
Common Stock that is held by any subsidiary of the Company and each share of
Company Common Stock that is owned by Buyer, Acquisition Sub or any other
subsidiary of Buyer shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each Share (other than
Shares to be canceled in accordance with Section 2.01(b)) shall be converted
into the right to receive from Buyer that number of shares of Buyer Common Stock
as is equal to the Exchange Number (the "MERGER CONSIDERATION"). As of the
Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration,
without interest. As used herein, the term "EXCHANGE NUMBER" means:
(i) to the extent the Buyer Common Stock Fair Market
Value is between $21 and $30, the Exchange Number shall be 1;
(ii) to the extent the Buyer Common Stock Fair Market
Value is $30 or greater, the Exchange Number shall be a number equal to a
fraction, the numerator of which is 30 and the denominator of which is the Buyer
Common Stock Fair Market Value; and
(iii) to the extent the Buyer Common Stock Fair
Market Value is below $21, the Exchange Number shall be a number equal to a
fraction, the numerator of which is 21 and the denominator of which is the Buyer
Common Stock Fair Market Value.
2
4
As used herein the Buyer Common Stock Fair Market Value means the
average daily closing price of one share of Buyer Common Stock as reported by
Nasdaq for the 5 business days ending two days prior to the Closing Date.
(d) COMPANY STOCK OPTIONS. The outstanding stock options of
the Company shall be treated as set forth in Section 6.07 hereof.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) TRANSFER AGENT. Prior to the Effective Time, Buyer shall
designate a bank or trust company to act as transfer agent in the Merger (the
"TRANSFER AGENT"), and, from time to time on, prior to or after the Effective
Time, Buyer shall make available, or cause the Surviving Corporation to make
available, to the Transfer Agent sufficient shares of Buyer Common Stock
necessary for the transfer of the Merger Consideration upon surrender of
certificates representing Shares as part of the Merger pursuant to Section 2.01.
The issuance of the Buyer Common Stock to the holders of the Shares pursuant to
this Agreement will be pursuant to an effective registration statement on Form
S-4 under the Securities Act of 1933, as amended (the "S-4 REGISTRATION
STATEMENT").
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Transfer Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented Shares (the "CERTIFICATES"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Transfer
Agent and shall be in a form and have such other provisions as Buyer may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Transfer Agent or to such other agent or
agents as may be appointed by Buyer, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Transfer Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for the Shares theretofore
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that is
not registered in the transfer records of the Company, transfer of the Merger
Consideration may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such transfer shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration for each Shares theretofore represented by such Certificate which
shall have been converted pursuant to Section 2.01. No interest will be paid or
will accrue on the Merger Consideration upon the surrender of any Certificate.
In the event any Certificate shall have been lost, stolen or destroyed, Buyer
may, in its discretion and as a condition precedent to the payment of the Merger
Consideration in respect of the shares represented by such Certificate, require
the owner of such lost, stolen or destroyed Certificate to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Buyer, the Surviving Corporation or the Transfer Agent.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Merger Consideration received upon the surrender of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares theretofore represented by
such Certificates. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Transfer
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II.
3
5
(d) NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional Buyer Common Stock shall be issued in connection with
the Merger, and such fractional interest shall not entitle the owner thereof to
vote or to any rights of a stockholder. In lieu of any such fractional shares,
each holder of Shares who would otherwise have been entitled to a fraction of a
share of Buyer Common Stock upon surrender of stock certificates for exchange
pursuant to this Article II shall be paid cash upon such surrender in an amount
equal to the product of such fraction multiplied by the average closing price
for a share of Buyer Common Stock on the Nasdaq National Market for the five (5)
trading days ending two business days prior to the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer and Acquisition Sub that,
other than as supplemented or modified by information set forth in the Company
SEC Documents and the disclosure schedules referenced below, the following
statements are correct and complete as of the date of this Agreement:
SECTION 3.01. ORGANIZATION. Each of the Company and its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority could not be reasonably expected to (i) prevent or
materially delay the consummation of the Merger, or (ii) have a material adverse
effect (as defined in Section 9.03) on the Company. The Company and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing could not reasonably be expected to
have a material adverse effect on the Company or prevent or materially delay the
consummation of the Merger. The Company has made available to Buyer complete and
correct copies of its Articles of Incorporation and Bylaws and the certificates
of incorporation and bylaws (or similar organizational documents) of the
Company's subsidiaries.
SECTION 3.02. SUBSIDIARIES. Other than those disclosed in the Company
SEC Documents, the only subsidiaries of the Company are listed in Section
3.02(a) of the disclosure schedule annexed hereto as Annex 1 (the "COMPANY
DISCLOSURE SCHEDULE"). All the outstanding shares of capital stock of each such
subsidiary are owned by the Company, by another wholly owned subsidiary of the
Company or by the Company and another wholly owned subsidiary of the Company,
free and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "LIENS") except as
otherwise specified on Section 3.02(a) of the Company Disclosure Schedule, and
are duly authorized, validly issued, fully paid and nonassessable. The Company
also owns the partnership and joint venture interests identified in Section
3.02(b) of the Company Disclosure Schedule free and clear of any Liens. Except
as otherwise specified in Section 3.02(b) of the Company Disclosure Schedule,
the Company owns 100% of such partnership and joint venture interests. Except
for the capital stock of its subsidiaries, the partnership interests in the
partnerships listed in Section 3.02(b) of the Company Disclosure Schedule and
the Company's ownership interest in certain incidental investments (the
aggregate book value of which do not exceed $5,000), the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 10,000,000 shares of Company Common Stock. At the close of
business on May 1, 2001, (i) 4,073,745 shares of Company Common Stock were
issued and outstanding, and (ii) 1,004,000 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding and future grants of Company
Stock Options (as defined in Section 6.07), of which 970,500 options were issued
and outstanding and 33,500 options were available for grant under the Company's
Option Plans (not including the 500,000 increase in the number of shares
4
6
issuable under the Company's Amended and Restated 1999 Stock Option Plan, which
increase has been approved by the Company's Board of Directors but is subject to
the approval of its shareholders (the "PROPOSED INCREASE"). Except as set forth
above, and except for shares issued upon the exercise of Company Stock Options
since May 1, 2001 and the Proposed Increase, as of the date of this Agreement,
no shares of capital stock or other voting securities of the Company have been
issued or reserved for issuance. Except for those rights (the "RIGHTS AGREEMENT
RIGHTS") outstanding under the 1997 Common Stock Purchase Rights Agreement (the
"RIGHTS AGREEMENT") there are no outstanding rights under any Company rights
agreement. All outstanding shares of capital stock of the Company are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights,
rights of first refusal or other transfer restrictions or conditions. There are
no bonds, debentures, notes or other indebtedness of the Company having the
right to (i) convert into or that are exchangeable for any capital stock,
securities or equity interests of the Company or (ii) vote (or convertible into,
or exchangeable for securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth above, there are not
any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound obligating the Company
or, any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other securities of the
Company or of any of its subsidiaries or instruments convertible into any of the
foregoing or obligating the Company or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are not any outstanding
contractual obligations (i) of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or (ii) of the Company to vote or to dispose of any shares of the
capital stock of any of its subsidiaries. Except as set forth in Section 3.03 of
the Company Disclosure Schedule, there are no restrictions on the right of the
Company to vote or dispose of any shares of the capital stock of its
subsidiaries.
SECTION 3.04. AUTHORITY. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the terms of this Agreement and the Merger by the
holders of a majority of the Shares (the "COMPANY STOCKHOLDER APPROVAL")). The
execution, delivery and performance of this Agreement and the consummation by
the Company of the Merger and of the other transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (in each case, other than, with respect to the Merger, the Company
Stockholder Approval). This Agreement has been duly executed and delivered by
the Company and, assuming this Agreement constitutes a valid and binding
obligation of Buyer and Acquisition Sub, constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally.
SECTION 3.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and the rules and regulations promulgated
thereunder (including the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement relating to any required approval by the
Company's stockholders of this Agreement and the Merger (the "PROXY
STATEMENT")), the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and Section 607 of the Corporation Law, or state
securities or blue sky laws neither the execution, delivery or performance of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the Articles of Incorporation or Bylaws of the Company or of
the similar organizational documents of any of its subsidiaries, (ii) require
any filing with, or permit, authorization, consent or approval of, any federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
domestic, foreign or supranational (a "GOVERNMENTAL ENTITY") (except where the
5
7
failure to obtain such permits, authorizations, consents or approvals or to make
such filings could not reasonably be expected to have a material adverse effect
on the Company or prevent or materially delay the consummation of the Merger),
(iii) except as set forth in Section 3.05 of the Company Disclosure Schedule,
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound.
SECTION 3.06. SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the SEC, and has heretofore made available to Buyer true and complete
copies of, all forms, reports, schedules, statements and other documents (other
than preliminary materials) required to be filed by it under the Exchange Act or
the Securities Act of 1933 (the "SECURITIES ACT") (such forms, reports,
schedules, statements and other documents, including any financial statements or
schedules included therein, are referred to as the "COMPANY SEC DOCUMENTS"). The
Company SEC Documents, at the time filed, except to the extent subsequently
amended and on file with the SEC, (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. Except to the extent revised or superseded by a subsequently filed
Company SEC Document, the Company SEC Documents and such press release do not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the Company SEC Documents, as well as the Company's financial statements as of
and for the twelve months ended January 31, 2001 (the "BALANCE SHEET DATE")
heretofore delivered to Buyer, as of the dates thereof comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule 10-01
of Regulation S-X promulgated by the SEC) and fairly present (subject, in the
case of the unaudited statements, to normal, recurring audit adjustments, none
of which will be material) the consolidated financial position of the Company
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. None of
the Company's subsidiaries is required to file any forms, reports, schedules,
statements or other documents with the SEC.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 3.07 of the Company Disclosure Schedule, since the Balance Sheet
Date, the Company and its subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice, and there
has not been any material adverse change (as defined in Section 9.03) with
respect to the Company. Except as contemplated by Section 6.07 or as set forth
in Section 3.07 of the Company Disclosure Schedule, since the Balance Sheet
Date, there has not been (i) any declaration, setting aside or payment of any
dividend or other distribution with respect to the Company's capital stock or
any redemption, purchase or other acquisition of any of its capital stock, (ii)
any split, combination or reclassification of any of the Company's capital stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iii)
any material change in accounting methods, principles or practices by the
Company (except insofar as may be required by a change in generally accepted
accounting principles or adoption of a new accounting pronouncement), (iv) (V)
any amendment or modification to any Company Stock Option Plan (as defined
below) or any Company Stock Options (as defined below), (W) any granting by the
Company or any of its subsidiaries to any executive officer of the Company or
any of its subsidiaries of any increase in compensation, except in the ordinary
course of business (including in connection with promotions) consistent with
past practice or as was required under employment agreements in effect as of the
Balance Sheet Date, (X) any granting by the Company or any of its subsidiaries
to any such officer of any increase in severance or termination pay, except as
6
8
was required under employment, severance or termination agreements and listed on
Section 3.15 of the Company Disclosure Schedule, (Y) except employment
arrangements in the ordinary course of business consistent with past practice
with employees other than any executive officer of the Company, any entry by the
Company or any of its subsidiaries into any employment, severance or termination
agreement with any such employee or executive officer, or (Z) except as
contemplated by Section 6.07, any increase in or establishment of any bonus,
insurance, deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards or the amendment of any existing
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a material adverse
effect on the Company, (vi) any amendments or changes in the Articles of
Incorporation or Bylaws of the Company, (vii) any material revaluation by the
Company of any of its assets, including writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business, or (viii) any other action or event that would have required the
consent of Buyer pursuant to Section 5.01 had such action or event occurred
after the date of this Agreement.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as and to the extent
set forth in Section 3.08 of the Company Disclosure Schedule, as of the Balance
Sheet Date, neither the Company nor any of its subsidiaries had any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that would be reasonably expected to have a material adverse effect on the
Company or that would be required by generally accepted accounting principles to
be reflected on a consolidated balance sheet of the Company and its subsidiaries
(including the notes thereto). Since the Balance Sheet Date, except as and to
the extent set forth in Section 3.08 of the Company Disclosure Schedule and
except for liabilities or obligations incurred in the ordinary course of
business consistent with past practice (but excluding in any case, any such
liabilities resulting from any breach or default of any Company obligation),
neither the Company nor any of its subsidiaries has incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, that would be
reasonably expected to have a material adverse effect on the Company, or would
be required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto).
SECTION 3.09. BROKERS; FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than US Bancorp Xxxxx Xxxxxxx, the fees
and expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
SECTION 3.10. BENEFIT PLANS.
(a) Except as set forth in Section 3.10 of the Company
Disclosure Schedule, each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "PENSION PLAN"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "WELFARE Plan") and each other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, bonuses, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by the Company or its subsidiaries for the
benefit of any present or former employee, officer or director (each of the
foregoing, a "BENEFIT PLAN") has been administered in all material respects in
accordance with its terms. Except as set forth in Section 3.10 of the Company
Disclosure Schedule, the Company and its subsidiaries and all the Benefit Plans
are in compliance in all material respects with the applicable provisions of
ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), all other
applicable laws and all applicable collective bargaining agreements. Section
3.10 of the Company Disclosure Schedule sets forth a list of all material
Benefit Plans. Except as set forth in Section 3.10 of the Company Disclosure
Schedule, none of the Welfare Plans promises or provides retiree medical or
other retiree welfare benefits to any person, except as required by Part 6 of
Title I, Subtitle B of ERISA and Section 4980B of the Code or applicable state
law. Except as set forth in Section 3.10 of the Company Disclosure Schedule, to
7
9
the knowledge of the Company, no fiduciary of a Benefit Plan has breached any of
the responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA, which breach would reasonably be expected to result in any material
liability to the Company. Each Benefit Plan intended to qualify under section
401(a) of the Code and each trust intended to qualify under section 501(a) of
the Code is the subject of a favorable determination letter from the Internal
Revenue Service (the "SERVICE"), and nothing has occurred which would reasonably
be expected to impair such determination. All contributions required to be made
with respect to any Benefit Plan pursuant to the terms of the Benefit Plan or
any collective bargaining agreement, have been made on or before their due
dates.
(b) None of the Pension Plans is subject to Title IV of ERISA
and none of the Company or any other person or entity that, together with the
Company, is or was treated as a single employer under Section 414 of the Code or
pursuant to Title IV of ERISA (each, including the Company, a "COMMONLY
CONTROLLED ENTITY") has any liability under Title IV of ERISA (whether actual or
contingent) with respect to a Pension Plan, or to any other employee pension
benefit plan that is or was maintained, contributed to or required to be
contributed to by a Commonly Controlled Entity (other than for contributions not
yet due) or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due), which liability has not been fully paid.
(c) No Commonly Controlled Entity is required to contribute to
any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid or as to which a commonly controlled
entity would have liability pursuant to Section 4212(c) of ERISA.
(d) Neither the Company nor any trustee, administrator, other
fiduciary or any other "party in interest" or "disqualified person" with respect
to the Pension Plans or Welfare Plans, has engaged in a "prohibited transaction"
(as such term is defined in Section 4975 of the Code or Section 406 of ERISA)
that could result in a material tax or penalty on the Company under Section 4975
of the Code or Section 502(i) of ERISA.
(e) Each Welfare Plan which covers or has covered employees or
former employees of Company and which is a "group health plan," as defined in
Section 607(l) of ERISA, has been operated in compliance in all material
respects with provisions of Part 6 of Title 1, Subtitle B of ERISA and Section
4980B of the Code at all times. No Welfare Plan provides any health or life
insurance benefits for retired or former employees, except as required by Part 6
of Title 1, Subtitle B of ERISA and Section 4980B of the Code, or applicable
state law.
(f) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without material liability to
the Company or its subsidiaries.
SECTION 3.11. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in the S-4 Registration Statement or the Proxy Statement, will, at the
time the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Company Stockholders Meeting (as defined in Section 6.02), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Buyer or Acquisition Sub specifically for inclusion or
incorporation by reference therein.
SECTION 3.12. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the votes entitled to be cast of the outstanding shares of Company
Common Stock is the only vote of the holders of any class of capital stock of
8
10
the Company necessary to approve this Agreement and the Merger. The Board of
Directors of the Company, at a meeting duly called and held, duly and
unanimously adopted resolutions approving this Agreement and the Merger.
SECTION 3.13. LITIGATION. Except as set forth in Section 3.13 of the
Company Disclosure Schedule, there is no claim, action, suit, investigation or
proceeding pending against, or to the knowledge of the Company, threatened
against or affecting, the Company or any of its respective properties which
would have a material adverse effect on the Company.
SECTION 3.14. COMPLIANCE WITH LAWS; NO DEFAULTS. The Company is not in
violation of any statute, law, ordinance, regulation, rule, judgment, decree,
order, writ, injunction, permit or license or other authorization or approval of
any Governmental Entity applicable to its business or operations, except for
violations and failures to comply that have not had and would not result in a
material adverse effect. Each material contract to which the Company or any of
its assets are bound (a "COMPANY CONTRACT") is a valid, binding and enforceable
obligation of the Company and in full force and effect, and the Company is not
in default under any Company Contract, except as set forth in Section 3.14 of
the Company Disclosure Schedule and except where the failure of any such Company
Contract to be valid, binding and enforceable and in full force and effect, or
such default, would not have a material adverse effect. The Company has all
permits and licenses necessary to carry on the business conducted by it as of
the date hereof, except where the failure to have such permit or license would
not, individually or in the aggregate, have a material adverse effect.
SECTION 3.15. LABOR MATTERS. The Company is not a party to or subject
to any collective bargaining agreements. Except as set forth on Section 3.15 of
the Company Disclosure Schedule, the Company has no material written or oral
contracts with any Company employee or any other person with regard to
employment, severance or other similar matters. There have been no strikes or
work slowdowns pending against or affecting the Company.
SECTION 3.16. INTELLECTUAL PROPERTY. The Company has all rights to use
all of its Intellectual Property, in the manner used by the Company in the
operation of its business, except (other than with respect to the use of the
name "Sound Advice" in the State of Florida) where the failure to have such
rights would not, individually or in the aggregate, have a material adverse
effect. As used herein, the term "Intellectual Property" means all licenses,
patents, copyrights, designs and drawings, engineering and manufacturing
documents, technical manuals, patterns, processes, formulae, know-how, trade
secrets, trademarks, service marks, trade names, inventions and discoveries
(whether patentable or not), computer software, and other similar rights, and
specifically include without limitation the name "Sound Advice;" and all
applications therefor and registrations thereof, and specifically including any
and all rights to xxx for past, present and future infringement or other
violations of, and all goodwill associated with, any of the foregoing.
SECTION 3.17. TAXES. Except as set forth on Section 3.17 of the Company
Disclosure Schedule:
(a) The Company and each affiliated group (within the meaning
of Section 1504 of the Code) of which the Company is or has been a member, has
timely filed (or has had timely filed on its behalf) all material Tax Returns
required by applicable law to be filed by it prior to the date hereof, and all
such material Tax Returns were true, correct and complete in all material
respects.
(b) The Company has paid (or has had paid on its behalf) all
Taxes shown due with respect to Tax Returns filed prior to the date hereof;
(c) The federal income Tax Returns of the Company have been
examined and settled with the Service (or the applicable statutes of limitation
for the assessment of federal income Taxes for such periods have expired) for
all years through 1996;
(d) The Company and its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes;
9
11
(e) The Company is not party to any tax allocation, tax
sharing, tax indemnity or similar agreement (whether or not in writing),
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority); and
(f) No federal, state, local or foreign audits or
administrative proceedings are presently pending with regard to any material
Taxes or Tax Return of the Company and the Company has not received a written
notice of any proposed audit or proceeding regarding any pending audit or
proceeding.
As used herein "Taxes" (including the term "TAX") shall mean
any and all taxes, charges, fees, levies or other similar assessments imposed by
the Service or any other taxing authority (whether domestic or foreign) (a
"TAXING AUTHORITY"), and such term shall include any interest, penalties or
additional amounts with respect to any such taxes, charges, fees, levies or
other assessments. "Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any Taxing
Authority (foreign or domestic) with respect to Taxes.
SECTION 3.18. ENVIRONMENTAL. To the Company's knowledge, no Hazardous
Material has been discharged, disposed of, dumped, injected, pumped, deposited,
spilled, leaked, emitted or released at, on or under any property now or, to the
knowledge of the Company, previously owned, leased or operated by the Company;
and the Company has not received any notice under the citizen suit provisions of
any Environmental Law or any request for information, notice, demand letter, or
notice of any claim or legal proceeding with respect to any Environmental Law;
excluding any of the foregoing that would not have a material adverse effect on
the Company.
As used herein, the term "Environmental Laws" shall mean any
and all applicable federal, state, county or local laws, ordinances or
regulations relating to the generation, discharge, release, containment,
storage, transportation, disposal, assessment or cleanup of Hazardous Materials
or other contaminants or similar materials, including without limitation the
following: (1) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C.ss.9601 et seq.; (2) the Toxic Substances
Control Act, 15 U.S.C.ss.2101 et seq.; (3) the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C.ss.136; (4) the Hazardous Materials Transportation
Act, 49 U.S.C. ss.ss.1801 to 1812; (5) the Federal Water Pollution Control Act,
32 U.S.C.ss.1251 et seq.; (6) the Federal Solid Waste Disposal Act; (7) the
Federal Clean Air Act, 42 U.S.C.ss.1857 et seq.; and (8) any other federal,
state, county, or local statutes or implementing regulations (or any other
statutes or implementing regulations of any other Governmental Entity) relating
to, regulating, or having jurisdiction over, any environmental contamination or
Hazardous Material (as hereinafter defined).
As used herein, the term "Hazardous Material" shall mean any pollutant,
toxic substance, hazardous waste, hazardous material, hazardous substance or oil
or other petroleum product, including as any of the foregoing may be defined in
any Environmental Law.
SECTION 3.19. INSURANCE. Section 3.19 of the Company Disclosure
Schedule accurately lists all material policies of insurance relating to the
Company or its business currently maintained by the Company. Except to the
extent that the following would not have a material adverse effect: (a) all such
insurance is in full force and effect, (b) all premiums, including any current
retrospective premiums or other like arrangement with respect to such policies
of insurance have been paid when due; and (c) no notice of cancellation or
termination has been received by the Company with respect to any such policy of
insurance, and no claim is currently reserved or under any policy of insurance.
SECTION 3.20. LIENS AND ENCUMBRANCES. Except as set forth on Section
3.20 of the Company Disclosure Schedule, the Company has good and marketable
title to all of its assets, free and clear of all Liens other than Liens for
Taxes which are not due and payable, and except to the extent that title defects
or Liens would not have a material adverse effect on the Company.
10
12
SECTION 3.21. FULL DISCLOSURE. (i) No statement contained in this
Agreement or in any certificate or schedule furnished or to be furnished by the
Company or its subsidiaries to Buyer or Acquisition Sub in, or pursuant to the
provisions of, this Agreement, and (ii) none of the monthly consolidated
financial statements for February and March 2001 heretofore furnished by the
Company to Buyer, including the accompanying commentary, contains or will
contain any untrue statement of a material fact or omits to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION SUB
Buyer and Acquisition Sub represent and warrant to the Company that,
other than as supplemented or modified by information set forth in the Buyer SEC
Documents and the disclosure schedules referenced below, the following
statements are correct and complete as of the date of this Agreement:
SECTION 4.01. ORGANIZATION. Each of Buyer and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority could not be reasonably expected to (i) prevent or materially
delay the consummation of the Merger, or (ii) have a material adverse effect (as
defined in Section 9.03) on Buyer. Buyer and each of its subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing could not reasonably be expected to have a material adverse
effect on Buyer or prevent or materially delay the consummation of the Merger.
Buyer has made available to the Company complete and correct copies of its
Certificate of Incorporation and Bylaws and the certificates of incorporation
and bylaws (or similar organizational documents) of Buyer's subsidiaries.
SECTION 4.02. SUBSIDIARIES. Other than those disclosed in the Buyer SEC
Documents, the only subsidiaries of Buyer are listed in Section 4.02(a) of the
disclosure schedule annexed hereto as Annex 2 (the "BUYER DISCLOSURE SCHEDULE").
All the outstanding shares of capital stock of each such subsidiary are owned by
Buyer, by another wholly owned subsidiary of Buyer or by Buyer and another
wholly owned subsidiary of Buyer as set forth in Section 4.02(a) of the Buyer
Disclosure Schedule, free and clear of all Liens, and are duly authorized,
validly issued, fully paid and nonassessable. Buyer also owns the partnership
and joint venture interests identified in Section 4.02(b) of the Buyer
Disclosure Schedule free and clear of any Liens. Except as otherwise specified
in Section 4.02(b) of the Buyer Disclosure Schedule, Buyer owns 100% of such
partnership and joint venture interests. Except for the capital stock of its
subsidiaries, the capital stock of the Company, the partnership interests in the
partnerships listed in Section 4.02(b) of the Buyer Disclosure Schedule and
Buyer's ownership interest in certain publicly traded companies (the aggregate
market value of which do not exceed $5,000,000), Buyer does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of Buyer
consists of 30,000,000 shares of Buyer Common Stock and 10,000,000 shares of
preferred stock. At the close of business on May 1, 2001, 18,709,024 shares of
Company Common Stock were issued and outstanding and no shares of Buyer
preferred stock were issued and outstanding. As of September 30, 2000, 4,190,780
shares of Buyer Common Stock were reserved for issuance upon exercise of
outstanding and future grants of Buyer Stock Options (as defined in Section
6.07), of which 1,927,060 options were issued and outstanding and 2,263,720
options were available for grant under the Buyer's option plans. Except as set
forth above, and except for shares issued (i) upon the exercise of Buyer Stock
Options since September 30, 2000, (ii) shares issued or issuable pursuant to the
transactions described in Section 4.07 of the Buyer Disclosure Schedule, and
(iii) except as permitted pursuant to Section 5.02(c), as of the date of this
11
13
Agreement, no shares of capital stock or other voting securities of Buyer were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Buyer are, and all shares which may be issued will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, rights of first refusal or other transfer restrictions or
conditions. There are no bonds, debentures, notes or other indebtedness of Buyer
having the right to (i) convert into or that are exchangeable for any capital
stock, securities or equity interests of Buyer or (ii) vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of Buyer may vote. Except as set forth above, there are
not any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Buyer or any of its
subsidiaries is a party or by which any of them is bound obligating Buyer or,
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other securities of
Buyer or of any of its subsidiaries or instruments convertible into any of the
foregoing or obligating Buyer or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are not any outstanding contractual
obligations (i) of Buyer or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Buyer or (ii) of Buyer to vote
or to dispose of any shares of the capital stock of any of its subsidiaries.
Except as set forth in Section 4.03 of the Buyer Disclosure Schedule, there are
no restrictions on the right of Buyer to vote or dispose of any shares of the
capital stock of its subsidiaries.
SECTION 4.04. AUTHORITY. Buyer and Acquisition Sub have requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (other than and subject to the
stockholder approvals as described in Section 4.13). The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer and Acquisition Sub and no other corporate proceedings on
the part of Buyer and Acquisition Sub are necessary to authorize this Agreement
or to consummate such transactions (other than and subject to the Buyer
stockholder approval as described in Section 4.13 (the "BUYER STOCKHOLDER
APPROVAL")). This Agreement has been duly executed and delivered by Buyer and
Acquisition Sub, as the case may be, and, assuming this Agreement constitutes a
valid and binding obligation of the Company, constitutes a valid and binding
obligation of each of Buyer and Acquisition Sub enforceable against them in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally.
SECTION 4.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act and the Exchange
Act, the HSR Act and Section 252 of the Delaware Corporation Law and the
Corporation Law, state securities and blue sky laws neither the execution,
delivery or performance of this Agreement by Buyer and Acquisition Sub nor the
consummation by Buyer and Acquisition Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Certificate/Articles of Incorporation or bylaws of Buyer and
Acquisition Sub, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings could not
be reasonably expected to prevent or materially delay the consummation of the
Merger), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which Buyer or
Acquisition Sub is a party or by which either of them or any of their properties
or assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Buyer or Acquisition Sub or any of
their properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which could not, individually or in the
aggregate, be reasonably expected to prevent or materially delay the
consummation of the Merger.
SECTION 4.06. SEC REPORTS AND FINANCIAL STATEMENTS. Buyer has filed
with the SEC, and has heretofore made available to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents (other
than preliminary materials) required to be filed by it under the Exchange Act or
the Securities Act) (such forms, reports, schedules, statements and other
12
14
documents, including any financial statements or schedules included therein, are
referred to as the "BUYER SEC DOCUMENTS"). The Buyer SEC Documents, at the time
filed, except to the extent subsequently amended and on file with the SEC, (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Except to the extent
revised or superseded by a subsequently filed Buyer SEC Document or by Buyer's
annual/quarterly earnings press release dated April 18, 2001, the Buyer SEC
Documents and such press release do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Buyer included in the Buyer SEC
Documents, as well as Buyer's financial statements as of and for the twelve
months ended September 30, 2000 (the "BUYER BALANCE SHEET DATE") heretofore
delivered to the Company, as of the dates thereof comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule 10-01
of Regulation S-X promulgated by the SEC) and fairly present (subject, in the
case of the unaudited statements, to normal, recurring audit adjustments, none
of which will be material) the consolidated financial position of Buyer and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. None of Buyer's
subsidiaries is required to file any forms, reports, schedules, statements or
other documents with the SEC.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 4.07 of the Buyer Disclosure Schedule or as otherwise specifically
permitted under this Agreement, since the Buyer Balance Sheet Date, there has
not been any material adverse change (as defined in Section 9.03) with respect
to Buyer. Except as contemplated by Section 5.02(c) or as set forth in Section
4.07 of the Buyer Disclosure Schedule, since the Buyer Balance Sheet Date, there
has not been (i) any declaration, setting aside or payment of any dividend or
other distribution with respect to Buyer's capital stock or any redemption,
purchase or other acquisition of any of its capital stock, (ii) any split,
combination or reclassification of any of Buyer's capital stock or any issuance
or the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (iii) any material
change in accounting methods, principles or practices by Buyer (except insofar
as may be required by a change in generally accepted accounting principles),
(iv) (V) any amendment or modification to any Buyer Stock Option Plan (as
defined below) or any Buyer Stock Options (as defined below), (W) any granting
by Buyer or any of its subsidiaries to any executive officer of Buyer or any of
its subsidiaries of any increase in compensation, except in the ordinary course
of business (including in connection with promotions) consistent with past
practice or as was required under employment agreements in effect as of the
Buyer Balance Sheet Date, (X) any granting by Buyer or any of its subsidiaries
to any such officer of any increase in severance or termination pay, except as
was required under employment, severance or termination agreements in effect as
of the Buyer Balance Sheet Date and listed on Section 4.16 of the Buyer
Disclosure Schedule, or (Y) except as contemplated by Section 6.07, any increase
in or establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit-sharing, stock option (including the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock appreciation
rights, performance awards or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, (v) any damage, destruction
or loss, whether or not covered by insurance, that has or reasonably could be
expected to have a material adverse effect on Buyer, (vi) any amendments or
changes in the Certificate of Incorporation or Bylaws of Buyer, (vii) any
material revaluation by Buyer of any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business, or (viii) any other action or event that would have
required the consent of Buyer pursuant to Section 5.01 had such action or event
occurred after the date of this Agreement.
13
15
SECTION 4.08. NO UNDISCLOSED LIABILITIES. As of the Buyer Balance Sheet
Date, neither Buyer nor any of its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be reasonably expected to have a material adverse effect on Buyer or that
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of Buyer and its subsidiaries (including the notes
thereto). Since the Buyer Balance Sheet Date, except for liabilities or
obligations incurred in the ordinary course of business consistent with past
practice (but excluding in any case, any such liabilities resulting from any
breach or default of any Buyer obligation), neither Buyer nor any of its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, that would be reasonably expected to have a material
adverse effect on Buyer, or would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of Buyer and its
subsidiaries (including the notes thereto).
SECTION 4.09. BROKERS; FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Deutsche Banc Alex. Xxxxx, the
fees and expenses of which will be paid by Buyer, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
SECTION 4.10. BENEFIT PLANS.
(a) Except as set forth in Section 4.10 of the Buyer
Disclosure Schedule, each "employee pension benefit plan" (as defined in Section
3(2) of ERISA) (a "PENSION PLAN"), "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA) (a "WELFARE PLAN") and each other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, bonuses, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by Buyer or its subsidiaries for the benefit
of any present or former employee, officer or director (each of the foregoing, a
"BUYER BENEFIT PLAN") has been administered in all material respects in
accordance with its terms. Buyer and its subsidiaries and all the Buyer Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended, all other applicable
laws and all applicable collective bargaining agreements. Section 4.10 of the
Buyer Disclosure Schedule sets forth a list of all material Buyer Benefit Plans.
Except as set forth in Section 4.10(a) of the Buyer Disclosure Schedule, none of
the Welfare Plans promises or provides retiree medical or other retiree welfare
benefits to any person. To the knowledge of Buyer, no fiduciary of a Buyer
Benefit Plan has breached any of the responsibilities or obligations imposed
upon fiduciaries under Title I of ERISA, which breach would reasonably be
expected to result in any material liability to Buyer. Each Buyer Benefit Plan
intended to qualify under section 401(a) of the Code and each trust intended to
qualify under section 501(a) of the Code is the subject of a favorable
determination letter from the IRS, and nothing has occurred which would
reasonably be expected to impair such determination. All contributions required
to be made with respect to any Buyer Benefit Plan pursuant to the terms of the
Buyer Benefit Plan or any collective bargaining agreement, have been made on or
before their due dates.
(b) None of the Pension Plans is subject to Title IV of ERISA
and none of Buyer or any other person or entity that, together with Buyer, is or
was treated as a single employer under Section 414 of the Code or pursuant to
Title IV of ERISA (each, including Buyer, a "BUYER COMMONLY CONTROLLED ENTITY")
has any liability under Title IV of ERISA (whether actual or contingent) with
respect to a Pension Plan, or to any other employee pension benefit plan that is
or was maintained, contributed to or required to be contributed to by a Buyer
Commonly Controlled Entity (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment of premiums not yet
due), which liability has not been fully paid.
(c) No Buyer Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has withdrawn from any multiemployer plan where such withdrawal has
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid or as to which a commonly
controlled entity would have liability pursuant to Section 4212(c) of ERISA.
14
16
(d) Neither Buyer nor any trustee, administrator, other
fiduciary or any other "party in interest" or "disqualified person" with respect
to the Pension Plans or Welfare Plans, has engaged in a "prohibited transaction"
(as such term is defined in Section 4975 of the Code or Section 406 of ERISA)
that could result in a material tax or penalty on Buyer under Section 4975 of
the Code or Section 502(i) of ERISA.
(e) Each Welfare Plan which covers or has covered employees or
former employees of Buyer and which is a "group health plan," as defined in
Section 607(l) of ERISA, has been operated in compliance in all material
respects with provisions of Part 6 of Title 1, Subtitle B of ERISA and Section
4980B of the Code at all times. No Welfare Plan provides any health or life
insurance benefits for retired or former employees, except as required by Part 6
of Title 1, Subtitle B of ERISA and Section 4980B of the Code, or applicable
state law.
(f) Each Buyer Benefit Plan that is a Welfare Plan may be
amended or terminated at any time after the Effective Time without material
liability to Buyer or its subsidiaries.
SECTION 4.11. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Buyer or Acquisition Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will at the time the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Buyer or
Acquisition Sub with respect to statements made or incorporated by reference
therein based on information supplied by the Company specifically for inclusion
or incorporation by reference therein.
SECTION 4.12. INTERIM OPERATIONS OF ACQUISITION SUB. Acquisition Sub
was formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
SECTION 4.13. VOTE REQUIRED; BOARD DETERMINATION. The affirmative vote
of the holders of a majority of the votes entitled to be cast of the outstanding
shares of Buyer Common Stock is the only vote of the holders of any class of
capital stock of Buyer necessary to approve the issuance of the Buyer Common
Stock in the Merger. The Board of Directors of Buyer, at a meeting duly called
and held, duly and unanimously adopted resolutions approving this Agreement and
the Merger.
SECTION 4.14. LITIGATION. Except as set forth in Section 4.14 of the
Buyer Disclosure Schedule, there is no claim, action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer, threatened against or
affecting, Buyer or any of its respective properties which would have a material
adverse effect on Buyer.
SECTION 4.15. COMPLIANCE WITH LAWS; NO DEFAULTS. Buyer is not in
violation of any statute, law, ordinance, regulation, rule, judgment, decree,
order, writ, injunction, permit or license or other authorization or approval of
any Governmental Entity applicable to its business or operations, except for
violations and failures to comply that have not had and would not result in a
material adverse effect. Each material contract to which Buyer or any of its
assets are bound (a "BUYER CONTRACT") is a valid, binding and enforceable
obligation of Buyer and in full force and effect, and Buyer is not in default
under any Buyer Contract, except where the failure of any such Buyer Contract to
be valid, binding and enforceable and in full force and effect, or such default,
would not have a material adverse effect. Buyer has all permits and licenses
necessary to carry on the business conducted by it as of the date hereof, except
where the failure to have such permit or license would not, individually or in
the aggregate, have a material adverse effect.
SECTION 4.16. LABOR MATTERS. Buyer is not a party to or subject to any
collective bargaining agreements. Except as set forth on Section 4.16 of the
15
17
Buyer Disclosure Schedule, Buyer has no material written or oral contracts with
any Buyer employee or any other person with regard to employment, severance or
other similar matters. There have been no strikes or work slowdowns pending
against or affecting Buyer.
SECTION 4.17. INTELLECTUAL PROPERTY. Except as set forth on Section
4.17 of the Buyer Disclosure Schedule, Buyer has all rights to use all of its
Intellectual Property, in the manner used by Buyer in the operation of its
business, except (other than with respect to the name "Tweeters") where the
failure to have such rights would not, individually or in the aggregate, have a
material adverse effect. As used herein, the term "Intellectual Property" means
all licenses, patents, copyrights, designs and drawings, engineering and
manufacturing documents, technical manuals, patterns, processes, formulae,
know-how, trade secrets, trademarks, service marks, trade names (including,
without limitation, the name "Tweeter"), inventions and discoveries (whether
patentable or not), computer software, and other similar rights; and all
applications therefor and registrations thereof, and specifically including any
and all rights to xxx for past, present and future infringement or other
violations of, and all goodwill associated with, any of the foregoing.
SECTION 4.18. TAXES.
(a) Buyer and each affiliated group (within the meaning of
Section 1504 of the Code) of which Buyer is or has been a member, has timely
filed (or has had timely filed on its behalf) all material Tax Returns required
by applicable law to be filed by it prior to the date hereof, and all such
material Tax Returns were true, correct and complete in all material respects.
(b) Buyer has paid (or has had paid on its behalf) all Taxes
shown due with respect to Tax Returns filed prior to the date hereof;
(c) The federal income Tax Returns of Buyer have been examined
and settled with the Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired) for all years
through 1997;
(d) Buyer and its subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes;
(e) Buyer is not party to any tax allocation, tax sharing, tax
indemnity or similar agreement (whether or not in writing), arrangement or
practice with respect to Taxes (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any Taxing Authority);
(f) Neither Buyer nor any affiliate is obligated to make any
payments that may constitute "excess parachute payments," as defined in Section
280G of the Code; and
(g) No federal, state, local or foreign audits or
administrative proceedings are presently pending with regard to any material
Taxes or Tax Return of Buyer and Buyer has not received a written notice of any
proposed audit or proceeding regarding any pending audit or proceeding.
SECTION 4.19. ENVIRONMENTAL. Except as set forth on Section 4.19 of the
Buyer Disclosure Schedule: to the Buyer's knowledge, no Hazardous Material has
been discharged, disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on or under any property now or, to the
knowledge of Buyer, previously owned, leased or operated by Buyer; and Buyer has
not received any notice under the citizen suit provisions of any Environmental
Law or any request for information, notice, demand letter, or notice of any
claim or legal proceeding with respect to any Environmental Law; excluding any
of the foregoing that would not have a material adverse effect on Buyer.
SECTION 4.20. INSURANCE. Section 4.20 of the Buyer Disclosure Schedule
accurately lists all material policies of insurance relating to Buyer or its
business currently maintained by Buyer. Except to the extent that the following
would not have a material adverse effect: (a) all such insurance is in full
force and effect, (b) all premiums, including any current retrospective premiums
16
18
or other like arrangement with respect to such policies of insurance have been
paid when due; and (c) no notice of cancellation or termination has been
received by Buyer with respect to any such policy of insurance, and no claim is
currently reserved or under any policy of insurance.
SECTION 4.21. LIENS AND ENCUMBRANCES. Except as set forth on Section
4.21 of the Buyer Disclosure Schedule, Buyer has good and marketable title to
all of its assets, free and clear of all Liens other than Liens for Taxes which
are not due and payable, and except to the extent that title defects or Liens
would not have a material adverse effect on Buyer.
SECTION 4.22. FULL DISCLOSURE. No statement contained in this Agreement
or in any certificate or schedule furnished or to be furnished by Buyer or its
subsidiaries to the Company in, or pursuant to the provisions of, this
Agreement, contains or will contain any untrue statement of a material fact or
omits to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE V
COVENANTS
SECTION 5.01. COVENANTS OF THE COMPANY. The Company agrees as to itself
and its subsidiaries that (except as expressly contemplated or permitted by this
Agreement or the Company Disclosure Schedule):
(a) ORDINARY COURSE. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course and the Company shall, and shall cause its subsidiaries to, use
all reasonable efforts to preserve intact their present business organizations,
keep available the services of their present officers and employees and preserve
their relationships with customers, suppliers, landlords and others having
business dealings with the Company and its subsidiaries.
(b) DIVIDENDS; CHANGES IN STOCK. The Company shall not, and
shall not permit any of its subsidiaries to, (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, except for
dividends by a direct or indirect wholly owned subsidiary of the Company to its
parent, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or its
subsidiaries or any other securities thereof.
(c) ISSUANCE OF SECURITIES. The Company shall not, and shall
not permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber,
or authorize or propose the issuance, delivery, sale, pledge or encumbrance of,
or amend or modify any agreement or obligation in effect on the Balance Sheet
Date with respect to: any shares of its capital stock of any class or any
securities or other instruments convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, any such shares or convertible
securities or instruments, or any other ownership interest (including stock
appreciation rights or phantom stock) other than (i) the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement under stock option plans as in effect as of the
Balance Sheet Date and in accordance with the terms of such Company Stock
Options, (ii) issuances by a wholly-owned subsidiary of the Company of its
capital stock to its parent, (iii) the termination of its ESOP pursuant to this
Agreement or (iv) up to 33,500 shares or securities convertible into shares
issued in the ordinary course of business.
(d) GOVERNING DOCUMENTS. The Company shall not, and shall not
permit any of its subsidiaries to, amend or propose to amend its Articles of
Incorporation or bylaws (or similar organizational documents).
17
19
(e) NO ACQUISITIONS. The Company shall not, and shall not
permit any of its subsidiaries to, without the prior written consent of Buyer,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or any substantial assets of (other than inventory and
equipment in the ordinary course consistent with past practice, to the extent
not otherwise prohibited by this Agreement), or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof.
(f) NO DISPOSITIONS. Other than dispositions in the ordinary
course of business consistent with past practice, the Company shall not, and
shall not permit any of its subsidiaries to, without the prior written consent
of Buyer, sell, lease, license, encumber or otherwise dispose of, or agree to
sell, lease, license, encumber or otherwise transfer or dispose of, any of its
assets.
(g) INDEBTEDNESS. The Company shall not, and shall not permit
any of its subsidiaries to, (i) incur (which shall not be deemed to include
credit agreements, lines of credit or similar agreements until borrowings are
made under such agreements) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any obligation or debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business consistent with past practice under the Company's credit facility
existing and in effect on the date of this Agreement, or (ii) make any loans,
advances or capital contributions to, or investments in, any other person, other
than, with respect to both clause (i) and (ii) above, to the Company or any
direct or indirect wholly owned subsidiary of the Company.
(h) ADVICE OF CHANGES; FILINGS. The Company shall confer with
Buyer on a regular and frequent basis as reasonably requested by Buyer, report
on operational matters and promptly advise Buyer orally and, if requested by
Buyer, in writing of any change or event having, or which, insofar as can
reasonably be foreseen, is likely to have, a material adverse effect on the
Company. The Company shall promptly provide to Buyer (or its counsel) copies of
all filings made by the Company with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
(i) ACCOUNTING CHANGES. The Company shall not make any
material change, other than as required by the SEC or law, with respect to any
accounting methods, principles or practices used by the Company (except insofar
as may be required by a change in generally accepted accounting principles, of
which the Company shall promptly notify Buyer).
(j) DISCHARGE OF LIABILITIES. Except for fees and expenses
related to the transactions contemplated herein, the Company shall not, and
shall not permit any of its subsidiaries to, pay, discharge, settle or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of (i) liabilities recognized
or disclosed in the Company's most recent financial statements within the
Company's most recently filed Annual Report on Form 10-K, (ii) liabilities not
required by generally accepted accounting principles to be recognized or
disclosed therein and incurred in the ordinary course of business consistent
with past practice or (iii) liabilities incurred since the date of such
financial statements in the ordinary course of business consistent with past
practice. The Company shall not, and shall not permit any of its subsidiaries
to, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any of
its subsidiaries is a party.
(k) COMPENSATION OF COMPANY EMPLOYEES. Except as provided in
Section 3.07 of the Company Disclosure Schedule or in Section 6.07 or in the
proviso below, the Company and its subsidiaries will not, without the prior
written consent of Buyer, except as may be required by law, (i) enter into,
adopt, amend or terminate any Company employee benefit plan or any agreement,
arrangement, plan or policy for the benefit of any director, executive officer
or current or former key employee, (ii) increase in any manner or amend the
compensation or fringe benefits of, or pay any bonus to, any director, executive
18
20
officer or key employee, except as required by any Company employee benefit plan
or agreement with such employees as in effect as of the Balance Sheet Date,
(iii) enter into, adopt, amend or terminate any Company employee benefit plan or
other benefit plan or agreement, arrangement, plan or policy for the benefit of
any employees who are not directors, executive officers or current or former key
employees of the Company, other than increases in the compensation of employees
made in the ordinary course of business consistent with past practice, or (iv)
pay any benefit not required by any plan or arrangement as in effect as of the
Balance Sheet Date (including the granting of, acceleration of exercisability of
or vesting of stock options, stock appreciation rights or restricted stock).
(l) MATERIAL CONTRACTS. Except in the ordinary course of
business consistent with past practice, and except as necessary to implement the
terms of this Agreement and the other agreements entered into by the Company
pursuant to this Agreement, neither the Company nor any of its subsidiaries
shall (i) enter into, modify, amend or terminate any material contract or
agreement to which the Company or such subsidiary is or is to become a party, or
(ii) waive, release or assign any material rights or claims; provided that in no
event shall the Company enter into, modify, amend or terminate any lease of real
estate, or waive, release or assign any material rights or claims thereunder,
without Buyer's prior written consent.
(m) NO DISSOLUTION, ETC. The Company shall not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation of the Company or any of its subsidiaries.
(n) TAX ELECTION. Except as set forth in Section 3.17 of the
Company Disclosure Schedule, the Company shall not make any tax election or
settle or compromise any material income tax liability.
(o) FINANCIAL STATEMENTS. The Company shall promptly provide
Buyer with copies of its internal monthly financial reports.
(p) BENEFIT PLANS. The Company shall, and shall cause its
subsidiaries to, (i) afford Buyer, and the officers, employees, accountants,
counsel and other representatives of Buyer, access, during normal business
hours, to all records and information relating to the Company's Benefit Plans
and the administration thereof, upon reasonable notice and subject to
restrictions contained in confidentiality agreements, and (ii) in the event that
Buyer's investigations reveal any noncompliance with law or with the terms of
any such Benefit Plans, cooperate with Buyer in undertaking promptly all such
remedial steps and making all such tax and other filings as Buyer may reasonably
recommend.
(q) GENERAL. The Company shall not, and shall not permit any
of its subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 5.01.
SECTION 5.02. COVENANTS OF BUYER AND ACQUISITION SUB. Buyer agrees as
to itself and its subsidiaries that (except as expressly contemplated or
permitted by this Agreement or Buyer Disclosure Schedule):
(a) ORDINARY COURSE. Buyer shall, and shall cause its
subsidiaries to, use all reasonable efforts to preserve intact their present
business organizations, keep available the services of their present officers
and employees and preserve their relationships with customers, suppliers,
landlords and others having business dealings with Buyer and its subsidiaries.
(b) DIVIDENDS; CHANGES IN STOCK. Buyer shall not, and shall
not permit any of its subsidiaries to, (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock, except for
dividends by a direct or indirect wholly owned subsidiary of Buyer to its
parent, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) repurchase,
redeem or otherwise acquire any shares of capital stock of Buyer or its
subsidiaries or any other securities thereof.
19
21
(c) ISSUANCE OF SECURITIES. Buyer shall not, and shall not
permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of, or
amend or modify any agreement or obligation in effect on Buyer Balance Sheet
Date with respect to: any shares of its capital stock of any class or any
securities or other instruments convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, any such shares or convertible
securities or instruments, or any other ownership interest (including stock
appreciation rights or phantom stock) other than (i) the issuance of shares of
Buyer Common Stock upon the exercise of Buyer Stock Options outstanding on the
date of this Agreement under stock option plans as in effect as of the Buyer
Balance Sheet Date and in accordance with the terms of such Buyer Stock Options,
(ii) issuances by a wholly-owned subsidiary of Buyer of its capital stock to its
parent (iii) the issuance, between the Buyer Balance Sheet Date and the Closing
Date, of no more than 750,000 stock options under existing Buyer Stock Option
Plans, and (iv) an amendment to the Buyer Stock Option Plan to increase the
number of options issuable in order to accommodate the transaction contemplated
by this Agreement.
(d) GOVERNING DOCUMENTS. Buyer shall not, and shall not permit
any of its subsidiaries to, amend or propose to amend its certificate of
incorporation or bylaws (or similar organizational documents). Notwithstanding
the foregoing, Buyer agrees to amend its certificate of incorporation, the Buyer
Stock Option Plans, the Registration Statement on Form S-8 registering issuances
under the Buyer Stock Option Plans, and any other governing or similar documents
as shall be necessary to give effect to the transactions contemplated in this
Agreement.
(e) NO ACQUISITIONS. Buyer shall not, and shall not permit any
of its subsidiaries to, without the prior written consent of the Company,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or any substantial assets of (other than inventory and
equipment in the ordinary course consistent with past practice, to the extent
not otherwise prohibited by this Agreement), or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof for consideration in excess of
$10,000,000 (the "Permitted Acquisitions").
(f) INDEBTEDNESS. Except as set forth in Section 5.02(f) of
the Buyer Disclosure Schedule, and other than to Buyer or any direct or indirect
wholly owned subsidiary of Buyer, Buyer shall not, and shall not permit any of
its subsidiaries to incur (which shall not be deemed to include credit
agreements, lines of credit or similar agreements until borrowings are made
under such agreements) any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Buyer or any of its subsidiaries, guarantee any
obligation or debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business consistent with past practice and borrowings in connection with
Permitted Acquisitions, in either case under Buyer's existing credit facility,
as in effect on the date of this Agreement or as amended to be increased to
allow borrowing of up to $75.0 million accordance with negotiations underway as
of the date of this Agreement.
(g) ADVICE OF CHANGES; FILINGS. Buyer shall confer with the
Company on a regular and frequent basis as reasonably requested by the Company,
report on operational matters and promptly advise the Company orally and, if
requested by the Company, in writing of any change or event having, or which,
insofar as can reasonably be foreseen, is likely to have, a material adverse
effect on Buyer. Buyer shall promptly provide to the Company (or its counsel)
copies of all filings made by Buyer with any Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
(h) ACCOUNTING CHANGES. Buyer shall not make any material
change, other than as required by the SEC or law, with respect to any accounting
methods, principles or practices used by Buyer (except insofar as may be
required by a change in generally accepted accounting principles, of which Buyer
shall promptly notify the Company and except in accordance with the
20
22
implementation of new pronouncements or regulations adopted by the financial
accounting standards board relating to the impairment of goodwill in connection
with acquisitions).
(i) NO DISSOLUTION, ETC. Buyer shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation of Buyer or any of its subsidiaries.
(j) TAX ELECTION. Except as set forth in Section 4.18 of the
Buyer Disclosure Schedule, Buyer shall not make any tax election or settle or
compromise any material income tax liability.
(k) FINANCIAL STATEMENTS. Buyer shall promptly provide the
Company with copies of its internal monthly financial reports.
(l) GENERAL. Buyer shall not, and shall not permit any of its
subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 5.02.
SECTION 5.03. OTHER ACTIONS.
(a) Except as contemplated by Section 5.01, the Company shall
not, and shall not permit any of its subsidiaries to, take any action that could
reasonably be expected to result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect, or (iii) any
of the conditions to the Merger set forth in Article VII hereof not being
satisfied in all material respects.
(b) Except as contemplated by Section 5.02, the Buyer shall
not, and shall not permit any of its subsidiaries to, take any action that could
reasonably be expected to result in (i) any of the representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect, or (iii) any
of the conditions to the Merger set forth in Article VII hereof not being
satisfied in all material respects.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT/PROXY STATEMENT; QUOTATION ON
NASDAQ NATIONAL MARKET.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Buyer shall prepare and file with the SEC preliminary
proxy materials which shall constitute the preliminary Proxy Statement and a
preliminary prospectus with respect to the Buyer Common Stock to be issued in
connection with the Merger. As promptly as practicable after comments are
received from the SEC with respect to the preliminary proxy materials and after
the furnishing by the Company and Buyer of all information required to be
contained therein (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants), the Company and Buyer shall file with the SEC the definitive Proxy
Statement and Buyer shall file with the SEC the Registration Statement, which
Proxy Statement and Registration Statement shall each comply in all material
respects with the applicable requirements of the Exchange Act and Securities
Act, respectively, and the applicable rules and regulations of the SEC
thereunder. Buyer and the Company shall use their reasonable efforts to cause
the Registration Statement to become effective as soon thereafter as
practicable.
(b) The Company and Buyer shall cause the Proxy Statement to
be mailed to their respective stockholders and, if necessary, after the Proxy
Statement shall have been so mailed, promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies.
21
23
(c) Each of Buyer and Acquisition Sub, on the one hand, and
the Company, on the other hand, warrants to the other that the information
provided and to be provided by Buyer and Acquisition Sub and the Company,
respectively (or incorporated by reference to filings made with the SEC by Buyer
and the Company, respectively), for use in each of the Registration Statement,
on the date the Registration Statement becomes effective, and the Proxy
Statement, on the date the Proxy Statement is filed with the SEC and on the date
it is first mailed to the Company's stockholders and the date it is first mailed
to Buyer's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of Buyer and Acquisition Sub, on the one hand, and the
Company, on the other, shall notify the other parties promptly of the receipt of
any comments by the SEC and of any request by the SEC for amendments or
supplements to the preliminary Proxy Statement, the Proxy Statement or the
Registration Statement or for additional information, and shall supply one
another with copies of all correspondence with the SEC with respect to any of
the foregoing. If at any time prior to the Special Meeting, any event should
occur relating to Buyer or Acquisition Sub (or any of their respective
affiliates, directors or officers) which should be described in an amendment or
supplement to the Proxy Statement or the Registration Statement, Buyer shall
promptly inform the Company. If at any time prior to the Buyer Stockholders'
Meeting, any event should occur relating to the Company, its subsidiaries or any
of their respective affiliates, directors or officers which should be described
in an amendment or supplement to the Proxy Statement or the Registration
Statement, the Company shall promptly inform Buyer. Whenever any event occurs
which should be described in an amendment or supplement to the Proxy Statement
or the Registration Statement, Buyer and the Company shall, upon learning of
such event, cooperate with each other promptly to file and clear with the SEC
and, if applicable, mail such amendment or supplement to the stockholders of the
Company and Buyer.
(d) Buyer shall use its best efforts to obtain approval for
quotation on the Nasdaq National Market, upon official notice of issuance, of
the Buyer Common Stock to be issued pursuant to the Merger.
SECTION 6.02. COMPANY STOCKHOLDER APPROVAL.
(a) The Company, acting through its Board of Directors (the
"COMPANY BOARD"), shall, in accordance with applicable law, duly call, give
notice of, convene and hold a special meeting (the "COMPANY STOCKHOLDERS
MEETING") of its stockholders as soon as practicable for the purpose of
approving and adopting the plan of merger set forth in this Agreement and
approving the Merger, and, shall include in the Company Proxy Statement the
recommendation of the Company Board that the stockholders of the Company vote in
favor of the adoption of the plan of merger set forth in this Agreement and
approval of the Merger, subject only to Section 6.14.
(b) Buyer agrees to cause all Shares owned by Buyer or any
subsidiary of Buyer to be voted in favor of the Company Stockholder Approval.
(c) The Company hereby consents and agrees to the inclusion in
the Proxy Statement of the recommendation of the Company's Board, subject to any
modification, amendment or withdrawal thereof.
(d) In connection with the Merger, the Company shall cause its
transfer agent to furnish Acquisition Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Acquisition Sub such information and assistance (including updated
lists of stockholders, security position listings and computer files) as Buyer
may reasonably request. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the documents necessary to
consummate the Merger, Buyer and Acquisition Sub and their agents shall hold in
confidence the information contained in any such labels, listings and files,
shall use such information only in connection with the Merger and, if this
22
24
Agreement shall be terminated, shall, upon request, deliver, and shall use their
best efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
SECTION 6.03. BUYER STOCKHOLDER APPROVAL. Buyer, acting through its
Board of Directors (the "BUYER BOARD"), shall, in accordance with applicable
law, duly call, give notice of, convene and hold a special meeting (the "BUYER
STOCKHOLDERS MEETING") of its stockholders as soon as practicable for the
purpose of approving (a) the issuance of the Buyer Common Stock as the Merger
Consideration pursuant to this Agreement; and (b) an increase to the number of
shares of Buyer Common Stock issuable under Buyer's stock option plan; and,
shall include in the Proxy Statement the recommendation of Buyer Board that the
stockholders of Buyer vote in favor of such issuance and increase.
SECTION 6.04. BUYER REGISTRATION STATEMENT. Buyer agrees to file a
Registration Statement on Form S-4 (or such other form as may be deemed
appropriate by the SEC) with the SEC to register the issuance of the Buyer
Common Stock being issued pursuant to the merger (the "S-4 REGISTRATION
STATEMENT"). Buyer also agrees to file a Registration Statement on Form S-3 (or
equivalent or successor form) to register the resale of the Buyer Common Stock
being issued to affiliates (as the term is used under Rule 145 of the Exchange
Act) (the "S-3 REGISTRATION STATEMENT"), pursuant to the terms and conditions
set forth in the Registration Rights Agreement by and among the Buyer and
certain Company shareholders dated as of the date hereof.
SECTION 6.05. ACCESS TO INFORMATION. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which the Company and
Buyer are subject (from which they shall use reasonable efforts to be released),
the Company and Buyer shall, and shall cause each of their subsidiaries to,
afford to the other and to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours to all
their respective properties, books, contracts, commitments and records and,
during such period, the Company and Buyer shall (and shall cause each of their
subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to SEC requirements, and (b) all other information
concerning its business, properties and personnel as the other may reasonably
request. Except as otherwise agreed to by the Company and Buyer, and
notwithstanding termination of this Agreement, the terms of the confidentiality
letter agreement, dated May 1, 2001, between the Company and Buyer shall apply
to all information about the Company and Buyer which has been furnished under
this Agreement by either company to the other or any other person covered by
such agreement.
SECTION 6.06. REASONABLE EFFORTS. Each of the Company, Buyer and
Acquisition Sub agrees to use its reasonable efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger (which actions shall
include furnishing all information required under the HSR Act and in connection
with approvals of or filings with any other Governmental Entity) and shall
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Merger. Each of the Company, Buyer and Acquisition Sub will,
and the Company shall cause each of its subsidiaries to, use its reasonable
efforts to take all reasonable actions necessary to obtain (and will cooperate
with each other in obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public or private third
party required to be obtained or made by Buyer, Acquisition Sub, the Company or
any of their subsidiaries in connection with the Merger or the taking of any
action contemplated by this Agreement, except that no party need waive any
substantial rights or agree to any substantial limitation on its operations or
to dispose of or hold separate any material assets.
SECTION 6.07. COMPANY STOCK OPTIONS; PLANS.
(a) The Company shall, effective as of the Effective Time,
cause each outstanding option to purchase Company Common Stock (a "COMPANY STOCK
OPTION") issued pursuant to the Company's Amended and Restated 1999 Stock Option
Plan and its 1986 Stock Option Plan (the "COMPANY STOCK OPTION PLANS"), whether
or not exercisable or vested, to become fully exercisable and vested. The
23
25
Company and Buyer shall cause each Company Stock Option that is outstanding to
be exchanged for fully exercisable and vested options to purchase shares of
Buyer Common Stock ("BUYER STOCK OPTIONS"), in an amount equal to the product of
the Exchange Number times the number of shares of Company Common Stock issuable
upon exercise of such Company Stock Option. Such Buyer Stock Options shall have
an exercise price equal to the original exercise price for the Company Stock
Options divided by the Exchange Number and shall be covered, as of the Closing,
by an effective registration statement on Form S-8.
(b) Except as may otherwise be agreed by Buyer or Acquisition
Sub and the Company, the Company Stock Option Plan shall terminate as of the
Effective Time, and no holder of Company Stock Options or any participant in the
Company Stock Option Plan shall have any rights thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any subsidiary thereof.
(c) Except as may otherwise be agreed by Buyer or Acquisition
Sub and the Company, all other plans, programs or arrangements providing for the
issuance or grant of any other interest or payment in respect of the capital
stock of the Company or any of its subsidiaries shall terminate as of the
Effective Time, and no participant in any such plans, programs or arrangements
shall have any rights thereunder to acquire any equity securities of the
Company, the Surviving Corporation or any subsidiary thereof.
SECTION 6.08. CONFIDENTIALITY. Prior to the Closing, each of Buyer and
Acquisition Sub shall, and shall cause its affiliates (as defined in Section
9.03) and its and their employees, agents, accountants, legal counsel and other
representatives and advisers to, hold in strict confidence all, and not divulge
or disclose, or use for any purpose other than evaluating the Merger, any
information of any kind concerning the Company and its business; provided,
however, that the foregoing obligation of confidence shall not apply to (i)
information that is or becomes generally available to the public other than as a
result of a disclosure by Buyer, Acquisition Sub, any of their respective
affiliates or any of their respective employees, agents, accountants, legal
counsel or other representatives or advisers, (ii) information that is or
becomes available to Buyer, Acquisition Sub, any of their respective affiliates
or any of their respective employees, agents, accountants, legal counsel or
other representatives or advisers on a nonconfidential basis and other than in
breach of any confidentiality obligation, and (iii) information that is required
to be disclosed by Buyer, Acquisition Sub, any of their respective affiliates or
any of their respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Entity; and provided further that Buyer promptly
shall notify the Company of any disclosure pursuant to the foregoing clause
(iii). Promptly after any termination of this Agreement, Buyer, Acquisition Sub
and their representatives shall return to the Company or destroy all copies of
documentation with respect to the Company that were supplied by or on behalf of
the Company pursuant to this Agreement, without retaining any copy thereof, and
destroy any notes or analyses Buyer, Acquisition Sub and/or their
representatives may have prepared containing information derived from such
materials.
Prior to the Closing, the Company shall, and shall cause its affiliates
(as defined in Section 9.03) and its employees, agents, accountants, legal
counsel and other representatives and advisers to, hold in strict confidence
all, and not divulge or disclose, or use for any purpose other than evaluating
the Merger, any information of any kind concerning Buyer and its business;
provided, however, that the foregoing obligation of confidence shall not apply
to (i) information that is or becomes generally available to the public other
than as a result of a disclosure by Buyer, any of its affiliates or any of its
employees, agents, accountants, legal counsel or other representatives or
advisers, (ii) information that is or becomes available to the Company, any of
its affiliates or any of its employees, agents, accountants, legal counsel or
other representatives or advisers on a nonconfidential basis and other than in
breach of any confidentiality obligation, and (iii) information that is required
to be disclosed by the Company, any of its affiliates or any of its employees,
agents, accountants, legal counsel or other representatives or advisers as a
result of any applicable law, rule or regulation of any Governmental Entity; and
provided further that the Company promptly shall notify Buyer of any disclosure
pursuant to the foregoing clause (iii). Promptly after any termination of this
Agreement, the Company and its representatives shall return to Buyer or destroy
24
26
all copies of documentation with respect to Buyer that were supplied by or on
behalf of Buyer pursuant to this Agreement, without retaining any copy thereof,
and destroy any notes or analyses the Company and/or its representatives may
have prepared containing information derived from such materials.
SECTION 6.09. FEES AND EXPENSES; CERTAIN PAYMENTS.
(a) Except as provided below in this Section 6.09, all fees
and expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated. Notwithstanding
the foregoing, Buyer shall be responsible for all filing fees required under the
HSR Act in connection with the Merger and the transactions contemplated hereby.
(b) The Company shall immediately pay or cause to be paid to
Buyer a termination fee in the amount of $4.0 million if (1) the Company
terminates this Agreement pursuant to Sections 8.01(d)(iv), or (2) Buyer
terminates this Agreement pursuant to Section 8.01(c)(iv).
SECTION 6.10. INDEMNIFICATION; INSURANCE.
(a) Buyer and Acquisition Sub agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers (the
"INDEMNIFIED PARTIES") of the Company and its subsidiaries as provided in their
respective Certificate/Articles of Incorporation or bylaws (or similar
organizational documents) or existing indemnification contracts shall survive
the Merger and shall continue in full force and effect in accordance with their
terms.
(b) For not less than six years from the Effective Time, Buyer
shall maintain in effect the Company's current directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to Buyer); PROVIDED, HOWEVER, that Buyer may
substitute therefor a policy or policies of at least the same coverage and
amounts containing terms that are no less advantageous in any material respect
to the Indemnified Parties; and, PROVIDED, FURTHER, that in no event shall Buyer
be required to expend in any one year an amount in excess of 300% of the annual
premiums currently paid by the Company for such insurance; and, PROVIDED,
FURTHER, that if the annual premiums of such insurance coverage exceed such
amount, Buyer shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) This Section 6.10 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, Buyer, the
Surviving Corporation and the Indemnified Parties and their respective heirs,
personal representatives, successors and assigns, and shall be binding on all
successors and assigns of Buyer and the Surviving Corporation.
SECTION 6.11. EMPLOYMENT AND BENEFIT ARRANGEMENTS.
(a) From and after the Effective Time, Buyer shall cause the
Surviving Corporation to honor all employment, severance, termination and
retirement agreements to which the Company is a party and which are listed on
Section 3.15 of the Company Disclosure Schedule, as such agreements are in
effect on the date hereof, including but not limited to the base salary or
hourly rate and commission arrangements, at not less than the base salary or
hourly rate and commission arrangements then applicable to such employee and to
provide such benefits, holidays, vacation days, and similar benefits as are, in
the aggregate, substantially comparable to those then in effect for such
Employees. As used herein, "Employee" means all employees of the Company
immediately prior to the Effective Time.
(b) For a one-year period following the Effective Time, Buyer
shall cause the Surviving Corporation to continue to provide those employees of
the Surviving Corporation at the Effective Time, so long as they remain
employees of the Surviving Corporation, with benefits that are, in the
25
27
aggregate, no less favorable to such employees as are the benefits of the
Company provided to such employees immediately prior to the Effective Time
(c) As soon as practicable following the Effective Time, Buyer
and the Surviving Corporation shall cause to be transferred (i) from the Sound
Advice 401K Plan (the "COMPANY SAVINGS PLAN") to the savings plan sponsored by
Buyer and the Surviving Corporation (the "BUYER SAVINGS PLAN"), and the Buyer
Savings Plan shall assume, the account balance liability as of the date of
transfer for each Employee who participated in the Company Savings Plan prior to
the Closing Date (the "ELIGIBLE EMPLOYEES"), and (ii) from the trust relating to
the Company Savings Plan, an amount in cash or other property, including
participant loans, acceptable to the trustee of the Buyer Savings Plan equal to
the sum of the account values (as of the date of transfer) of each Eligible
Employee. The Company shall not be obligated to cause any amount to be
transferred to the Buyer Savings Plan or the trust thereunder until Buyer
provides evidence (such as a favorable determination letter from the Internal
Revenue Service, an opinion of counsel or other reasonably satisfactory
evidence) reasonably acceptable to the Company that such plan and trust satisfy
the requirements for qualification under Section 40l(a) of the Internal Revenue
Code (the "CODE"). Each Eligible Employee shall be entitled on the date of
transfer to a nonforfeitable account balance under the Buyer Savings Plan that
is not less than such Eligible Employee's nonforfeitable account balance under
the Company Savings Plan immediately prior to such transfer. Buyer agrees to
permit any Eligible Employee who has an unpaid loan balance under the Company
Savings Plan to continue to repay such loan under the Buyer Savings Plan under
the same terms as such loan was required to be repaid under the Company Savings
Plan.
(d) Buyer and the Surviving Corporation shall take all actions
required so that Employees shall receive service credit under the Surviving
Corporation's vacation and compensation programs, for the duration of their
service with the Company.
(e) For purposes of vesting and eligibility, Buyer and the
Surviving Corporation shall, with respect to each benefit required to be
provided under the terms of this Section 6.11, credit each Employee with all
service credited to the Employee under the Company's corresponding plan, policy,
program or arrangement applicable to such Employee as of the Effective Time.
(f) Buyer and the Surviving Corporation shall credit each
Employee with any vacation and sick days accrued as of the Effective Time in
accordance with the terms of the Company's vacation and sick day policies in
effect as of such date.
(g) Medical and Dental Plans
(i) Effective as of the Effective Time, the Surviving
Corporation shall make enrollment available to all Employees and their eligible
dependents without any waiting period in a Buyer plan or plans providing medical
and dental benefits (the "BUYER MEDICAL PLANS"), to the extent such individuals
were eligible for coverage under the Company Medical Plans. Such Buyer Medical
Plans shall waive any restrictions and limitations for pre-existing conditions
for all Employees and shall give credit to each Employee for any deductibles and
out-of-pocket expenses paid during the current plan year by such Employee under
Company's applicable medical and dental Plans (hereinafter collectively referred
to as the "COMPANY MEDICAL PLANS").
(ii) The Surviving Corporation shall be responsible
for medical and dental expenses covered under the terms of the Buyer Medical
Plans. If an Employee or a covered dependent of an Employee enrolled in the
Company Medical Plans is hospitalized on the Effective Time, the Company Medical
Plans shall continue to provide coverage for such person until he or she is
discharged from the hospital, to the extent coverage is provided under the terms
of the Company Medical Plans.
(iii) The Surviving Corporation, shall provide the
benefits, if any, required from and after the Effective Time pursuant to section
4980B of the Code or Part 6 of Title I of ERISA for any Employee who is or
becomes entitled to such continuation medical coverage from the Company or Buyer
or Acquisition Sub on or after the Effective Time.
26
28
(h) The provisions of this Section 6.11 are not intended to
create rights of third party beneficiaries.
(i) Notwithstanding anything contained herein to the contrary,
nothing in this Section 6.11 shall be deemed to be a commitment on the part of
Buyer or the Surviving Corporation to provide employment to any person for any
period of time and, except as otherwise provided in this Section 6.11, nothing
herein shall be deemed to prevent Buyer or the Surviving Corporation from
amending or terminating any benefit plan or arrangement in accordance with its
terms.
SECTION 6.12. RIGHTS AGREEMENT AMENDMENT. Subject to the terms and
conditions of this Agreement, the Company shall promptly enter into an amendment
to the Rights Agreement (the "RIGHTS AGREEMENT AMENDMENT") pursuant to which the
Rights Agreement and the Rights Agreement Rights will not be applicable to the
Merger, and consummation of the Merger shall not result in a "Distribution Date"
under the Rights Agreement or in Buyer or Acquisition Sub or their affiliates
being an "Acquiring Person" or in the Rights Agreement Rights becoming
exercisable.
SECTION 6.13. TAKEOVER STATUTES. If Sections 0901 or 0902 of the
Florida Corporation Law or any other "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States (each a "TAKEOVER STATUTE") is or may
become applicable to (i) the Merger; (ii) Buyer; (iii) any Company Common Stock
as to which Buyer has the right to vote or to direct voting; or (iv) Buyer's
ability to directly or indirectly acquire the Company Common Stock, the Company
shall, to the maximum extent permissible by law, waive the provisions and
protections of any such Takeover Statute, and take all other such actions as may
be necessary to eliminate or minimize the effects of any Takeover Statute to
Buyer.
SECTION 6.14. NO SOLICITATION.
(a) From the date hereof until the termination of this
Agreement, the Company agrees that neither it nor any of the officers or
directors shall, and that it shall direct and use its best reasonable efforts to
cause its officers, directors, employees, investment bankers, consultants,
attorneys and other agents not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal or any inquiry with respect thereto or engage in discussions or
negotiations with any person with respect thereto, or disclose any non-public
information relating to the Company or afford access to the properties, books or
records of the Company to any person that has made any Acquisition Proposal;
provided, that nothing contained in this Section 6.14 shall prevent the Company,
after providing prior notice thereof to Buyer that it is taking such action,
from furnishing non-public information to, or entering into discussions or
negotiations with, any person in connection with an unsolicited bona fide
Acquisition Proposal received from such person that the Company Board determines
in good faith is reasonably likely to lead to a Superior Proposal, so long as
(i) the Company has received prior to the date hereof an executed
confidentiality agreement or prior to furnishing non-public information to, or
entering into discussions or negotiations with, such person, the Company
receives from such person an executed confidentiality agreement containing
standard terms and conditions and (ii) the Company Board determines in good
faith, based on such matters that it deems relevant, but in any event upon the
advice of independent legal counsel, that such action is necessary for the
Company Board to comply with its fiduciary duties to the Company's shareholders
under applicable law; provided, further, that nothing contained in this
Agreement shall prevent the Company or its board of directors from complying
with Rule 14e-2 or 14d-9 under the 1934 Act with regard to an Acquisition
Proposal.
(b) The Company will (i) promptly (and in no event later than
48 hours after the receipt of any Acquisition Proposal) notify (which notice
shall be provided in writing and shall identify the person making such
Acquisition Proposal and set forth the material terms thereof) Buyer after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Company or any of its Subsidiaries or for access to the
properties, books or records of the Company or any of its Subsidiaries by any
person that may be considering making, or has made, an Acquisition Proposal, and
(ii) keep Buyer informed on a current basis of the status and content of any
discussions or negotiations with any third party regarding any Acquisition
27
29
Proposal. The Company will, and will cause the other applicable persons listed
in the first sentence of Section 6.14(a) to, immediately cease and cause to be
terminated all discussions and negotiations, if any, that have taken place prior
to the date hereof with any parties with respect to any Acquisition Proposal,
except as set forth in the proviso in Section 6.14(a).
(c) Except as set forth in this Section 6.14(c), the Company
Board shall not (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Buyer, its approval or recommendation of this
Agreement, or any of the transactions contemplated hereby, including the Merger,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (iii) cause the Company to enter into any agreement
(including, without limitation, any letter of intent but excluding any
confidentiality agreement) with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if the Company Board, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that it is necessary to do so in order to comply with its fiduciary duties under
applicable law, it may (1) withdraw or modify, or propose publicly to withdraw
or modify, its approval and recommendation of this Agreement, or any of the
transactions contemplated hereby, including the Merger, (2) approve or
recommend, or propose publicly to approve or recommend, a Superior Proposal or
(3) cause the Company to enter into an agreement with respect to a Superior
Proposal, but in the case of clause (3) only after the expiration of three (3)
business days after the date on which the Company provides written notice to
Buyer advising that the Company Board has received a Superior Proposal,
specifying the terms and conditions of such Superior Proposal and identifying
the person making such Superior Proposal during which period the Company Board
shall consider any revised offer submitted by Buyer in its discretion (a "BUYER
REVISED OFFER"). Prior to or concurrently with entering into an agreement
(including a letter of intent) with respect to a Superior Proposal, the Company
shall terminate this Agreement pursuant to Section 8.01(d)(iv).
For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal for, or any indication of interest in, a merger or other business
combination involving the Company or any of its subsidiaries, or the acquisition
of any equity interest in, or a substantial portion of the assets of, or any
tender offer or exchange offer that, if consummated, would result in any person
beneficially owning 20% or more of any class of equity securities of, the
Company or any of its subsidiaries, other than for an amount of assets not
material to the Company and its subsidiaries taken as a whole, that the Company
has no reason to believe would lead to a Change of Control of the Company (or to
the acquisition of a substantial portion of the assets of the Company and its
subsidiaries). For purposes of this Agreement, "Superior Proposal" means any
bona fide Acquisition Proposal (i) on terms that the Company Board determines in
its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation, taking into account all the terms and
conditions of the Acquisition Proposal, including any break-up fees included in
the Acquisition Proposal, expense reimbursement provisions and conditions to
consummation and after payment of the termination fee provided in Section
6.09(b) hereof) are more favorable to the Company's shareholders than the terms
and conditions of this Agreement and the Merger and any Buyer Revised Offer,
taken as a whole, (ii) for which financing, to the extent required, is then
fully committed or reasonably determined to be available by the Company Board,
and (iii) pursuant to which no less than 100% of the Company Common Stock (or a
corresponding amount of the assets of the Company and its subsidiaries) is
proposed to be acquired. For purposes of this Agreement, "Change of Control"
means any event or occurrence, or series of related events or occurrences,
pursuant to which 20% or more of the voting power of the Company is acquired by
a third party or group acting in concert in connection with the transactions
contemplated by any Acquisition Proposal.
SECTION 6.15. NOTICE OF EVENTS. The Company and Buyer shall promptly
notify each other of: (i) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement; (ii) any notice or other
communication from any Governmental Entity in connection with the transactions
contemplated by this Agreement; and (iii) any actions, suits, claims,
investigations or proceedings commenced, or to the knowledge of the Company or
Buyer, as the case may be, threatened, against or otherwise affecting the
Company or Buyer, as the case may be, which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.13 (in the case of the Company) or Section 4.14 (in the case of Buyer) or
which relate to the transactions contemplated by this Agreement.
28
30
ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a majority
of the outstanding shares of Company Common Stock;
(b) The approval of Buyer's stockholders as described in
Section 6.03 shall have been obtained;
(c) The S-4 Registration Statement and the S-3 Registration
Statement shall have been declared effective under the Securities Act and no
stop order suspending the effectiveness of either Registration Statement shall
be in effect and no proceedings for such purpose shall be pending before or
threatened by the SEC, and the Buyer Common Stock to be issued in the Merger
shall have been approved for listing on Nasdaq, subject to notice of issuance;
(d) All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement, the failure to obtain which would prevent the consummation of the
Merger or have a material adverse effect on the Company, shall have been
obtained without the imposition of any condition having a material adverse
effect on Company;
(e) If applicable, early termination shall have been granted
or applicable waiting periods shall have expired under the HSR Act;
(f) No Governmental Entity or other regulatory body (including
any court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order or decree, or any
final and nonappealable ruling, permanent injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal, materially restricting or in any way preventing or
prohibiting the Merger or the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that each of the parties shall have used reasonable efforts
(subject to the other terms and conditions of this Agreement) to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered prior to it having
become final and nonappealable.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF BUYER AND ACQUISITION SUB TO
EFFECT THE MERGER. The obligations of Buyer and Acquisition Sub to effect the
Merger are further subject to satisfaction or waiver at or prior to the
Effective Time of the following conditions.
(a) There shall not have occurred any change, condition, event
or development that has resulted in, or could reasonably be expected to result
in, a material adverse effect on the Company;
(b) The representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time;
(c) The representations and warranties of the Company in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective Time;
29
31
(d) The Company shall have performed in all material respects
all obligations required to be performed by it under this Agreement;
(e) An officer of the Company shall have delivered to Buyer
and Acquisition Sub a certificate to the effect that each of the conditions
specified in Sections 7.02(a), (b), (c) and (d) is satisfied in all respects;
(f) All authorizations, consents, waivers and approvals from
parties to contracts or other agreements to which any of the Company or its
subsidiaries is a party, or by which any of them is bound, as may be required to
be obtained by them in connection with the performance of this Agreement, the
failure to obtain which would prevent the consummation of the Merger or have,
individually or in the aggregate, a material adverse effect on Company shall
have been obtained (provided that the failure to obtain a landlord's consent
which, upon the payment of a customary fee no greater than $1000 would be
reasonably expected to be obtained, shall not be deemed to be material);
(g) Buyer shall have received an opinion, dated the Effective
Time, of Xxxxxxxxx Xxxxxxx, P.A., counsel to the Company, in form and substance
reasonably satisfactory to Buyer, with respect to the matters set forth in
Sections 3.01, 3.02, 3.03 and 3.04 (including as to the Company Stockholder
Approval) hereof;
(h) No suit, action or proceeding before any court or any
governmental or regulatory authority shall have been commenced and be pending by
any person against the Company, Buyer, Acquisition Sub or any of their
affiliates, associates, officers or directors (i) challenging the Merger,
seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or seeking to obtain any substantial damages
relating to the consummation of the transactions contemplated by this Agreement,
or (ii) seeking to prohibit or impose any material limitation on the ownership
or operation by Buyer, Acquisition Sub (or any of their respective affiliates or
subsidiaries) of all or any portion of the business or assets of the Company or
any of its subsidiaries, (iii) seeking to impose any material limitation upon
the ability of Buyer (or any of its affiliates) effectively to acquire or hold
or to exercise full rights of ownership of the Company and its subsidiaries, or
(iv) which otherwise is reasonably likely to have a material adverse effect on
the Company or Buyer;
(i) The Company shall have either terminated the Rights
Agreement or effected the Rights Agreement Amendment; and
(j) At the mailing date of the Proxy Statement and the date of
the Buyer Stockholders Meeting, the Proxy Statement shall not contain, with
respect to the information provided by the Company, any untrue statement of a
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) There shall not have occurred any change, condition, event
or development that has resulted in, or could reasonably be expected to result
in, a material adverse effect on Buyer.
(b) The representations and warranties of Buyer and
Acquisition Sub in this Agreement that are qualified by materiality shall be
true and correct in all respects as of the date of this Agreement and as of the
Effective Time;
(c) The representations and warranties of Buyer and
Acquisition Sub in this Agreement that are not qualified by materiality shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Time;
30
32
(d) Buyer and Acquisition Sub shall have performed in all
material respects all obligations required to be performed by them under this
Agreement;
(e) An officer of Buyer and Acquisition Sub shall have
delivered to the Company a certificate to the effect that each of the conditions
specified in Sections 7.03(a), (b) and (c) is satisfied in all respects;
(f) The Company shall have received an opinion, dated the
Effective Time, of Goulston & Storrs, P.C., counsel to Buyer, in form reasonably
satisfactory to the Company, with respect to the matters set forth in Sections
4.01, 4.02, 4.03 and 4.04 (including as to the Buyer Stockholder Approval)
hereof;
(g) All authorizations, consents, waivers and approvals from
parties to contracts or other agreements to which any of Buyer or its
subsidiaries is a party, or by which any of them is bound, as may be required to
be obtained by them in connection with the performance of this Agreement, the
failure to obtain which would prevent the consummation of the Merger or have,
individually or in the aggregate, a material adverse effect on Buyer shall have
been obtained;
(h) At the mailing date of the Proxy Statement and the date of
the Company Stockholders Meeting, the Proxy Statement shall not contain, with
respect to the information provided by Buyer and Acquisition Sub, any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading; and
(i) No suit, action or proceeding before any court or any
governmental or regulatory authority shall have been commenced and be pending by
any person (i) against the Company's officers or directors seeking to obtain any
substantial damages relating to the consummation of the transactions
contemplated by this Agreement from the members of the Company's Board of
Directors or officers individually, or (ii) against the Company challenging the
Merger which is reasonably likely to have a material adverse effect on the
Buyer.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the stockholders of the Company or of Buyer:
(a) by mutual written consent of Buyer and the Company;
(b) by either Buyer or the Company if any Governmental Entity
shall have issued an order, injunction, decree or ruling or taken any other
action (that has not been vacated, withdrawn or overturned) permanently
enjoining, restraining or otherwise prohibiting the acceptance for payment of,
or payment for, shares of Company Common Stock pursuant to the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.01(b) shall not be available to any party that has
failed to perform its obligations under Section 6.06;
(c) by Buyer or Acquisition Sub, if
(i) (A) the representations and warranties of the
Company in Section 3.03 shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made (and, in
each case, the same has continued unremedied for ten (10) business days after
the Company has received written notice from Buyer or Acquisition Sub of the
occurrence of such failure to be true and correct), except in any case where
31
33
such failure to be true and correct would not, in the aggregate, (x) have a
material adverse effect on the Company, or (y) prevent or materially delay the
consummation of the Merger; or (z) result in the conditions in Sections 7.02(b)
or (c) being incapable of satisfaction;
(ii) (A) the representations and warranties of the
Company in Section 3.03(other than representations and warranties made as of a
specified date) shall have ceased at any later date to be true and correct in
all material respects as if made as of such later date, or (B) any other
representation or warranty of the Company (other than representations and
warranties made as of a specified date) shall have ceased at any later date to
be true and correct in all material respects as if made at such later date (and,
in each case, the same has continued unremedied for ten (10) business days after
the Company has received written notice from Buyer or Acquisition Sub of the
occurrence of such failure to be true and correct), except in any case where
such failure to be true and correct would not, (x) in the aggregate, have a
material adverse effect or (y) prevent or materially delay the consummation of
the Merger or (z) result in the conditions in Sections 7.02(b) or (c) being
incapable of satisfaction;
(iii) the Company shall have failed to comply (after
the passage of ten (10) business days after the Company has received notice from
Buyer or Acquisition Sub of the failure) with any of its obligations or
covenants contained herein except in any case where such failure to comply would
not be reasonably likely to (x) have a material adverse effect with respect to
the Company or (y) prevent or materially delay the consummation of the Merger;
or (z) result in the conditions in Section 7.02(d) being incapable of
satisfaction; or
(iv) the Board of Directors of the Company or any
committee thereof shall have (A) failed to approve and recommend or shall have
withdrawn or modified, or publicly proposed to withdraw or modify, in a manner
adverse to Buyer or Acquisition Sub its approval or recommendation of the Merger
or this Agreement or (B) approved or recommended, or publicly proposed to
approve or recommend, any Acquisition Proposal; or
(v) the Company Stockholder Approval is not obtained
by November 1, 2001.
(d) by the Company, if
(i) the representations or warranties of Buyer or
Acquisition Sub shall not have been true and correct in all material respects
when made (and the same has continued unremedied for ten (10) business days
after either Buyer or Acquisition Sub has received written notice from the
Company of the occurrence of such failure to be true and correct), except in any
case where such failure to be true and correct would not, in the aggregate, (x)
have a material adverse effect on the Company, or (y) prevent or materially
delay the consummation of the Merger; or (z) result in the conditions in
Sections 7.03(b) or (c) being incapable of satisfaction;
(ii) the representations or warranties of Buyer and
Acquisition Sub (other than representations and warranties made as of a
specified date) shall have ceased at any later date to be true and correct in
all material respects as if made at such later date (and the same has continued
unremedied for ten (10) business days after either Buyer or Acquisition Sub has
received written notice from the Company of the occurrence of such failure to be
true and correct), except in any case where such failure to be true and correct
would not, (x) in the aggregate, have a material adverse effect or (y) prevent
or materially delay the consummation of the Merger; or (z) result in the
conditions in Sections 7.03(b) and (c) being incapable of satisfaction;
(iii) Buyer and Acquisition Sub shall have failed to
comply with any of their obligations or covenants contained herein comply (after
the passage of ten (10) business days after either Buyer or Acquisition Sub has
received notice from the Company of the failure), except in any case where such
failure to comply would not be reasonably likely to (x) have a material adverse
effect with respect to Buyer and Acquisition Sub or (y) prevent or materially
delay the consummation of the Merger; or (z) result in the conditions in
Sections 7.03(d) being incapable of satisfaction;
32
34
(iv) prior to the Company Stockholder Approval, if
the Company Board shall have received an Acquisition Proposal which the Company
Board has determined in good faith is a Superior Proposal and the Company
promptly following such termination enters into an agreement (including a letter
of intent) providing for the transactions contemplated by such Superior Proposal
after complying with Section 6.14(c) (including, without limitation, the
expiration of the three (3) business day period set forth therein); provided
that it shall be a condition to the effectiveness of such termination that the
Company shall have made the payment referred to in Section 6.09(b) hereof;
(v) the Board of Directors of Buyer and Acquisition
Sub or any committee thereof shall have failed to approve and recommend or shall
have withdrawn or modified in a manner adverse to the Company its approval or
recommendation of the Merger, this Agreement, or the issuance of the Buyer
Common Stock pursuant to the Merger; or
(vi) the Buyer Stockholder Approval is not obtained
by November 1, 2001.
(e) by either Buyer or the Company if the Effective Time shall
not have occurred on or before December 31, 2001, unless extended by agreement
of the parties hereto.
(f) by either Buyer or the Company if the average daily
closing price of one share of Buyer Common Stock, as reported by Nasdaq for the
5 business days ending two days prior to the Closing Date, is less than $18.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a termination of
this Agreement by any of the Company, Buyer or Acquisition Sub as provided in
Section 8.01, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Buyer, Acquisition Sub or the Company or
their respective officers, directors, stockholders or affiliates, except with
respect to Section 3.09, Section 4.09, the last sentence of Section 6.05,
Section 6.08, Section 6.09, Section 6.14, this Section 8.02 and Article IX;
PROVIDED, HOWEVER, that nothing herein shall relieve any party for liability for
any breach hereof.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after obtaining the Company Stockholder Approval and the
Buyer Stockholder Approval, but, after any such approvals, no amendment shall be
made which by law requires further approval by such stockholders (or which
reduces the amount or changes the Merger Consideration to be delivered to such
stockholders) without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by mutual action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or,
(iii) subject to the first sentence of Section 8.03, waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or, in the
case of the Company, shall survive the acceptance for payment of, and payment
for, Shares by Acquisition Sub pursuant to this Agreement. This Section 9.01
33
35
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger.
SECTION 9.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer or Acquisition Tweeter Home Entertainment Group, Inc.
Sub, to: 00 Xxxxxx Xxx
Xxxxxx, XX 00000
Attention: Mr. Xxxxxxx Xxxxx
Telecopy No.: (000) 000-0000
Confirm No.: (000) 000-0000
with a copy to: Goulston & Storrs, P.C.
000 Xxxxxxxx Xxx.
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Confirm No.: (000) 000-0000
and
(b) if to the Company, to: Sound Advice, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
Confirm No.: (000) 000-0000
with a copy to: Greenberg, Traurig, PA
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Confirm No.: (000) 000-0000
SECTION 9.03. INTERPRETATION. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in this Agreement, they
shall be deemed to be followed by the words "WITHOUT LIMITATION." The phrase
"MADE available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, the term "SUBSIDIARY" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person, and the term "AFFILIATE"
shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act. As used in this Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE
EFFECT" means, any change or effect (or any development that, insofar as can
reasonably be foreseen, is likely to result in any change or effect) that,
individually or in the aggregate with any such other changes or effects, is
materially adverse to the business, prospects, assets (including intangible
34
36
assets), financial condition or results of operations of the Company and its
subsidiaries taken as a whole. Notwithstanding the foregoing, a material adverse
change or material adverse effect:
(a) shall not include (i) any material adverse change or
material adverse effect caused by any change resulting from the announcement of
the Merger, (ii) changes in general economic conditions or changes affecting
generally the industries in which the Company operates, (iii) changes in trading
prices for such party's capital stock, (iv) shareholder litigation arising from
allegations of a breach of fiduciary duty relating to this Agreement, or (v) the
impact of changes in GAAP; but
(b) with respect to the Company, shall in any case include any
change, effect, condition, circumstance or fact as to which a representation,
warranty or closing condition applies (without regard to exceptions for a
material adverse effect) which would singly or in conjunction with any other
change, effect, condition, circumstance or fact as to which a representation,
warranty or closing condition applies (without regard to exceptions for a
material adverse effect) either (i) prohibit or prevent, or be reasonably
expected to prohibit or prevent, the continued operation in a manner consistent
with the Company's past practices of any Company store or stores by Buyer
following Closing which store or stores had aggregate sales revenues during the
Company's fiscal year ended January 31, 2001, of more than $4.0 million; or (ii)
result, or be reasonably expected to result (not including any resulting from
changes in accounting methods that are not deviations from GAAP) in a liability
or obligation of more than $4.0 million (provided, however, that, without
limiting the foregoing, the liabilities and obligations to be aggregated in
clause (ii) shall include (x) all amounts necessary to bring the Company into
compliance with its representations and warranties made in Section 3.10 of this
Agreement without regard to any disclosure made in Section 3.10 of the Company
Disclosure Schedule and (y) all amounts reasonably required to be paid to obtain
landlord consents required in order to effect the transactions contemplated by
this Agreement).
Whenever "TO ITS KNOWLEDGE," "KNOWN" or a similar phrase is used to
qualify a representation of the Company or Buyer, as the case may be, the
"KNOWLEDGE" so referred to shall be deemed to be each and both of (a) the actual
knowledge of the executive offices of the Company or Buyer, as the case may be,
and (b) the knowledge that any of the foregoing persons would reasonably be
expected to acquire in the prudent discharge of his or her duties with respect
to the Company or Buyer, as the case may be.
SECTION 9.04. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when said counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 9.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.10, are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 9.06. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida and, to the extent
provided herein, the Corporation Law, without regard to any applicable conflicts
of law.
SECTION 9.07. PUBLICITY. Except as otherwise required by law or the
rules of the Nasdaq National Market, for so long as this Agreement is in effect,
neither the Company, Acquisition Sub nor Buyer shall, nor shall the Company
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Acquisition Sub may assign, in its
35
37
sole discretion, any or all of its rights, interests and obligations hereunder
to Buyer or to any direct or indirect wholly owned subsidiary of Buyer so long
as Buyer or such assignee also assumes all of Acquisition Sub's obligations
under this Agreement and Buyer acknowledges to the Company in a way satisfactory
to the Company that Buyer will cause such assignee to satisfy all of such
obligations. Acquisition Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.09. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of Florida in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of Florida. The prevailing party in any judicial
action shall be entitled to receive from the other party reimbursement for the
prevailing party's reasonable attorneys' fees and disbursements, and court
costs.
SECTION 9.10. NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth in this Agreement shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes this Agreement impossible to perform, in which case this
Agreement shall terminate pursuant to Article VIII hereof. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
*** signatures appear on the following page ***
36
38
IN WITNESS WHEREOF, Buyer, Acquisition Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TWEETER HOME ENTERTAINMENT GROUP, INC.
By: /s/ Xxxxxx XxXxxxx
--------------------------------------------------
Xxxxxx XxXxxxx, Vice President and Chief
Financial Officer
TWT ACQUISITION CORP.
By: /s/ Xxxxxx XxXxxxx
--------------------------------------------------
Xxxxxx XxXxxxx, President
SOUND ADVICE, INC.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------------------------
Xxxxx Xxxxxxxx, President
37
39
Exhibits and Schedules to Agreement and Plan of Merger among Tweeter Home
Entertainment Group, Inc., TWT Acquisition Corp. and Sound Advice, Inc. dated as
of June 1, 2001 Omitted in Accordance with Item 601(b)(2) of Regulation S-K
---------------------------
Schedule 3.02(a) Subsidiaries
Schedule 3.02(b) Partnership and Joint Venture Interests
Schedule 3.03 Restrictions on Subsidiary Stock
Schedule 3.05 Violations
Schedule 3.07 Certain Changes or Events
Schedule 3.08 Undisclosed liabilities
Schedule 3.10 Benefit Plans
Schedule 3.13 Litigation
Schedule 3.14 Compliance with Laws; No Defaults
Schedule 3.15 Labor Matters
Schedule 3.17 Taxes
Schedule 3.19 Insurance
Schedule 3.20 Liens and Encumbrances
Schedule 4.02(a) Buyer Subsidiaries
Schedule 4.02(b) Partnership and Joint Venture Interests
Schedule 4.03 Restrictions on Subsidiary Stock
Schedule 4.05 Consents and Approvals; No Violations
Schedule 4.07 Absence of Certain Changes or Events
Schedule 4.10 Benefit Plans
Schedule 4.14 Litigation
Schedule 4.16 Labor Matters
Schedule 4.17 Intellectual Property
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Liens and Encumbrances
Tweeter Home Entertainment Group, Inc. will furnish supplementally a copy of any
omitted exhibit or schedule to the Securities and Exchange Commission upon
request; provided however, that Tweeter Home Entertainment Group, Inc. may
request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934, as amended, for any schedule or exhibit so furnished.
