EXHIBIT 2.1
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GOOD GUYS, INC.,
COMPUSA INC.
and
GLADIATOR ACQUISITION CORP.
==================================
AGREEMENT AND PLAN OF MERGER
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Dated as of September 29, 2003
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TABLE OF CONTENTS
Page No.
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ARTICLE I. THE MERGER........................................................................ 1
SECTION 1.1. The Merger........................................................................ 1
SECTION 1.2. Closing........................................................................... 1
SECTION 1.3. Effective Time.................................................................... 2
SECTION 1.4. Effect of the Merger.............................................................. 2
SECTION 1.5. Subsequent Actions................................................................ 2
SECTION 1.6. Certificate of Incorporation; By-Laws; Directors and Officers..................... 2
ARTICLE II. CONVERSION OF SECURITIES.......................................................... 3
SECTION 2.1. Conversion of Capital Stock....................................................... 3
SECTION 2.2. Exchange of Certificates.......................................................... 4
SECTION 2.3. Stock Plans....................................................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB....................... 7
SECTION 3.1. Corporate Organization............................................................ 7
SECTION 3.2. Authority Relative to this Agreement.............................................. 7
SECTION 3.3. No Conflict; Required Filings and Consents........................................ 8
SECTION 3.4. Financing Arrangements............................................................ 8
SECTION 3.5. No Prior Activities............................................................... 8
SECTION 3.6. Litigation........................................................................ 9
SECTION 3.7. Brokers........................................................................... 9
SECTION 3.8. Information Supplied.............................................................. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... 9
SECTION 4.1. Organization and Qualification; Subsidiaries...................................... 9
SECTION 4.2. Capitalization.................................................................... 10
SECTION 4.3. Authority Relative to this Agreement.............................................. 12
SECTION 4.4. No Conflict; Required Filings and Consents........................................ 12
SECTION 4.5. SEC Filings; Financial Statements................................................. 13
SECTION 4.6. Absence of Certain Changes or Events.............................................. 13
SECTION 4.7. Litigation........................................................................ 15
SECTION 4.8. Employee Benefit Plans............................................................ 15
SECTION 4.9. Properties........................................................................ 17
SECTION 4.10. Intellectual Property............................................................. 18
SECTION 4.11. Insurance......................................................................... 20
SECTION 4.12. Environmental..................................................................... 20
SECTION 4.13. Material Contracts................................................................ 22
SECTION 4.14. Conduct of Business............................................................... 23
SECTION 4.15. Compliance with Law............................................................... 24
(i)
SECTION 4.16. Taxes............................................................................. 25
SECTION 4.17. Labor Relations................................................................... 27
SECTION 4.18. Transactions with Affiliates...................................................... 27
SECTION 4.19. Brokers........................................................................... 27
SECTION 4.20. Control Share Acquisition......................................................... 27
SECTION 4.21. Vote Required..................................................................... 27
SECTION 4.22. Investment Company................................................................ 28
SECTION 4.23. Information Supplied.............................................................. 28
SECTION 4.24. WARN.............................................................................. 28
SECTION 4.25. Suppliers......................................................................... 28
SECTION 4.26. Bank Accounts..................................................................... 28
SECTION 4.27. Board Action...................................................................... 29
SECTION 4.28. Opinion of Financial Advisor...................................................... 29
SECTION 4.29. Disclosure........................................................................ 29
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER............................................ 29
SECTION 5.1. Conduct of Business by the Company Pending the Merger............................. 29
SECTION 5.2. No Solicitation................................................................... 32
ARTICLE VI. ADDITIONAL AGREEMENTS............................................................. 34
SECTION 6.1. Proxy Statement................................................................... 34
SECTION 6.2. Meeting of Stockholders of the Company............................................ 35
SECTION 6.3. Compliance with Law............................................................... 35
SECTION 6.4. Notification of Certain Matters................................................... 35
SECTION 6.5. Access to Information............................................................. 36
SECTION 6.6. Public Announcements.............................................................. 36
SECTION 6.7. Reasonable Best Efforts; Cooperation.............................................. 36
SECTION 6.8. Agreement to Defend and Indemnify................................................. 36
SECTION 6.9. Employee Benefits................................................................. 37
SECTION 6.10. State Takeover Laws............................................................... 38
SECTION 6.11. SEC Reports....................................................................... 38
SECTION 6.12. Delisting......................................................................... 38
SECTION 6.13. Resignations...................................................................... 38
SECTION 6.14. Communications to Employees....................................................... 38
SECTION 6.15. Transfer Taxes.................................................................... 38
SECTION 6.16. Voting of Company Common Stock.................................................... 38
ARTICLE VII. CONDITIONS OF MERGER.............................................................. 39
SECTION 7.1. Conditions for Each Party's Obligations to Effect the Merger...................... 39
SECTION 7.2. Additional Conditions to Obligation of the Company to Effect the Merger........... 39
SECTION 7.3. Additional Conditions to Obligations of Parent and Merger Sub to Effect the Merger 40
(ii)
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER................................................. 41
SECTION 8.1. Termination....................................................................... 41
SECTION 8.2. Effect of Termination............................................................. 42
ARTICLE IX. GENERAL PROVISIONS................................................................ 43
SECTION 9.1. Non-Survival of Representations, Warranties and Agreements........................ 43
SECTION 9.2. Notices........................................................................... 43
SECTION 9.3. Expenses.......................................................................... 44
SECTION 9.4. Certain Definitions............................................................... 44
SECTION 9.5. Headings.......................................................................... 46
SECTION 9.6. Severability...................................................................... 46
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries.................................... 46
SECTION 9.8. Assignment........................................................................ 46
SECTION 9.9. Governing Law..................................................................... 46
SECTION 9.10. Amendment......................................................................... 46
SECTION 9.11. Waiver............................................................................ 46
SECTION 9.12. Counterparts...................................................................... 46
(iii)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 29, 2003
(this "Agreement"), among Good Guys, Inc., a Delaware corporation (the
"Company"), CompUSA Inc., a Delaware corporation ("Parent"), and Gladiator
Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") and the Boards of Directors of Parent and Merger Sub have each
determined that it is advisable and in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company (the "Merger") in
accordance with the General Corporation Law of the State of Delaware (as in
effect from time to time, "Delaware Law") and upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors and the Boards of Directors of
Parent and Merger Sub have approved the Merger; and
WHEREAS, Parent and Merger 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 premises and
the mutual covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Merger Sub hereby agree as
follows:
ARTICLE I.
THE MERGER
SECTION 1.1. The Merger. At the Effective Time (as defined in
Section 1.3) and subject to and upon the terms and conditions of this Agreement
and Delaware Law, Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger hereinafter sometimes is referred to as the "Surviving
Corporation."
SECTION 1.2. Closing. The closing of the Merger (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 am on the second business day
following the satisfaction (or, to the extent permitted by law, waiver by all
parties) of the conditions set forth in Section 7.1, or, if on such day any
condition set forth in Section 7.2 or 7.3 has not been satisfied (or, to the
extent permitted by law, waived by the party entitled to the benefits thereof),
as soon as practicable after all the conditions set forth in Article VII have
been satisfied (other than those conditions that by their nature are to be
satisfied at the Closing), but subject to the fulfillment or, to the extent
permitted by law, waiver of those conditions by the parties entitled to the
benefits thereof, or at such other place, time and date as shall be agreed in
writing among Parent, Merger Sub and the Company.
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The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date." For purposes of this Agreement, "business day" shall mean any
day except a Saturday, a Sunday or any other day on which commercial banks are
required or authorized to close in New York, New York.
SECTION 1.3. Effective Time. Prior to the Closing, the parties
shall prepare, and on the Closing Date the parties shall file, a certificate of
merger or other appropriate documents (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law. The Merger
shall become effective at such time as the Certificate of Merger is filed with
such Secretary of State, or at such later time as Parent, Merger Sub and the
Company shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
SECTION 1.4. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. Subsequent Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Merger Sub acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Merger Sub, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.6. Certificate of Incorporation; By-Laws; Directors
and Officers.
(a) Unless otherwise determined by Merger Sub before the
Effective Time, at the Effective Time the Restated Certificate of Incorporation
of the Company, as amended (the "Restated Certificate"), as in effect
immediately before the Effective Time, shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter amended as provided by law and
such Certificate of Incorporation.
(b) The By-Laws of Merger Sub, as in effect immediately
before the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation of
the Surviving Corporation and such By-Laws.
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(c) The directors of Merger Sub immediately before the
Effective Time will be the initial directors of the Surviving Corporation, and,
except as Merger Sub may otherwise notify the Company in writing prior to the
Effective Time, the officers of the Company immediately before the Effective
Time will be the initial officers of the Surviving Corporation, in each case
until their respective successors are elected or appointed and qualified or
until their death, resignation or removal in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation. If, at the Effective
Time, a vacancy shall exist on the Board of Directors or in any office of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by law, the Certificate of Incorporation of the Surviving Corporation
and such By-Laws.
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.1. Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of Merger Sub,
the Company or the stockholders of any of the foregoing, the shares of stock of
the constituent corporations shall be converted as follows:
(a) Common Stock of Merger Sub. The shares of common
stock, par value $.01 per share, of Merger Sub (the "Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into the number of shares of fully paid and nonassessable shares of
common stock, par value $.01 per share, of the Surviving Corporation equal to
the number of shares of Company Common Stock (as defined below) outstanding
immediately prior to the Effective Time.
(b) Cancellation of Treasury Stock and Merger Sub-Owned
Company Common Stock. Each issued and outstanding share of common stock, par
value $.001 per share, of the Company (the "Company Common Stock") that is owned
by Merger Sub or any subsidiary of Merger Sub or held in the treasury of the
Company (collectively, the "Excluded Shares") shall automatically be canceled
and retired and shall cease to exist, and no cash, Company Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion or Retention of Company Common Stock. Each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time other than Excluded Shares or Dissenting Shares (as defined in
Section 2.1(d)) shall be converted into the right to receive $2.05 in cash
following the Merger (the "Merger Consideration").
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
holder who has validly demanded payment of the fair value for such holder's
shares as determined in accordance with Section 262 of Delaware Law ("Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
the Merger Consideration (but instead shall be converted into the right to
receive payment from the Surviving Corporation with respect to such Dissenting
Shares in accordance with Delaware
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Law), unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right under Delaware Law. If any
such holder of Company Common Stock shall have failed to perfect or shall have
effectively withdrawn or lost such right, each share of Company Common Stock of
such holder shall be treated, at the Company's sole discretion, as a share of
Company Common Stock that had been converted as of the Effective Time into the
right to receive the Merger Consideration in accordance with Section 2.1(c). The
Company shall give prompt notice to Merger Sub of any demands received by the
Company for appraisal of shares of Company Common Stock, and Merger Sub shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Merger Sub, make any payment with respect to, or settle or offer to settle, any
such demands.
(e) Cancellation and Retirement of Company Common Stock.
As of the Effective Time, all shares of Company Common Stock (other than
Dissenting Shares and any shares owned by Parent or any subsidiary of Parent
other than Merger Sub) issued and outstanding immediately prior to the Effective
Time, 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 of Company Common Stock (a "Certificate") shall, to the extent
such Certificate represents such shares, cease to have any rights with respect
thereto, except, in all cases, the right to receive the Merger Consideration.
The right of any holder of any share of Company Common Stock to receive the
Merger Consideration shall be subject to and reduced by the amount of any
withholding that is required under applicable tax law.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the mailing of the Proxy
Statement (as defined in Section 3.8), Merger Sub shall appoint a bank or trust
company to act as exchange agent (the "Exchange Agent") for the payment of the
Merger Consideration. Immediately after the Effective Time, Parent shall deposit
or cause the Surviving Corporation to deposit with the Exchange Agent, for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, the Merger Consideration (such cash
consideration being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions of the Surviving
Corporation, make payments of the Merger Consideration out of the Exchange Fund.
The Exchange Fund shall not be used for any other purpose. Any and all interest
earned on the Exchange Fund shall be paid to Parent.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a Certificate or Certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive Merger Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass to
the Exchange Agent, only upon delivery of the Certificates to the Exchange
Agent, and shall be in such form and have such other provisions as Parent 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 Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other
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documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash payable in respect of the shares of Company Common Stock theretofore
represented by such Certificate pursuant to the provisions of this Article II,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, payment 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 payment 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 Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2, 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 as contemplated by this Section 2.2. No interest shall be
paid or accrue on any cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock
Exchanged For Cash. The Merger Consideration paid upon the surrender for
exchange of Certificates representing shares of Company Common Stock 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 of Company Common
Stock exchanged for cash theretofore represented by such Certificates.
(d) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the Certificates for
six months after the Effective Time shall be delivered to the Surviving
Corporation and any holders of shares of Company Common Stock prior to the
Merger who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation and only as general creditors thereof for
payment of the Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the
Surviving Corporation, the Company or the Exchange Agent, or any employee,
officer, director, agent or affiliate thereof, shall be liable to any Person in
respect of any cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificate has not been surrendered prior to five years after the Effective
Time (or immediately prior to such earlier date on which the Merger
Consideration would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(b))), any such cash in respect of
such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by the Surviving
Corporation, on a daily basis. Any interest and other income resulting from such
investments shall be paid to Parent. To the extent that there are losses with
respect to such investments, or the Exchange Fund diminishes for other reasons
below the level required to make prompt payments of the Merger Consideration as
contemplated hereby, Parent shall promptly replace or restore the portion of the
Exchange Fund lost through investments or other events so as to ensure that the
Exchange Fund is, at all times, maintained at a level sufficient to make such
payments.
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(g) Withholding Rights. The Surviving Corporation or the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as the Surviving Corporation or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended and the treasury regulations
promulgated thereunder (the "Code"), or any provision of state, local or foreign
Tax law. To the extent that amounts are so deducted and withheld by the
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or the Exchange Agent.
(h) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may require as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable in respect thereof, pursuant to
this Agreement.
SECTION 2.3. Stock Plans.
(a) Post-November 8, 2000 Options. The Company shall take
all actions necessary to provide that, at the Effective Time, (i) each then
outstanding option to purchase shares of Company Common Stock granted on or
after November 8, 2000 under any of the Company's stock option plans referred to
in Section 4.2 hereof, each as amended (the "Option Plans") and the option for
1,000,000 shares of Company Common Stock granted to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ on August
15, 2000 (collectively, the "Post-November 2000 Options"), whether or not then
exercisable or vested, shall be cancelled and (ii) the Company shall provide the
notice prescribed by the Company's 1994 Stock Incentive Plan to each holder of
Post-November 2000 Options.
(b) Pre-November 8, 2000 Options. The Company shall use
its reasonable best efforts to provide that, at the Effective Time, each then
outstanding option to purchase shares of Company Common Stock granted prior to
November 8, 2000 under any of the Company's Option Plans (collectively, the
"Pre-November 2000 Options" and together with the Post-November 2000 Options,
the "Options"), whether or not then exercisable or vested, shall be cancelled in
accordance with applicable law and in a manner reasonably acceptable to Parent
and the Company. The Company represents that as of the date hereof, there are
484,376 Pre-November 2000 Options outstanding and which are held of record by
197 Persons. In connection with the cancellation of the Pre-November 2000
Options, the Company shall not provide consideration to the holders thereof an
amount in cash in excess of $100,000 in the aggregate.
(c) Warrants and Other Rights. The Company acknowledges
and agrees that any and all other outstanding options (other than the Options),
stock warrants and stock rights, other than the shares of Company Common Stock
issuable upon conversion of the Note (as defined below) (collectively, "Warrants
and Other Rights") granted pursuant to any option
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agreement, option plan, warrant agreement or otherwise (collectively, the
"Warrant Agreements"), whether or not then exercisable or vested, shall upon
consummation of the Merger, pursuant to the terms of such Warrants Agreements,
automatically and without the action of any Person, be converted into the right
to receive upon exercise of the rights under the Warrants Agreements, the Merger
Consideration for which such Warrant Agreement could have been exercised
immediately prior to the Effective Time (such amount being herein referred to as
the "Warrant Price"). Parent agrees to cause the Surviving Corporation to pay
the Warrant Price, if any, upon surrender by a holder of a Warrant Agreement.
(d) Except as provided herein or as otherwise agreed to
by the parties and to the extent permitted by the Option Plans, (i) the Company
shall cause the Option Plans to terminate as of the Effective Time and shall
provide for the payment of any benefit due under such Option Plans in cash; (ii)
the Company shall cause the provisions in any other plan, program or arrangement
that currently provides or previously provided for the issuance or grant by the
Company of any interest in respect of the capital stock of the Company, or for
payments based on the value of the capital stock of the Company (each such other
plan being referred to as an "Other Stock Plan"), to terminate as of the
Effective Time and shall provide for the payment of any benefit due under such
Other Stock Plans in cash; and (iii) the Company shall take all action necessary
to (A) ensure that following the Effective Time no holder of Post-November 2000
Options or Warrants and Other Rights nor any participant in the Option Plans
(other than holders of Pre-November 2000 Options that do not relinquish their
options) or in any Other Stock Plan shall have any right thereunder to acquire
any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof, and (B) terminate all such option plans. The Parent shall
assure that the Surviving Corporation has the funds necessary to meet its
obligations under this Section 2.3(d).
(e) Prior to the Effective Time, the Board of Directors
shall take all commercially reasonable action to terminate the Company's
Employee Stock Purchase Plan and to return all cash accumulated in each
participant's account to such participants.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
SECTION 3.1. Corporate Organization. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Merger Sub is a wholly owned
subsidiary of Parent.
SECTION 3.2. Authority Relative to this Agreement. Parent and
Merger Sub have the necessary corporate power and authority to enter into this
Agreement and to carry out their obligations hereunder. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent and Merger
Sub and constitutes a legal, valid and binding obligation of each such
corporation, enforceable against
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each of them in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer, moratorium or other laws relating to
or affecting creditors' rights generally and by general principles of equity.
SECTION 3.3. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the performance of this Agreement by Parent
and Merger Sub will not, (i) conflict with or violate any law, regulation, court
order, judgment or decree applicable to Parent or Merger Sub or by which any of
their property is bound or affected, (ii) violate or conflict with either the
Certificate of Incorporation or By-Laws or other organizational documents of
either Parent or Merger Sub, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or result in, or give rise to any rights of termination,
cancellation or acceleration of any obligations or any loss of any material
benefit under, or result in the creation of a Lien (as defined in Section
4.2(b)) on any of the property or assets of Parent or Merger Sub pursuant to,
any contract, instrument, permit, license or franchise to which Parent or Merger
Sub is a party or by which Parent or Merger Sub or any of their respective
properties is bound or affected, except for, in the case of clause (i),
conflicts, violations, breaches or defaults which would not be reasonably likely
to (x) impair, in any material respect, the ability of either Parent or Merger
Sub to perform their respective obligations under this Agreement or (y) prevent
or materially delay the consummation of any of the transactions contemplated by
this Agreement.
(b) Except for (i) applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the
pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if applicable, (iii) the
filing and recordation of appropriate merger documents as required by Delaware
Law, and (iv) filings as may be required by any applicable "blue sky" laws
and/or the rules of the National Association of Securities Dealers, Inc.,
neither Parent nor Merger Sub is required to submit any notice, report or other
filing with any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity") in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as set forth in Schedule 3.3, no
waiver, consent, approval or authorization of any Governmental Entity is
required to be obtained or made by either Parent or Merger Sub in connection
with its execution, delivery or performance of this Agreement.
SECTION 3.4. Financing Arrangements. Parent has or, on or
prior to the Closing Date, will have sufficient cash to pay the Merger
Consideration.
SECTION 3.5. No Prior Activities. Except for obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), Merger Sub has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever, or entered into any agreements or arrangements with any Person
or entity.
8
SECTION 3.6. Litigation. There are no claims, actions, suits,
proceedings (including, without limitation, condemnation or arbitration
proceedings) or investigations pending or, to the knowledge of Parent or Merger
Sub, threatened against or involving Parent or Merger Sub, or any properties or
rights of Parent or Merger Sub, by or before any Governmental Entity or
arbitrator which, either individually or in the aggregate, are reasonably likely
to be materially adverse to the ability of Parent and/or Merger Sub to
consummate any transactions contemplated by this Agreement or to perform their
respective obligations under this Agreement (a "Purchaser Material Adverse
Effect").
SECTION 3.7. Brokers. Except as to ▇.▇. ▇▇▇▇▇▇ Securities,
Inc., no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Merger Sub.
SECTION 3.8. Information Supplied. None of the information
supplied by Parent or Merger Sub or their respective officers, directors,
representatives, agents or employees (the "Purchaser Information") for inclusion
in the proxy statement to be filed with the Securities and Exchange Commission
(the "SEC") in connection with the Merger (the "Proxy Statement"), will, on the
date the Proxy Statement is first mailed to the Company's stockholders or at the
time of the meeting of stockholders to be held in connection with the Merger
(the "Special Meeting"), contain any statement which, at such time and in light
of the circumstances under which it will be made, will be false or misleading
with respect to any material fact, or will omit to state any material fact
necessary in order to make the statements therein not false or misleading. If at
any time prior to the date of the Special Meeting, any event with respect to
Parent and/or Merger Sub, or with respect to information supplied by Parent
and/or Merger Sub specifically for inclusion in the Proxy Statement, shall occur
which is required to be described in an amendment of, or supplement to, the
Proxy Statement, such event shall be so described by Parent and/or Merger Sub
and provided to the Company. All documents that Parent and/or Merger Sub is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form, in all material respects, with the
provisions of the Exchange Act, and each such document required to be filed with
any Governmental Entity (other than the SEC) will comply in all material
respects with the provisions of applicable law as to the information required to
be contained therein. Notwithstanding the foregoing, each of Parent and Merger
Sub makes no representation or warranty with respect to the information supplied
or to be supplied by the Company or any affiliate (other than Parent or Merger
Sub to the extent Parent and/or Merger Sub is determined to be an affiliate of
the Company) thereof for inclusion or incorporation by reference in the Proxy
Statement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub as follows:
SECTION 4.1. Organization and Qualification; Subsidiaries. (a)
Each of the Company and its Subsidiaries (defined below) is a corporation duly
organized, validly existing
9
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and any necessary governmental
authority and approvals to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted, and is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its activities makes
such qualification or licensing necessary, except for such failure which, when
taken together with all other such failures, would not be reasonably likely to
have a Material Adverse Effect. The Company has heretofore made available to
Parent and Merger Sub accurate and complete copies of the Certificate of
Incorporation and Bylaws (or similar governing documents) as currently in effect
of the Company and its Subsidiaries. For purposes of this Agreement, "Material
Adverse Effect" means any change in or effect on the business of the Company or
any of the Subsidiaries (other than losses incurred during the period commencing
on March 1, 2003 and ending on August 31, 2003 in the amount of approximately
$15.3 million) that is or is reasonably likely to be materially adverse to (x)
the business, operations, properties (including intangible properties and
leased, owned or managed properties), condition (financial or otherwise),
assets, liabilities or regulatory status of the Company and the Subsidiaries,
taken as a whole, other than changes or effects resulting from conditions in the
United States or foreign economies or securities markets in general or resulting
from conditions in the industry in which the Company and the Subsidiaries
operate in general, except to the extent that the Company or the Subsidiaries
are disproportionately affected thereby or (y) the ability of the Company to
consummate any transactions contemplated by this Agreement or to perform its
obligations under this Agreement.
(b) A true and complete list of all of the Subsidiaries,
together with the jurisdiction of incorporation or organization of each
Subsidiary, the jurisdictions in which each Subsidiary is licensed or qualified
to do business and the percentage of each Subsidiary's outstanding capital stock
or other equity interests owned by the Company or another Subsidiary, is set
forth in Schedule 4.1 hereto.
(c) For purposes of this Agreement, "Subsidiary" means
any corporation or other legal entity of which the Company (either alone or
through or together with any other Subsidiary) (i) owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity, or (ii) in the case of
partnerships, serves as a general partner, or (iii) in the case of a limited
liability company, serves as managing member or owns a majority of the equity
interests, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof.
SECTION 4.2. Capitalization. (a) The authorized capital stock
of the Company consists of: (i) 40,000,000 shares of Company Common Stock and
(ii) 2,000,000 shares of preferred stock, $.01 par value per share, of the
Company (the "Company Preferred Stock"). As of the date hereof, (A) 27,267,690
shares of Company Common Stock were issued and outstanding, all of which were
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (B) no shares of Company Preferred Stock were issued and
outstanding, (C) 33,250 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Options under the Company's 1985 Stock
Option Plan, (D) 2,612,450 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding
10
Options under the Company's 1994 Stock Incentive Plan, (E) 1,000,000 shares were
reserved for issuance upon exercise of an outstanding option granted to ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, (F) 1,815,500 shares of Company Common Stock were reserved for
issuance upon the exercise of currently outstanding Warrants and Other Rights
and (G) 2,439,025 shares of Company Common Stock are reserved for issuance upon
conversion of the Note (as defined below). Except as set forth in Schedule
4.2(a) or in this Section 4.2(a): (x) there are no other options, calls,
warrants or rights, agreements, arrangements or commitments of any character
obligating the Company or any of its Subsidiaries to issue, deliver or sell any
shares of capital stock of or other equity interests in the Company or any of
the Subsidiaries; (y) there are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote; and (z) there are no stockholders'
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting, registration
or disposition of any shares of the capital stock of the Company (including any
such agreements or understandings that may limit in any way the solicitation of
proxies by or on behalf of the Company from, or the casting of votes by, the
stockholders of the Company with respect to the Merger) or granting to any
person or group of persons the right to elect, or to designate or nominate for
election, a director to the Board of Directors. Except as set forth in Schedule
4.2(a), there are no programs in place or outstanding contractual obligations of
the Company or any of the Subsidiaries (1) to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or (2) to vote or to dispose
of any shares of the capital stock of any of the Subsidiaries. Schedule 4.2(a)
contains a true, accurate and complete list, as of the date hereof, of the name
of each Option and Warrant and Other Rights holder, the number of outstanding
Options and Warrant and Other Rights held by such holder, the grant or purchase
date thereof, the number of shares of Company Common Stock such holder is
entitled to receive upon exercise thereof and the corresponding exercise price.
(b) All the outstanding capital stock of each of the
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights and, except as set forth in Schedule 4.1,
is owned by the Company or a Subsidiary free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances of any nature
whatsoever (collectively "Liens"). There are no existing options, calls,
warrants or similar rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock or other equity
interests or securities of any Subsidiary. Except for the Subsidiaries and its
interest in ▇▇▇▇▇▇▇▇.▇▇▇, Inc., the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in any other
corporation, partnership, joint venture or other business association or entity.
Neither the Company nor any Subsidiary is under any current or prospective
obligation to make a capital contribution or investment in or loan to, or to
assume any liability or obligation of, any corporation, partnership, joint
venture or business association or entity.
11
SECTION 4.3. Authority Relative to this Agreement. The Company
has the necessary corporate power and authority to enter into this Agreement and
the other Transaction Documents (as defined below) and, subject to obtaining any
necessary stockholder approval of the Merger, to carry out its obligations
hereunder and thereunder. The execution and delivery each Transaction Document
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger by the Company's stockholders in accordance with Delaware Law. Each
Transaction Document has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer, moratorium or other laws relating to
or affecting creditors' rights generally and by general principles of equity.
The affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote approving this Agreement is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated hereby.
SECTION 4.4. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 4.4(a) hereto, the
execution and delivery of (w) this Agreement, (x) the unsecured subordinated
convertible promissory note, dated the date hereof, in the aggregate principal
amount of $5,000,000.00 issued to Parent (the "Note"), (y) the Intercreditor and
Subordination Agreement, dated as of the date hereof, by and among Bank of
America, N.A. as Agent, the Company, Good Guys California, Inc., and Parent (the
"Intercreditor Agreement") and (z) the registration rights agreement, dated the
date hereof, between Parent and the Company (the "Registration Rights Agreement"
and together with this Agreement, the Intercreditor Agreement and the Note, the
"Transaction Documents") by the Company does not, and the performance of such
agreements by the Company will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to the Company or any of
the Subsidiaries or by which its or any of their property is bound or affected,
(ii) violate or conflict with the Certificate of Incorporation or By-Laws or
equivalent organizational documents of the Company or any Subsidiary, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or result in any, or
give rise to any rights of termination, cancellation or acceleration of any
obligations or any loss of any material benefit under, or result in the creation
of a Lien on any of the properties or assets (whether owned, leased or managed)
of the Company or any of the Subsidiaries pursuant to, any agreement, contract,
instrument, permit, license or franchise to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries or
its or any of their property (whether owned, leased or managed) is bound or
affected, except for, in the case of clause (i), conflicts, violations, breaches
or defaults which, individually or in the aggregate, would not be reasonably
likely to (x) have a Material Adverse Effect, (y) impair, in any material
respect, the ability of the Company to perform its obligations under this
Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(b) Except for (i) applicable requirements, if any, of
the Exchange Act, (ii) the pre-merger notification requirements of the HSR Act,
if applicable, (iii) the filing and
12
recordation of appropriate merger or other documents as required by Delaware
Law, (iv) filings as may be required by any "blue sky" laws of various states
and/or the rules of the National Association of Securities Dealers, Inc., and
(v) as set forth in Schedule 4.4(b) hereto, the Company and each of the
Subsidiaries are not required to submit any notice, report or other filing with
any Governmental Entity in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. No waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained or made by the Company in
connection with its execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 4.5. SEC Filings; Financial Statements.
(a) The Company has timely filed all forms, reports and
documents (including all exhibits thereto) required to be filed with the SEC
since December 31, 1999 (collectively, the "SEC Reports"). The SEC Reports (i)
were prepared in accordance with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed 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 the light of the
circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any statements or reports with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act. The Company has heretofore
furnished or made available to Merger Sub a complete and correct copy of any
amendments or modifications to SEC Reports which have not yet been filed with
the SEC pursuant to the Securities Act or the Exchange Act.
(b) The consolidated financial statements contained in
the SEC Reports were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly presented
in all material respects the consolidated financial position of the Company and
the Subsidiaries as at the respective dates thereof and the consolidated results
of operations and changes in financial position of the Company and the
Subsidiaries for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments (which in the aggregate were not material in amount).
(c) Except as disclosed in any SEC Report filed prior to
the date of this Agreement, and except for liabilities and obligations incurred
in the ordinary course of business consistent with past practice since the date
of the most recent consolidated balance sheet included in the SEC Reports filed
and publicly available prior to the date of this Agreement, the Company and the
Subsidiaries have no liabilities or obligations of any nature (whether accrued,
absolute, fixed, contingent or otherwise).
SECTION 4.6. Absence of Certain Changes or Events. Except as
expressly permitted by this Agreement, as disclosed in any SEC Report filed
prior to the date of this Agreement, or as set forth in Schedule 4.6 hereto,
since February 28, 2003, the business of the Company and the Subsidiaries has
been conducted in the ordinary course consistent with past practice and there
has not been:
13
(a) any Material Adverse Effect;
(b) any damage, destruction or loss (whether or not
covered by insurance) with respect to any of the assets of the Company or any of
the Subsidiaries having a Material Adverse Effect;
(c) any redemption or other acquisition of Company Common
Stock by the Company or any of the Subsidiaries or any declaration or payment of
any dividend or other distribution in cash, stock or property with respect to
Company Common Stock, except for purchases heretofore made pursuant to the terms
of the Company's employee benefit plans;
(d) any change by the Company in accounting methods,
principles or practices;
(e) any revaluation by the Company of any asset
(including, without limitation, any writing down of the value of inventory or
writing off of notes or accounts receivable), other than in the ordinary course
of business consistent with past practice;
(f) any entry by the Company or any Subsidiary into any
commitment or transaction material to the Company and the Subsidiaries taken as
a whole, other than commitments or transactions entered into in the ordinary
course of business consistent with past practice;
(g) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards) stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any directors, officers or key
employees of the Company or any Subsidiary, except in the ordinary course of
business consistent with past practice;
(h) any entry by the Company or any Subsidiary into any
employment, consulting, severance, termination or indemnification agreement with
any director, officer or key employee of the Company or any Subsidiary;
(i) (i) any settlement or compromise by the Company or
any Subsidiary of any claim, litigation or other legal proceeding, other than in
the ordinary course of business consistent with past practice in an amount
involving more than $50,000 or (ii) any payment, discharge or satisfaction by
the Company or any Subsidiary of any other claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(A) in the ordinary course of business and consistent with past practice or (B)
with respect to any other such claims, liabilities or obligations reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company; or
(j) any agreement, in writing or otherwise, by the
Company or any Subsidiary to take any of the actions described in this Section
4.6, except as expressly contemplated by this Agreement.
14
SECTION 4.7. Litigation. Schedule 4.7 sets forth all
litigation matters in which the Company and/or the Subsidiaries are involved as
a party. There are no claims, actions, suits, proceedings (including, without
limitation, condemnation or arbitration proceedings) or investigations pending
or, to the knowledge of the Company, threatened against or involving the Company
or any of the Subsidiaries, or any properties or rights of the Company or any of
the Subsidiaries, by or before any Governmental Entity or arbitrator which,
either individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect. Neither the Company nor any Subsidiaries nor any of
their property is subject to any outstanding order, writ, judgment, injunction
or decree.
SECTION 4.8. Employee Benefit Plans.
(a) (i) Schedule 4.8(a)(i) sets forth a list of all
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other employee
benefit or executive compensation arrangements, perquisite programs or payroll
practices, including, without limitation, any such arrangements or payroll
practices providing severance pay, sick leave, vacation pay, salary continuation
for disability, retirement benefits, deferred compensation, bonus pay, incentive
pay, stock options (including those held by directors, employees, and
consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company, any
Subsidiary or any entity within the same "controlled group" as the Company or
Subsidiary, within the meaning of Section 4001(a)(14) of ERISA (a "Company ERISA
Affiliate") or to which the Company, any Subsidiary or Company ERISA Affiliate
is obligated to contribute thereunder for current or former employees of the
Company, any Subsidiary or Company ERISA Affiliate (the "Company Employee
Benefit Plans").
(ii) Schedule 4.8(a)(ii) sets forth, with respect
to each Option that is outstanding under the Option Plans as of the
date hereof, the name of the holder of such Option, the number of
shares of Company Common Stock subject to such Option, the date or
grant of such Option and the exercise price per share of such Option.
(b) None of the Company Employee Benefit Plans is a
"multiemployer plan", as defined in Section 4001(a)(3) of ERISA (the "Company
Multiemployer Plan"). Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any Company
Multiemployer Plan, nor has any of them incurred any liability due to the
termination or reorganization of a Company Multiemployer Plan.
(c) None of the Company Employee Benefit Plans is a
"single employer plan", as defined in Section 4001(a)(15) of ERISA, that is
subject to Title IV of ERISA. Neither the Company, any Subsidiary nor any
Company ERISA Affiliate has incurred any outstanding liability under Section
4062 of ERISA to the Pension Benefit Guaranty Corporation or to a trustee
appointed under Section 4042 of ERISA. Neither the Company, any Subsidiary nor
any Company ERISA Affiliate has engaged in any transaction described in Section
4069 of ERISA. Neither the Company nor any Subsidiary maintains, or is required,
either currently or in the future, to provide medical benefits to employees,
former employees or retirees after their termination of employment, other than
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985.
15
(d) Each Company Employee Benefit Plan that is intended
to qualify under Section 401 of the Code, and each trust maintained pursuant
thereto, has been determined to be exempt from federal income taxation under
Section 501 of the Code by the IRS, and, to the Company's knowledge, nothing has
occurred with respect to the operation of any such Company Employee Benefit Plan
that would cause the loss of such qualification or exemption or the imposition
of any material liability, penalty or tax under ERISA or the Code.
(e) All contributions (including all employer
contributions and employee salary reduction contributions) required to have been
made under any of the Company Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof.
(f) There has been no material violation of ERISA or the
Code with respect to the filing of applicable reports, documents and notices
regarding the Company Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of required reports, documents or
notices to the participants or beneficiaries of the Company Employee Benefit
Plans.
(g) None of the Company, the Subsidiaries, the officers
of the Company or any of the Subsidiaries or the Company Employee Benefits Plans
which are subject to ERISA, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject the Company, any of the
Subsidiaries or any officer of the Company or any of the Subsidiaries to any
material tax or penalty on prohibited transactions imposed by such Section 4975
or to any material liability under Section 502(i) or (1) of ERISA.
(h) Except as set forth in Schedule 4.8(h), neither the
Company nor any of the Subsidiaries is a party to any contract, agreement or
other arrangement which could result in the payment of amounts that could be
nondeductible by reason of Section 162(m) or Section 280G of the Code.
(i) True, correct and complete copies of the following
documents, with respect to each of the Company Benefit Plans, have been
delivered or made available to Parent by the Company: (i) all Company Employee
Benefit Plans and related trust documents, and amendments thereto; (ii) the most
recent Forms 5500 and (iii) summary plan descriptions.
(j) There are no pending actions, claims or lawsuits
which have been asserted, instituted or, to the Company's knowledge, threatened,
against the Company Employee Benefit Plans, the assets of any of the trusts
under such plans or the plan sponsor or the plan administrator, or against any
fiduciary of the Company Employee Benefit Plans with respect to the operation of
such plans (other than routine benefit claims).
(k) All Company Employee Benefit Plans subject to ERISA
or the Code have been maintained and administered, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code,
respectively, (including rules and regulations
16
thereunder) and other applicable federal and state laws and regulations and all
employees required to be included as participants by the terms of such plans
have been properly included.
SECTION 4.9. Properties.
(a) The Company and each of the Subsidiaries has good and
marketable title to, or a valid leasehold interest in, all its properties and
assets, free and clear of all Liens, except (i) Liens for current taxes not yet
due and payable, (ii) Liens securing debt under that certain Loan and Security
Agreement, dated as of September 30, 1999, by and among Bank of America, N.A.
and General Electric Capital Corporation (as Lenders), Bank of America, N.A. (as
Administrative Agent), General Electric Capital Corporation (as Documentation
Agent) and Good Guys California, Inc. (as Borrower), as amended, (iii) Liens
securing the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons and (iv) Liens against equipment
leased by the Company, as lessee, under any operating lease, including Liens
evidenced by protective UCC filings in favor of lessors of such equipment. All
tangible personal property, fixtures and equipment which comprise the assets of
the Company and the Subsidiaries, or are otherwise used in connection with its
respective businesses, are in a good state of repair (ordinary wear and tear
excepted) and operating condition. All improvements on the Leased Real Property
(as defined below) are in good operating condition and repair, have all
necessary access rights and utilities and generally are adequate and suitable in
all material respects for the present and continued use, operation and
maintenance thereof as now used, operated or maintained. Neither the Company nor
any Subsidiary has any knowledge of or received written notice from any utility
company, municipality or other entity of the discontinuation of sewer, water,
electric, gas, telephone or other utilities or services presently provided or
available to any Leased Real Property.
(b) Schedule 4.9(b) sets forth a true and complete list
and description of each lease or sublease relating to Leased Real Property from
which the Company or any Subsidiary currently operates (collectively, the
"Company Material Leases"). Such description includes (i) the street address and
current use of each Leased Real Property, (ii) the name of the landlord (and
sublandlord, if applicable) and the entity which holds the tenant (and
subtenant, if applicable) interest under each Company Material Lease, (iii) the
identity of any guarantor of the Company's or any Subsidiary's obligations under
any Company Material Lease, (iv) the approximate square footage of each Leased
Real Property, (v) the aggregate annual rent (including base rent, and if
applicable, percentage and additional rent) under each Company Material Lease
(vi) the length of the term and any options to renew provided for in each
Company Material Lease and (vii) any provisions with respect to early
termination of a Company Material Lease.
(c) Neither the Company nor any Subsidiary owns any real
property.
(d) There are no violations of any law, ordinance or
regulation (including, without limitation, any building, planning or zoning law,
ordinance or regulation) relating to any of the real property or interests in
real property leased or subleased by the Company or any Subsidiary, as lessee or
lessor (the "Leased Real Property"), except for those violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect.
17
(e) The Company has, or has caused to be, delivered to
Parent true and complete copies of the Company Material Leases and any and all
material ancillary documents pertaining thereto (including, but not limited to,
all amendments, subordination, non-disturbance and attornment agreements,
operating agreements, restrictive covenant agreements and notices to exercise
renewal options). With respect to each of the Company Material Leases, (i) such
lease or sublease is legal, valid, binding, enforceable and in full force and
effect, (ii) except as otherwise set forth in Schedule 4.9(e), (x) such lease or
sublease will not cease to be legal, valid, binding, enforceable and in full
force and effect on terms identical to those currently in effect as a result of
the consummation of the transactions contemplated by this Agreement, nor will
the consummation of such transactions without the prior consent of any other
party constitute a breach or default under such Company Material Lease or
otherwise give the other party thereto a right to terminate such Company
Material Lease and (y) there are no material controversies, claims, disputes or
disagreements existing between the parties to such Company Material Lease and
(iii) neither the Company nor any Subsidiary knows of, or has given or received
notice of, any violation or default thereunder (nor, to the knowledge of the
Company, does there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation or default
thereunder).
(f) All improvements on real property constructed by or
on behalf of the Company or any Subsidiary, to the knowledge of the Company,
were constructed in compliance with applicable laws, ordinances and regulations
(including, but not limited to, any building or zoning laws, ordinances and
regulations) affecting such Leased Real Property.
SECTION 4.10. Intellectual Property.
(a) The Company and the Subsidiaries own all right, title
and interest in and to, or have a valid and enforceable license to use all the
Intellectual Property (defined below) used by them in connection with their
respective businesses, which represents all Intellectual Property rights
necessary or desirable to the conduct of their business as now conducted. After
the Closing, Merger Sub will own all right, title and interest in and to, or
have a valid and enforceable license to use, the Intellectual Property. The
Company and the Subsidiaries are in compliance with all contractual obligations
relating to the protection of such Intellectual Property as they use pursuant to
license or other agreement. To the knowledge of the Company, there are no
conflicts with or infringements of any Intellectual Property by any third party.
To the knowledge of the Company, the conduct of the Company's and the
Subsidiaries' business as currently conducted does not conflict with or infringe
or will conflict with or infringe any intellectual property or proprietary
rights of any third party and none of the Intellectual Property infringes upon
or unlawfully or wrongfully uses or incorporates any intellectual property or
proprietary rights of any third party. There is no claim, suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries: (i) alleging any such conflict or
infringement with any third party's intellectual property or proprietary rights;
or (ii) challenging the Company's or any of the Subsidiaries' ownership or use
of, or the validity or enforceability of any Intellectual Property.
(b) Schedule 4.10(b) sets forth a complete and current
list of patents, copyrights, domain names, trademarks and common law rights
pertaining to the Intellectual Property ("Listed Intellectual Property") and a
summary description of each such item, the owner
18
of record, date of application or issuance and relevant jurisdiction as to each.
Except as described in Schedule 4.10(b), all Listed Intellectual Property is
owned by the Company or the Subsidiaries free and clear of security interests,
liens, encumbrances or claims of any nature. All Listed Intellectual Property is
valid, subsisting, unexpired, in proper form and enforceable and all renewal
fees and other maintenance fees that have fallen due on or prior to the
effective date of this Agreement have been paid. Except as listed in Schedule
4.10(b), no Listed Intellectual Property is the subject of any proceeding before
any governmental, registration or other authority in any jurisdiction, including
any office action or other form of preliminary or final refusal of registration.
(c) Schedule 4.10(c) sets forth a complete list of all
agreements relating to Intellectual Property owned by the Company or any of the
Subsidiaries or to Intellectual Property licensed to the Company or any of the
Subsidiaries. Except as set forth on Schedule 4.10(c), neither the Company nor
any of the Subsidiaries, are under any obligation to pay royalties or other
payments in connection with any agreement relating to the Intellectual Property,
nor are they restricted from assigning their rights respecting any Intellectual
Property nor will the Company or any of the Subsidiaries, otherwise be, as a
result of the execution and delivery of this Agreement or the performance of
Company's obligations under this Agreement, in breach of any agreement, contract
or license relating to the intellectual property or proprietary rights of any
other person or entity.
(d) Except as set forth in Schedule 4.10(d), no present
or former employee, officer or director of the Company or any of the
Subsidiaries, or any agent, consultant, outside contractor or subcontractor of
the Company or any of the Subsidiaries, holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Intellectual Property.
Except as set forth in Schedule 4.10(d), neither the Company nor any of the
Subsidiaries have sold, licensed, leased or otherwise transferred or granted any
interest or rights in or to any portion of the Intellectual Property.
(e) To the Company's knowledge: (i) none of the
Intellectual Property has been used, disclosed or appropriated to the detriment
of the Company or any of the Subsidiaries for the benefit of any other person or
entity other than the Company or any of the Subsidiaries; and (ii) no officer,
director, employee, independent contractor or agent of the Company or any of the
Subsidiaries has misappropriated any trade secrets or other confidential
information of any other person or entity in the course of the performance of
his or her duties as an officer, director, employee, independent contractor or
agent of the Company or any of the Subsidiaries; and (iii) the Company and the
Subsidiaries have taken all actions necessary or advisable to protect the
Intellectual Property.
(f) Any Intellectual Property that was created by
employees of the Company or any of the Subsidiaries was made in the regular
course of such employees' employment or service relationships with the Company
or any of the Subsidiaries using the Company's or any of the Subsidiaries'
facilities and resources and, as such, constitute "works made for hire" within
the meaning of Section 101 of the Copyright Act of 1976 (or are owned by such
employees' employer pursuant to an equivalent legal doctrine in applicable
jurisdictions). Each such employee who has created, contributed to or
participated in the conception and development of the Intellectual Property or
any employee who in the regular course of his employment may
19
create Intellectual Property and all consultants, contractors, subcontractors or
any other person or entity performing work on behalf of the Company or any of
the Subsidiaries who have created, contributed to or participated in the
conception and development of Intellectual Property, have signed an assignment
or been a party to a similar agreement with the Company or any of the
Subsidiaries that has accorded the Company or any of the Subsidiaries full,
effective and exclusive ownership or, in the alternate, transferring and
assigning to the Company or any of the Subsidiaries all right, title and
interest in and to such Intellectual Property including copyright, patent and
other intellectual property rights therein.
(g) For purposes of this Agreement, "Intellectual
Property" shall mean (i) trademarks and service marks, logos, trade dress,
product configurations, trade names and other indications of origin,
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith; (ii) patentable inventions, inventions
(whether or not patentable), discoveries, improvements, ideas, know-how, formula
methodology, processes, technology, software (including password protected
interpretive code or source code, object code, source files, development
documentation, programming tools, drawings, specifications and technical data)
and all applications or patents in any jurisdiction pertaining to the foregoing,
including re-issues, divisions, continuations, continuations-in-part, renewals
or extensions; (iii) trade secrets, customer lists and supplier lists, including
confidential information and the right in any jurisdiction to limit the use or
disclosure thereof; (iv) copyrights in writings, designs, software, mask works
or other works, applications or registrations in any jurisdiction for the
foregoing and all moral rights related thereto; (v) database rights; (vi)
Internet Web sites, Web pages, domain names and applications and registrations
pertaining thereto and all intellectual property used in connection with or
contained in all versions of such Web sites; (vii) rights under all agreements
and licenses relating to the foregoing; (viii) books and records pertaining to
the foregoing; and (ix) claims or causes of action arising out of or related to
past, present or future infringement or misappropriation of the foregoing.
SECTION 4.11. Insurance. Schedule 4.11 sets forth a true and
complete list of all insurance policies carried by, or covering the Company and
the Subsidiaries with respect to their businesses, assets and properties and
with respect to which records are maintained at the Company's principal
executive offices, together with, in respect of each such policy, the name of
the insurer, the policy number, the type of policy, the amount of coverage and
the deductible. True and complete copies of each such policy have previously
been provided to Parent. All such policies are in full force and effect, and no
notice of cancellation has been given with respect to any such policy. All
premiums due on such policies have been paid in a timely manner and the Company
and the Subsidiaries have complied in all material respects with the terms and
provisions of such policies.
SECTION 4.12. Environmental.
Except as set forth in Schedule 4.12:
(a) The Company and the Subsidiaries are and have been in
compliance with all applicable Environmental Laws defined below, have obtained
all Environmental Permits (defined below) and are and have been in compliance
with their requirements, and have resolved all past non-compliance with
Environmental Laws and Environmental Permits without any
20
pending, on-going or future obligation, cost or liability, except where the
failure to do so would not be reasonably likely to have, individually or the
aggregate, a Material Adverse Effect.
(b) Neither the Company nor any of the Subsidiaries has
(i) generated, stored, placed, held, located, released, transported or disposed
of any Hazardous Substances (defined below) on, under, from or at any of the
Company's or any of the Subsidiaries' properties (whether presently or formerly
owned, leased or managed) or any other properties, (ii) any knowledge or reason
to know of the presence or threat of release of any Hazardous Substances on,
under or at any of the Company's or any of the Subsidiaries' properties or any
other property but arising from the Company's or any of the Subsidiaries'
current or former properties or operations, or (iii) received any written notice
(A) of any violation of or liability under any Environmental Laws, (B) of the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any such
violation or liability, (C) requiring the response to or remediation of
Hazardous Substances at or arising from any of the Company's or any of the
Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of the Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties;
(c) No Environmental Law imposes any obligation upon the
Company or the Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree. No
Lien has been placed upon any of the Company's or the Subsidiaries' properties
(whether owned, leased or managed) under any Environmental Law;
(d) The Company and the Subsidiaries have provided Parent
with copies of any environmental assessment or audit report (including all
records maintained for required environmental compliance) or other similar
studies or analyses in the possession of the Company or the Subsidiaries
relating to any real property currently or formerly owned, leased, managed or
occupied by the Company or the Subsidiaries.
(e) As used in this Agreement, the following terms have
the meanings set forth below:
(i) "Environmental Law" means any local, state
or federal law, (including the common law), regulation or ordinance now
or hereafter in effect and as amended, and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution
or protection of the environment, health or safety or natural
resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances.
21
(ii) "Environmental Permit" means any permit,
approval, identification number, license or other authorization
required under any applicable Environmental Law.
(iii) "Hazardous Substances" means any chemicals,
materials or substances that are potentially harmful to human health
and the environment or otherwise regulated as toxic or hazardous or as
a pollutant, contaminant or waste under any applicable Environmental
Law, including without limitation, petroleum, petroleum products,
cathode ray tubes, asbestos and asbestos-containing materials, and
mold.
SECTION 4.13. Material Contracts.
(a) Except as set forth in the SEC Reports filed prior to the
date of this Agreement or in Schedule 4.13, neither the Company nor any of the
Subsidiaries is a party to or bound by:
(i) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the Securities Act and
the Exchange Act);
(ii) any contract or agreement for the purchase
or lease (as lessee) of materials or personal property from any
supplier or for the furnishing of services to the Company or any
Subsidiary that involves or is likely to involve future monthly
payments by the Company or any of the Subsidiaries of $50,000 or more;
(iii) any contract or agreement for the sale,
license or lease (as lessor) by the Company or any Subsidiary of
services, materials, products, supplies or other assets, owned or
leased by the Company or the Subsidiaries, that involves or is likely
to involve future monthly payments to the Company or any of the
Subsidiaries of $50,000 or more;
(iv) any contract, agreement or instrument
relating to or evidencing indebtedness for borrowed money of the
Company or any Subsidiary in excess of an aggregate of $50,000;
(v) any contract, agreement or understanding
with ▇▇▇▇▇▇▇▇.▇▇▇, Inc. or its stockholders;
(vi) any non-competition agreement or any other
agreement or obligation which purports to limit in any respect the
manner in which, or the localities in which, the business of the
Company or the Subsidiaries may be conducted;
(vii) any agreement with any present or former
affiliates of the Company;
(viii) any partnership, joint venture, strategic
alliance or cooperation agreement (or any agreement similar to any of
the foregoing);
(ix) any voting or other agreement governing how
any shares of Company Common Stock shall be voted;
22
(x) any agreement with any stockholders of the
Company; or
(xi) any contract or other agreement which would
prohibit or materially delay the consummation of the Merger or any of
the transactions contemplated by this Agreement.
The foregoing contracts and agreements to which the Company or any Subsidiary
are parties or are bound are collectively referred to herein as "Company
Material Contracts."
(b) Each Company Material Contract is valid and binding
on the Company (or, to the extent a Subsidiary is a party, such Subsidiary) and
is in full force and effect, and the Company and each Subsidiary have performed
all obligations required to be performed by them to date under each Company
Material Contract, except where such noncompliance, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.
Except as set forth on Schedule 4.13(b)(i), the Company has, or has caused to
be, delivered to Parent or its counsel true and complete copies of the Company
Material Contracts requested by same and any and all ancillary documents
pertaining thereto (including, but not limited to, all amendments and waivers).
Except as otherwise set forth in Schedule 4.13(b)(ii), each Company Material
Contract will not cease to be legal, valid, binding, enforceable and in full
force and effect on terms identical to those currently in effect as a result of
the consummation of the transactions contemplated by this Agreement, nor will
the consummation of such transactions constitute a breach or default under such
Company Material Contract or otherwise give the contracting party a right to
terminate such Company Material Contract. Except as set forth in Schedule
4.13(b)(ii), neither the Company nor any Subsidiary knows of, or has given or
received notice of, any violation or default under (nor, to the knowledge of the
Company, does there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation or default under) any
Company Material Contract.
(c) Except as disclosed in the SEC Reports filed prior to
the date of this Agreement or in Schedule 4.13(c) or as expressly provided for
in this Agreement, neither the Company nor any of the Subsidiaries is a party to
any oral or written (i) employment or consulting agreement that cannot be
terminated on thirty days' or less notice, (ii) agreement with any officer or
other key employee of the Company or any of the Subsidiaries the benefits of
which are contingent or vest, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Company or any the Subsidiaries of
the nature contemplated by this Agreement, (iii) agreement with respect to any
officer or other key employee of the Company or any of the Subsidiaries
providing any term of employment or compensation guarantee or (iv) stock or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of such transactions.
SECTION 4.14. Conduct of Business.
(a) Except as set forth in Schedule 4.14(a), the business
and operations of the Company and the Subsidiaries are not being conducted in
default or violation of any term, condition or provision of (i) their respective
Certificates of Incorporation or By-Laws or similar
23
organizational documents, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement of any kind to which the
Company or any of the Subsidiaries is now a party or by which the Company or any
of the Subsidiaries or any of their respective properties or assets may be
bound, except, with respect to the foregoing clause (ii), defaults or violations
that would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect. Except as set forth in Schedule 4.14(a), to the
Company's knowledge, no other party to any Company Material Contract is in
default or violation in respect thereof, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default or
violation.
(b) Schedule 4.14(b) sets forth a true and complete list
of all licenses, permits, franchises, authorizations and approvals issued or
granted to the Company or its Subsidiaries by any Governmental Authority (the
"Licenses and Permits"), and all pending applications therefor. Such list
contains a summary description of each such item and, where applicable,
specifies the date issued, granted or applied for, the expiration date and the
current status thereof. Each License and Permit has been duly obtained, is valid
and in full force and effect, and is not subject to any pending or, to the
Company's knowledge, threatened administrative or judicial proceeding to revoke,
cancel, suspend or declare such License and Permit invalid in any respect. To
the Company's knowledge, the Licenses and Permits are sufficient and adequate in
all material respects to permit the continued lawful conduct of the Company's
and Subsidiaries' businesses in the manner now conducted and as proposed to be
conducted, and none of the operations of the Company or Subsidiaries are being
conducted in a manner that violates in any material respect any of the terms or
conditions under which any License and Permit was granted. Except as set forth
in Schedule 4.14(b), no such License and Permit will be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.
(c) The contracts, agreements and understandings set
forth on Schedule 4.14(c) have been terminated or expired by their terms,
without any further liability to the Company or the Subsidiaries.
SECTION 4.15. Compliance with Law. Except as set forth in
Schedule 4.15, the operations of the Company and the Subsidiaries have been
conducted in compliance in all material respects with all applicable laws,
regulations, orders and other requirements of all Governmental Authorities
having jurisdiction over the Company and the Subsidiaries and their respective
assets, properties and operations. Except as set forth in Schedule 4.15, neither
the Company nor any Subsidiary has received notice of any violation of any such
law, regulation, order or other legal requirement, and is not in default with
respect to any order, writ, judgment, award, injunction or decree of any
Governmental Authority. The Company has no knowledge of any proposed change in
any such laws, rules or regulations (other than laws of general applicability)
that would materially and adversely affect the transactions contemplated by this
Agreement or would be reasonably likely to have a Material Adverse Effect. To
the Company's knowledge, neither the Company nor any Subsidiary, nor any
director, officer, agent, employee or other Person associated with or acting on
behalf of the Company or any Subsidiary has: used any funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any
24
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
SECTION 4.16. Taxes.
(a) Except as set forth in Schedule 4.16:
(i) All Tax Returns (as defined below) required
to be filed by or on behalf of the Company or any Subsidiary or any
affiliated, combined or unitary group of which the Company or any
Subsidiary is or was a member have been duly and timely filed (giving
effect to all timely obtained extensions) with the appropriate taxing
authorities and were, in all material respects, true, complete and
correct.
(ii) The Company and each Subsidiary have paid or
will have paid to the appropriate taxing authority on its behalf,
within the time and in the manner prescribed by law, all material Taxes
(as defined below) for which it is liable, whether or not shown as
being due on any Tax Returns.
(iii) The Company and each Subsidiary have
established on its books and records adequate reserves in accordance
with GAAP for the payment of all Taxes for which it is liable that are
not yet due and payable, and with respect to any such Taxes that have
been proposed, assessed or asserted against them.
(iv) The Company and each Subsidiary have
complied in all respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes for which
it is liable (including, without limitation, withholding of such Taxes
pursuant to sections 1441 and 1442 of the Code or similar provisions
under any state, local or foreign laws) and has, within the time and in
the manner prescribed by law, withheld and paid over to the appropriate
taxing authorities all amounts required to be so withheld and paid over
under all applicable domestic and foreign laws.
(v) Neither the Company nor any Subsidiary has
requested any extension of time within which to file any Tax Return in
respect of any taxable year, which Tax Return has not since been filed.
(vi) There are no outstanding waivers or
comparable consents that have been given by the Company or any
Subsidiary or with respect to any Tax Return of the Company or any
Subsidiary regarding the application of any statute of limitations with
respect to any Taxes or Tax Returns of the Company or any such
Subsidiary.
(vii) No United States federal, state, local or
foreign audits, investigations, other administrative proceedings or
court proceedings are presently pending against the Company or any
Subsidiary with regard to any Taxes or Tax Returns of the Company or
any Subsidiary and no notification has been received by the Company or
any Subsidiary that such an audit, investigation or other proceeding is
pending or threatened.
25
(viii) Other than in the ordinary course of
business consistent with its past practices, neither the Company nor
any Subsidiary has granted any power of attorney or similar document
that is currently in force with respect to any matter relating to
Taxes.
(ix) No property of the Company or any Subsidiary
is property that the Company, the Subsidiary or any party to this
transaction is or will be required to treat as being owned by another
person pursuant to the provisions of section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, as in effect prior to the enactment
of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of section 168 of the Code.
(x) The Company and each Subsidiary are members
of an affiliated group of corporations within the meaning of section
1504(a) of the Code of which the Company is the common parent and such
affiliated group files a consolidated return with respect to United
States federal income taxes.
(xi) Neither the Company nor any Subsidiary has
liability for the Taxes of any person (other than members of the
affiliated group described in Section 4.16(a)(x))) under Treasury
Regulations section 1.1502-6 (or a similar or corresponding provision
of state, local, or foreign law).
(xii) There are no Liens for Taxes upon the assets
or properties of the Company or any Subsidiary except for statutory
Liens for Taxes not yet due.
(xiii) Neither the Company or any Subsidiary is a
party to, is bound by or has an obligation under any Tax sharing
agreement, Tax indemnification agreement, Tax allocation agreement or
similar contract or arrangement (including any agreement, contract or
arrangement providing for the sharing or ceding of credits or losses)
or has a potential liability or obligation to any person as a result of
or pursuant to any such agreement, contract, arrangement or commitment.
(xiv) No jurisdiction where the Company or any
Subsidiary has not filed a Tax Return has made a claim that the Company
or such Subsidiary is required to file a Tax Return in such
jurisdiction.
(xv) The Company and each Subsidiary have
previously delivered or made available to Parent complete and accurate
copies of all income Tax Returns filed with any taxing authority filed
by or on behalf of the Company or any Subsidiary for taxable years 1999
through 2003.
(b) For purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, severance, stamp,
occupation, real or personal property, social security, estimated, recording,
gift, value assessed, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed
26
by any taxing authority (domestic or foreign). For purposes of this Agreement,
"Tax Return" shall mean any return, declaration, report, estimate, information
or other document (including any documents, statements or schedules attached
thereto and any amendments thereof) required to be filed with any federal,
state, local or foreign tax authority with respect to Taxes.
SECTION 4.17. Labor Relations. Except as set forth in the SEC
Reports or Schedule 4.17, (i) each of the Company and the Subsidiaries is, and
has at all times been, in material compliance with all applicable laws, rules,
regulations and orders respecting employment and employment practices, terms and
conditions of employment, wages, hours or work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law; (ii) there is no labor
grievance, arbitration, strike, slowdown, stoppage or lockout pending, or, to
the knowledge of the Company, threatened against or affecting the Company or any
of the Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
union or other labor organization or is engaged in any labor negotiations with
any labor union; (iv) there are no proceedings pending between the Company and
any of the Subsidiaries or any of their respective employees before any federal
or state agency; and (v) to the knowledge of the Company, there are no
activities or proceedings of any labor union to organize any non-union employees
of the Company or any of the Subsidiaries.
SECTION 4.18. Transactions with Affiliates. Except as
disclosed in Schedule 4.18, no present or former affiliate of the Company has,
or since December 31, 2002 has had, (i) any interest in any property (whether
real, personal or mixed and whether tangible or intangible) used in or
pertaining to any of the businesses of the Company or any of the Subsidiaries,
(ii) has had business dealings or a material financial interest in any
transaction with the Company or any of the Subsidiaries (other than compensation
and benefits received in the ordinary course of business as an employee or
director of the Company or any of the Subsidiaries) or (iii) an equity interest
or any other financial or profit interest in any Person that has had business
dealings or a material financial interest in any transaction with the Company or
any of the Subsidiaries.
SECTION 4.19. Brokers. No broker, finder or investment banker
(other than ▇▇▇▇▇▇▇▇▇ & Company, Inc.) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company. The
Company has heretofore furnished to Parent true and complete copies of all
agreements and other arrangements between the Company and ▇▇▇▇▇▇▇▇▇ & Company,
Inc.
SECTION 4.20. Control Share Acquisition. No state takeover
statute or similar statute or regulation, including, without limitation, Section
203 of the Delaware Law and any statute adopted by the State of California
(which statutes and regulations are herein after collectively referred to as
"Takeover Laws"), or other comparable takeover provision of the Certificate of
Incorporation or By-Laws of the Company applies or purports to apply to the
Merger or this Agreement, or any of the transactions contemplated by this
Agreement.
SECTION 4.21. Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class
27
or series of the Company's capital stock which may be necessary to approve this
Agreement and the transactions contemplated hereby, including the Merger.
SECTION 4.22. Investment Company. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.23. Information Supplied. None of the information to
be supplied by the Company specifically for inclusion or incorporation by
reference in the Proxy Statement will, on the date it is first mailed to the
holders of the Company Common Stock or on the date of the Special 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, at such time and in light of the circumstances under which they are
made, not misleading. If at any time prior to the date of the Special Meeting,
any event with respect to the Company, or with respect to information supplied
by the Company specifically for inclusion in the Proxy Statement, shall occur
which is required to be described in an amendment or supplement to the Proxy
Statement, such event shall be so described by the Company. All documents that
the Company is responsible for filing with the SEC in connection with the
transactions contemplated herein, to the extent relating to the Company or other
information supplied by the Company for inclusion therein, will comply as to
form, in all material respects, with the provisions of the Exchange Act, and
each such document required to be filed with any Governmental Entity other than
the SEC will comply in all material respects with the provisions of applicable
law as to the information required to be contained therein. Notwithstanding the
foregoing, but subject to the definition of "Material Adverse Effect", the
Company makes no representation or warranty with respect to the information
supplied or to be supplied by Parent, Merger Sub or their respective affiliates
(other than the Company to the extent the Company is determined to be an
affiliate of Parent and/or Merger Sub) for inclusion or incorporation by
reference in the Proxy Statement.
SECTION 4.24. WARN. Within the past twelve months: (i) neither
the Company nor any of its Subsidiaries has effectuated a "plant closing" or a
"mass layoff" (as such terms are defined in the Worker Adjustment and Retraining
Notification Act (the "WARN Act")); (ii) the Company has not been affected by
any transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign law or
regulation; and (iii) none of the Company's or any of its Subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN Act) during
the 90 day period prior to the date of this Agreement.
SECTION 4.25. Suppliers. No supplier of the Company or any
Subsidiary whose failure to continue to be a supplier of the Company or any
Subsidiary would reasonably be likely to result in, individually or in the
aggregate, a Material Adverse Effect has indicated to the Company or any of its
Subsidiaries that it will stop, or materially decrease the rate of, supplying
products or services to the Company or any of its Subsidiaries.
SECTION 4.26. Bank Accounts. Schedule 4.26 sets forth a
complete list of the names and locations of each bank or other financial
institution at which the Company or any of its Subsidiaries has an account
(giving the account numbers) or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and the names of all Persons,
if
28
any, holding powers of attorney or comparable delegation of authority from the
Company or its Subsidiaries and a summary statement thereof.
SECTION 4.27. Board Action. The Board of Directors, at a
meeting duly called and held at which all directors of the Company were present,
duly and unanimously adopted resolutions (i) approving and declaring advisable
this Agreement and the other Transaction Documents, the Merger and the
transactions contemplated hereby and thereby; (ii) declaring that it is in the
best interests of the Company's stockholders that the Company enter into the
Transaction Documents and consummate the Merger on the terms and subject to the
conditions set forth in this Agreement; (iii) approving the Transaction
Documents, the Merger and the transactions contemplated hereby and thereby for
purposes of Section 203 of Delaware Law, (iv) directing that this Agreement be
submitted to a vote at a meeting of the Company's stockholders to be held as
promptly as practicable; and (v) recommending that the holders of Company Common
Stock adopt this Agreement, which resolutions have not been subsequently
rescinded, modified or withdrawn in any way except as permitted by Section 5.2.
Such resolutions are sufficient to render inapplicable to Merger Sub and Parent,
this Agreement, the Merger and the transactions contemplated hereby the
restrictions on "business combinations" contained in Section 203 of Delaware
Law.
SECTION 4.28. Opinion of Financial Advisor. Prior to or
concurrently with the execution of this Agreement, ▇▇▇▇▇▇▇▇▇ & Company, Inc. has
rendered to the Board of Directors a written opinion, dated as of the date of
this Agreement, to the effect that, subject to the assumptions and limitations
set forth therein, the Merger Consideration to be received by the holders of the
Company Common Stock pursuant to the Merger is fair to such holders, other than
Parent, Merger Sub and their respective affiliates, from a financial point of
view. A true and correct copy of such opinion will be delivered to Merger Sub,
solely for information purposes, within one business day following receipt
thereof by the Company. The Company has been authorized by ▇▇▇▇▇▇▇▇▇ & Company,
Inc. to permit the inclusion of such opinion in its entirety in the Proxy
Statement.
SECTION 4.29. Disclosure. No representation or warranty by the
Company in this Agreement and no statement contained in the certificates
delivered pursuant to Sections 7.3(a) and (b) hereof or in any Schedule
furnished or to be furnished by the Company to Parent or Merger Sub pursuant to
the provisions hereof, contains or will contain any untrue statement of material
facts or omits or will omit 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.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with its terms and the Effective Time, except as expressly contemplated by this
Agreement, the Company shall, and shall cause each of the Subsidiaries to (i)
carry on its respective businesses in the ordinary course consistent with past
29
practice, (ii) use reasonable best efforts to preserve intact its current
business organizations and keep available the services of its current officers
and key employees, (iii) use reasonable best efforts to preserve its
relationships with customers, suppliers, third party payors and other Persons
with which it has business dealings, (iv) comply in all material respects with
all laws and regulations applicable to it or any of its properties, assets or
business and (v) maintain in full force and effect all Licenses and Permits
necessary for such business. Without limiting the generality of the foregoing,
except as (x) expressly contemplated by this Agreement or (y) set forth in
Schedule 5.1, the Company shall not, and shall cause each of the Subsidiaries
not to, directly or indirectly, without the prior written consent of Merger Sub:
(a) amend its Certificate of Incorporation or By-Laws or
similar organizational documents or change the number of directors constituting
its entire board of directors;
(b) (i)(A) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock or other equity interests, except that a wholly owned Subsidiary
may declare and pay a dividend or make advances to its parent or the Company or
(B) redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock or other securities; (ii) issue, sell, pledge, dispose of or
encumber any (A) additional shares of its capital stock or other equity
interests, (B) securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of its
capital stock or other equity interests, or (C) of its other securities, other
than shares of Company Common Stock issued upon the exercise of Options or
Warrants and Other Rights outstanding on the date hereof in accordance with the
Option Plans or Warrant Agreements, as the case may be, as in effect on the date
hereof; or (iii) split, combine or reclassify any of its outstanding capital
stock or other equity interests;
(c) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
(including entities which are Subsidiaries) or (B) any assets, including real
estate, except (x) purchases of inventory, equipment and supplies in the
ordinary course of business consistent with past practice and (y) other
purchases in the ordinary course of business consistent with past practice in an
amount not involving more than $50,000 in the aggregate;
(d) authorize or make any capital expenditures in the
aggregate in excess of $400,000;
(e) except in the ordinary course of business, amend or
terminate any Company Material Contract or Company Material Lease, or waive,
release or assign any material rights or claims thereunder;
(f) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any property or assets other than in the ordinary course
of business and consistent with past practice;
(g) (i) enter into any employment or severance agreement
with or, except in accordance with the existing policies of the Company, grant
any severance or termination pay to
30
any officer, director or key employee of the Company or any Subsidiary; or (ii)
hire or agree to hire any new or additional key employees or officers;
(h) except as required to comply with applicable law or
as provided for in this Agreement or required by any option plan or any
employment agreement set forth on Schedule 5.1(h), (A) adopt, enter into,
terminate, amend or increase the amount or accelerate the payment or vesting of
any benefit or award or amount payable under any Company Employee Benefit Plan
or other arrangement for the current or future benefit or welfare of any
director, officer or current or former employee, (B) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or, other than in the ordinary course of business consistent with past practice,
employee, (C) pay any benefit not provided for under any Benefit Plan, (D) grant
any awards under any bonus, incentive, performance or other compensation plan or
arrangement or Company Employee Benefit Plan (including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Company Employee Benefit Plans or agreements or awards made thereunder)
or (E) take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract or
arrangement or Company Employee Benefit Plan;
(i) (i) incur or assume any long-term debt, or except in
the ordinary course of business in amounts consistent with past practice, incur
or assume any short-term indebtedness; (ii) incur or modify any material
indebtedness or other liability; (iii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person, except in the ordinary course of business
and consistent with past practice; (iv) make any loans, advances or capital
contributions to, or investments in, any other Person (other than to wholly
owned Subsidiaries or customary loans or advances to employees in accordance
with past practice); (v) settle any claims other than in the ordinary course of
business, in accordance with past practice, and without admission of liability;
or (vi) enter into any material commitment or transaction;
(j) change any accounting method, including any
accounting method with respect to Taxes, used by it unless required by GAAP;
(k) other than in the ordinary course of business
consistent with past practice, make any Tax election or settle or compromise any
Tax liability;
(l) (i) settle or compromise any claim, litigation or
other legal proceeding, other than in the ordinary course of business consistent
with past practice in an amount involving more than $250,000 in the aggregate or
(ii) pay, discharge or satisfy any other claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of (A) any such other claims, liabilities
or obligations, in the ordinary course of business and consistent with past
practice, or (B) of any such other claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company;
31
(m) except in the ordinary course of business consistent
with past practice, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any
Subsidiary is a party;
(n) permit any insurance policy naming the Company or any
Subsidiary as a beneficiary or a loss payable payee to be canceled or terminated
without notice to Parent, except in the ordinary course of business and
consistent with past practice or in connection with replacing such policy with a
policy providing comparable coverage;
(o) revalue any assets of the Company, except as required
by GAAP;
(p) enter into any new material line of business or enter
into any contract that restrains, limits or impedes the Company's or any of its
Subsidiaries' ability to compete with or conduct any business or line of
business;
(q) enter into any contract to allocate, share or
otherwise indemnify for Taxes;
(r) acquire, make (or commit to make) an investment in,
or make a capital contribution to, any Person;
(s) take or omit to take any action which would make any
of the representations or warranties of the Company contained in this Agreement
untrue and incorrect in any material respect as of the date when made if such
action had then been taken or omitted, or would result in any of the conditions
set forth in Article VII hereof not being satisfied; or
(t) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
SECTION 5.2. No Solicitation. (a) The Company shall not, nor
shall it permit or authorize any of the Subsidiaries or any officer, director,
employee, agent or representative (including accountants, attorneys and
investment bankers) of the Company or any of the Subsidiaries (collectively, the
"Company Representatives") to, (i) solicit or initiate, or encourage, directly
or indirectly, any inquiries regarding or the submission of, any Takeover
Proposal (as defined below), (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information or data with respect to, or
take any other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(iii) enter into any agreement with respect to any Takeover Proposal or approve
or resolve to approve any Takeover Proposal; provided, however, that nothing
contained in this Section 5.2 or any other provision hereof shall prohibit the
Company or the Board of Directors from (A) taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2 or Item 1012(a) of Regulation
M-A promulgated under the Exchange Act or (B) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Board of Directors,
after receiving advice from outside counsel, is required under applicable law,
provided that the Company may not, except as permitted by Section 5.2(b),
withdraw or modify, or propose to withdraw or modify, its approval or
recommendation of this Agreement or the transactions contemplated hereby,
including the Merger, or approve or recommend, or propose to
32
approve or recommend any Takeover Proposal, or enter into any agreement with
respect to any Takeover Proposal. Upon execution of this Agreement, the Company
shall, and it shall cause the Company Representatives to, immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Takeover Proposal. Notwithstanding the foregoing,
prior to the Effective Time, the Company may furnish information concerning its
business, properties or assets to any Person or group pursuant to
confidentiality agreements with terms and conditions similar to the
Confidentiality Agreement, dated August 23, 2002, as amended (the
"Confidentiality Agreement"), between the Company and Parent (provided that such
confidentiality agreements may not include any provision granting any such
Person or group an exclusive right to negotiate with the Company), and may
negotiate and participate in discussions and negotiations with such Person or
group concerning a Takeover Proposal if: (x) such Person or group has submitted
a Superior Proposal which is pending at the time the Company determines to take
such action; and (y) the Board of Directors determines in good faith, based upon
advice of outside counsel, that such action is required to discharge the Board
of Director's fiduciary duties to the Company's stockholders under Delaware Law.
The Company shall not release or permit the release of any Person from, or waive
or permit the waiver of any provision of, any such confidentiality agreement or
any other confidentiality, standstill or similar agreement to which the Company
is a party or under which the Company has any rights. Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any breach
by any Company Representative, or action taken by any Company Representative
with the intent of circumventing, any of the provisions set forth in the
preceding sentence shall be deemed to constitute a breach of this Section 5.2 by
the Company (whether or not such Company Representative is purporting to act on
behalf of the Company).
The Company will promptly (and in any event within one (1)
business day) notify Parent in writing, of the existence of any proposal,
discussion, negotiation or inquiry received by the Company with respect to any
Takeover Proposal, and the Company will promptly communicate to Parent the
material terms and conditions of any proposal, discussion, negotiation or
inquiry which it may receive. The Company will promptly provide to Parent any
non-public information concerning the Company provided to any other Person which
was not previously provided to Parent. The Company will keep Parent reasonably
informed of the status and details of any such Takeover Proposal.
As used in this Agreement, the following terms have the
meanings set forth below:
"Superior Proposal" means an unsolicited written proposal by a
Third Party (defined below) to acquire, directly or indirectly, 25% or more of
the shares of Company Common Stock then outstanding or all or substantially all
of the assets of the Company, and (i) otherwise on terms which the Board of
Directors determines in good faith to be more favorable to the Company's
stockholders than the Merger (based in part on advice of the Company's
independent financial advisor that the value of the consideration provided for
in such proposal, taking into account the Termination Fee (as defined below),
exceeds the value of the consideration provided for in the Merger), (ii) which
is not subject to a financing contingency and (iii) which, in the good faith
reasonable judgment of the Board of Directors of the Company, is reasonably
likely to be consummated within a reasonable time.
33
"Takeover Proposal" means any inquiry, proposal or offer,
whether in writing or otherwise, from a Third Party to acquire beneficial
ownership (as defined under Rule 13(d) of the Exchange Act) of all or a material
portion of the assets of the Company or any of its Subsidiaries or 20% or more
of any class of equity securities of the Company or any of the Subsidiaries
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer, exchange offer or similar
transaction with respect to either the Company or any of the Subsidiaries,
including any single or multi-step transaction or series of related
transactions, which is structured to permit such Third Party or another Third
Party to acquire beneficial ownership of any material portion of the assets of,
or 20% or more of the equity interest in either the Company or any of the
Subsidiaries.
"Third Party" means any Person or group other than Parent,
Merger Sub or any affiliate thereof.
(b) Except as set forth in this Section 5.2(b), neither
the Board of Directors nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Merger Sub,
the approval or recommendation by the Board of Directors or any such committee
of this Agreement or the transactions contemplated hereby, including the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, prior to the Effective Time, the Board
of Directors may withdraw or modify its approval or recommendation of this
Agreement or the transactions contemplated hereby, including the Merger, approve
or recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case if (A) the Company shall have received a
Superior Proposal which is pending at the time the Company determines to take
such action, (B) the Board of Directors shall have determined in good faith,
based upon advice of outside counsel, that such action is required to discharge
the Board of Director's fiduciary duties to the Company's stockholders under
Delaware Law, (C) at least three business days shall have passed following
Parent's receipt of written notice from the Company advising Parent that the
Board of Directors has received such a Superior Proposal which it intends to
accept, specifying the material terms and conditions of such Superior Proposal,
and Parent does not make an offer that the Board of Directors shall have
concluded in its good faith judgment, after consultation with its financial
advisors and outside counsel, is as favorable (taking into account the
Termination Fee) to the Company stockholders as such Superior Proposal and (D)
concurrently with taking such action the Company shall pay the Termination Fee
as provided in Section 8.2(b) (whether or not this Agreement shall be
terminated).
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. Proxy Statement. As promptly as practicable after
the date of this Agreement, the Company shall prepare the preliminary Proxy
Statement and, after consultation with and review by Merger Sub, file the
preliminary Proxy Statement with the SEC. The Company shall use its reasonable
best efforts to (i) obtain and furnish the information required to be included
by the SEC in the Proxy Statement and, after consultation with and review by
Merger Sub, to respond promptly to any comments made by the SEC with respect to
the Proxy
34
Statement; and (ii) promptly upon the earlier of (x) receiving notification that
the SEC is not reviewing the preliminary Proxy Statement and (y) the conclusion
of any SEC review of the preliminary Proxy Statement, cause a definitive Proxy
Statement to be mailed to the Company's stockholders and, if necessary, after
the definitive Proxy Statement shall have been so mailed, promptly circulate
amended or supplemental proxy materials and, if required in connection
therewith, resolicit proxies; provided, however, that no such amended or
supplemental proxy materials will be mailed by the Company without consultation
and review by Parent or Merger Sub. The Company will promptly notify Parent and
Merger Sub of the receipt of comments of the SEC and of any request from the SEC
for amendments or supplements to the preliminary Proxy Statement or definitive
Proxy Statement or for additional information, and will promptly supply Parent
and Merger Sub with copies of all written correspondence between the Company or
Company Representatives, on the one hand, and the SEC or members of its staff,
on the other hand, with respect to the preliminary Proxy Statement, the
definitive Proxy Statement, the Merger or any of the other transactions
contemplated by this Agreement. Parent and Merger Sub will cooperate with the
Company in connection with the preparation of the Proxy Statement, including,
but not limited to, furnishing to the Company any and all information regarding
Parent and Merger Sub and their respective affiliates as may be required to be
disclosed therein. The Proxy Statement shall contain the recommendation of the
Board of Directors that the Company's stockholders approve this Agreement and
the transactions contemplated hereby, provided that the Board of Directors may
withdraw, modify or change its recommendation of the Merger and this Agreement
if it does so in accordance with Section 5.2(b) hereof.
SECTION 6.2. Meeting of Stockholders of the Company. As
promptly as practicable after the date of this Agreement, the Company shall
promptly take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and By-Laws to convene the Special Meeting, whether
or not the Board of Directors or any committee thereof has withdrawn or
modified, or proposes to withdraw or modify its approval or recommendation of
this Agreement or the transactions contemplated hereby, including the Merger.
The stockholder vote required for approval of the Merger will be no greater than
that set forth in Delaware Law. Subject to the provisions of Section 5.2(b)
hereof, the Company shall use its reasonable best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and shall take all
other action necessary or, in the reasonable opinion of Merger Sub, advisable to
secure any vote of stockholders required by Delaware Law to effect the Merger.
SECTION 6.3. Compliance with Law. Each of the Company, Parent
and Merger Sub will comply in all material respects with all applicable laws and
with all applicable rules and regulations of any Governmental Entity in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
SECTION 6.4. Notification of Certain Matters. The Company
shall give prompt notice to Parent of (i) the occurrence, or non-occurrence of
any event whose occurrence, or non-occurrence would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at any time from the date hereof to the Effective Time
and (ii) any failure of the Company, or any of its officers, directors,
employees or agents, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.4 shall not limit or
otherwise affect the remedies available hereunder to Parent.
35
SECTION 6.5. Access to Information. From the date hereof to
the Effective Time, the Company shall, and shall cause its Subsidiaries,
officers, directors, employees, auditors and agents to, afford the officers,
employees and agents of Parent and Merger Sub reasonable access at all
reasonable times to its officers, employees, agents, properties (including,
without limitation, for purposes of conducting environmental site assessments),
offices and other facilities and to all books and records, and shall promptly
furnish Parent and Merger Sub with (a) all financial, operating and other data
and information as Parent or Merger Sub, through its officers, employees or
agents, may reasonably request and (b) a copy of each report, schedule and other
document filed or received by the Company or any of the Subsidiaries during such
period pursuant to the requirements of applicable securities laws.
SECTION 6.6. Public Announcements. So long as this Agreement
is in effect, Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger and shall not issue, or permit their affiliates to issue, any such
press release or make any such public statement before such consultation, except
as may be required by law.
SECTION 6.7. Reasonable Best Efforts; Cooperation. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
all reasonable best efforts to obtain in a timely manner all necessary waivers,
consents (including, without limitation, any consents relating to Company
Material Leases) and approvals and to effect all necessary registrations and
filings, and to use all reasonable best efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including, without limitation,
(i) cooperating in responding to inquiries from, and making presentations to,
regulatory authorities and (ii) defending against and responding to any action,
suit, proceeding, or investigation, whether judicial or administrative,
challenging or relating to this Agreement or the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed.
Company shall use reasonable best efforts to obtain from each
landlord or sublandlord (as the case may be) of Company or any Subsidiary under
a Company Material Lease an estoppel certificate certifying that such Company
Material Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), the dates to which the rent and other charges payable
hereunder have been paid, and stating whether or not, to the knowledge of the
signer of such certificate, the tenant or subtenant (as the case may be)
thereunder is in default in the performance of any covenant, agreement or
condition contained in such Company Material Lease and, if so, specifying each
such default of which the signer may have knowledge.
SECTION 6.8. Agreement to Defend and Indemnify.
(a) From and after the Effective Time, Parent agrees to,
and agrees to cause the Surviving Corporation to, honor any rights to
indemnification or exculpation from liabilities in favor of the officers and
directors of the Company and each of its Subsidiaries (collectively, the
"Indemnified Parties") as provided in their respective certificates of
incorporation or by-laws
36
(or comparable organizational documents) and the indemnification agreements set
forth on Schedule 6.8(a), of the Company. Parent further agrees, for a period of
five years after the Effective Time, that it will not, and will not permit the
Surviving Corporation (or any successor entity owned or controlled by Parent),
to amend, modify or repeal any provision of the certificates of incorporation or
by-laws (or comparable organizational documents) of the Company or any of its
Subsidiaries relating to the indemnification of officers, directors and/or
employees.
(b) For five years after the Effective Time, Parent
shall, and shall cause the Surviving Corporation (or any successor entity owned
or controlled by Parent) to, use reasonable best efforts to provide officers'
and directors' liability insurance in respect of acts or omissions occurring at
or prior to the Effective Time covering each such person currently covered by
the Company's officers' and directors' liability insurance policy on terms
reasonably comparable to those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this paragraph, Parent shall
not be obligated to cause the Surviving Corporation (or any successor entity
owned or controlled by Parent) to pay premiums in excess of 200% of the amount
per annum the Company paid in its last full fiscal year, which amount has been
disclosed in writing to Parent, and if Parent or the Surviving Corporation is
unable to obtain the insurance required by this paragraph, it shall obtain as
much comparable insurance as possible for an annual premium equal to such
maximum amount.
(c) Notwithstanding Section 9.7 hereof, this Section 6.8
is intended to be for the benefit of and to grant third-party rights to
Indemnified Parties whether or not parties to this Agreement, and each of the
Indemnified Parties shall be entitled to enforce the covenants contained herein.
(d) If the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 6.8.
SECTION 6.9. Employee Benefits. For a period of six months
following the Effective Time (the "Benefits Continuation Date"), Parent shall
maintain, or cause to be maintained, each of the Company Employee Benefit Plans
(other than stock based plans), provided that the Parent may substitute another
plan or arrangement for any Company Employee Benefit Plan provided that such
substituted plan or arrangement offers comparable benefits taken as a whole,
provided, further, that in the event the costs of maintaining the Company
Employee Benefit Plans increase prior to the Benefits Continuation Date, Parent
may proportionately increase the fees it charges the Surviving Corporation's
employees to participate in the Company Employee Benefit Plans. Notwithstanding
the foregoing, Parent or the Surviving Corporation may amend or terminate any of
the Company Employee Benefit Plans following the Benefits Continuation Date in
accordance with their respective terms and applicable law. In addition, Parent
shall, or shall cause the Surviving Corporation (or any successor entity owned
or controlled by Parent) to, honor the agreements set forth on Schedule 6.9.
37
SECTION 6.10. State Takeover Laws. If any Takeover Law becomes
or is deemed to become applicable to the Merger or this Agreement or any of the
transactions contemplated by this Agreement, the Company shall promptly take all
action necessary to render such Takeover Law inapplicable to all of the
foregoing.
SECTION 6.11. SEC Reports. From and after the date of this
Agreement until the earlier of the termination of this Agreement or the
Effective Time, the Company shall file on a timely basis all SEC Reports
required to be filed by it with the SEC under the Exchange Act and the
Securities Act, which SEC Reports shall comply in all material respects with the
requirements of the Exchange Act and the Securities Act, each as applicable to
such SEC Reports.
SECTION 6.12. Delisting. Each of the parties hereto agrees to
cooperate with the other party in taking, or causing to be taken, all actions
necessary to (i) delist the Company Common Stock from the Nasdaq National Market
and (ii) to terminate the registration of the Company Common Stock under the
Exchange Act; provided that such delisting or termination shall not be effective
until after the Effective Time.
SECTION 6.13. Resignations. At or prior to the Effective Time,
the Company shall obtain the resignations of each director of the Company and,
if so requested by Merger Sub, of any officer of the Company and any director or
officer of any Subsidiary of the Company.
SECTION 6.14. Communications to Employees. Merger Sub and the
Company will cooperate with each other with respect to, and endeavor in good
faith to agree in advance upon the method and content of, all written or oral
communications or disclosure to employees of the Company or any of the
Subsidiaries with respect to the Merger and any other transactions contemplated
by this Agreement.
SECTION 6.15. Transfer Taxes. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes") incurred
in connection with the transactions contemplated by this Agreement shall be paid
by either Merger Sub or the Surviving Corporation, and the Company shall
cooperate with Merger Sub and Parent in preparing, executing and filing any Tax
Returns with respect to such Transfer Taxes.
SECTION 6.16. Voting of Company Common Stock. Parent and
Merger Sub shall, and shall cause their respective affiliates to, vote any
shares of Company Common Stock held by them in favor of the Merger and the
adoption of this Agreement.
SECTION 6.17. Note. Prior to or concurrently with the
execution of this Agreement, Parent will make the investment to be evidenced by
the Note.
38
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1. Conditions for Each Party's Obligations to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. The Merger and this Agreement
shall have been approved and adopted by the requisite vote of the stockholders
of the Company.
(b) Injunction. No statute, rule, regulation, judgment,
writ, decree, order or injunction shall have been promulgated, enacted, entered
or enforced, and no other action shall have been taken, by any Governmental
Entity that in any of the foregoing cases has the effect of making illegal or
directly or indirectly restraining, prohibiting or restricting the consummation
of the Merger.
(c) HSR. Any waiting period applicable to the Merger
under the HSR Act shall have expired or have been terminated.
SECTION 7.2. Additional Conditions to Obligation of the
Company to Effect the Merger. The obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
additional following conditions, unless waived by the Company:
(a) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects their
respective agreements contained in this Agreement required to be performed on or
prior to the Effective Time and the Company shall have received certificates of
the President or Chief Executive Officer or a Vice President of Parent and
Merger Sub to that effect.
(b) Representations and Warranties of Parent and Merger
Sub. The representations and warranties of Parent and Merger Sub contained in
this Agreement shall be true and correct in all respects when made and on and as
of the Effective Time as if made on and as of such time (except for those
representations and warranties of Parent and Merger Sub that are so qualified
and relate to a particular date which representations and warranties shall be
true and correct in all respects as of such date); provided, however, that this
condition shall be deemed satisfied if the cumulative effect of all inaccuracies
of Parent's and Merger Sub's representations and warranties (for this purpose
disregarding any qualification or limitation as to knowledge, materiality or
Purchaser Material Adverse Effect) would not be reasonably likely to have a
Purchaser Material Adverse Effect. The Company shall have received certificates
of the President or Chief Executive Officer or a Vice President of each of
Parent and Merger Sub to the foregoing effects.
(c) Purchaser Material Adverse Effect. Since the date
hereof, there shall not have been any Purchaser Material Adverse Effect.
39
SECTION 7.3. Additional Conditions to Obligations of Parent
and Merger Sub to Effect the Merger. The obligations of Parent and Merger Sub to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the additional following conditions, unless waived by Parent
and Merger Sub:
(a) Performance of Obligations of the Company. The
Company shall have performed in all material respects its agreements contained
in this Agreement required to be performed on or prior to the Effective Time,
and Parent and Merger Sub shall have received a certificate of the President or
Chief Executive Officer or a Vice President of the Company to that effect.
(b) Representations and Warranties of the Company. The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all respects when made and on and as of the Effective
Time as if made on and as of such time (except for those representations and
warranties of the Company that are so qualified and relate to a particular date
which representations and warranties shall be true and correct in all respects
as of such date); provided, however, that this condition shall be deemed
satisfied if the cumulative effect of all inaccuracies of the Company's
representations and warranties (for this purpose disregarding any qualification
or limitation as to knowledge, materiality or Material Adverse Effect) would not
be reasonably likely to have a Material Adverse Effect. Parent and Merger Sub
shall have received a certificate of the President or Chief Executive Officer or
a Vice President of the Company to the foregoing effects.
(c) Material Adverse Effect. Since the date hereof, there
shall not have been any Material Adverse Effect.
(d) Consents. The Company shall have obtained and
provided to Parent and Merger Sub copies of evidence with respect thereto the
consents of third parties listed on Schedule 7.3(d), the terms of which consents
shall be reasonably satisfactory to Parent and Merger Sub.
(e) Pre-November 2000 Options. Not less than seventy-five
percent (75%) of the Pre-November 2000 Options shall have been terminated,
without any further liability to the Company or the Subsidiaries.
(f) Approvals. All notices, applications, approvals,
consents, and waivers ("Approvals") required to be furnished to or obtained from
any Governmental Entity necessary in order for the Company to conduct its
business following the consummation of the transactions contemplated by this
Agreement in all material respects in the manner as such business, taken as a
whole, was conducted prior to the Effective Time shall have been obtained or
furnished and any applicable waiting period or periods shall have expired (or,
if there be no time limit for waiver or objection, a notice of no-objection or
equivalent with respect thereto shall have been received by the Company).
40
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company:
(a) By the mutual written consent of the Board of
Directors of Parent, Merger Sub and the Company; or
(b) By Parent, Merger Sub or the Company if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling or other action each party hereto
shall use its reasonable best efforts to have vacated or reversed), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; or
(c) By Parent, Merger Sub or the Company, if the
stockholders of the Company fail to approve the Merger upon the taking of a vote
at a duly held meeting of the stockholders or at any adjournment thereof; or
(d) By Parent or Merger Sub if, without any material
breach by Merger Sub or Parent of their respective obligations under this
Agreement, the Merger shall not have been consummated on or before March 15,
2004 (the "Termination Date").
(e) By the Company if, without any material breach by the
Company of its obligations under this Agreement, the Merger shall not have been
consummated on or before the Termination Date.
(f) By the Company:
(i) if the Company has approved a Superior
Proposal in accordance with Section 5.2(b), provided the Company has
complied with all provisions thereof, including the notice provisions
therein; or
(ii) if Parent or Merger Sub shall have breached
its representations, warranties, covenants or other agreements
contained in this Agreement and the cumulative effect of all
inaccuracies of the Parent's and Merger Sub's representations and
warranties (for this purpose disregarding any qualification or
limitation as to knowledge, materiality or Purchaser Material Adverse
Effect) would be reasonably likely to have a Purchaser Material Adverse
Effect and which breach or failure to perform is incapable of being
cured or has not been cured by ten business days following written
notice thereof to Parent from the Company.
(g) By Parent or Merger Sub:
41
(i) if the Board of Directors shall have
withdrawn, or modified or changed in a manner adverse to Parent or
Merger Sub, its approval or recommendation of this Agreement or the
Merger, or shall have approved a Takeover Proposal, or if the Company
shall have entered into an agreement to effect a Takeover Proposal; or
(ii) if (A) a tender or exchange offer relating
to securities of the Company shall have been commenced (other than
pursuant to Section 2.3(b) hereof) and the Board of Directors shall not
have recommended that the Company's stockholders reject such tender or
exchange offer within ten business days after the commencement thereof
or (B) the Board of Directors shall have waived Section 203 of Delaware
Law with respect to any Person other than Parent, Merger Sub or their
affiliates or any group of which any them is a member; or
(iii) if the Company, or any of the Company
Representatives, shall take any actions in breach of Section 5.2(a)
hereof; or
(iv) if the Company shall have breached its
representations, warranties, covenants or other agreements contained in
this Agreement and if the cumulative effect of all inaccuracies of the
Company's representations and warranties (for this purpose disregarding
any qualification or limitation as to knowledge, materiality or
Material Adverse Effect) would be reasonably likely to have a Material
Adverse Effect and which breach or failure to perform is incapable of
being cured or has not been cured within ten business days following
written notice thereof to the Company from Merger Sub.
SECTION 8.2. Effect of Termination.
(a) In the event of termination of this Agreement by
either the Company, Parent or Merger Sub as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than the
provisions of this Article VIII and as provided in Section 6.8 and Section 9.1
and except that nothing herein shall relieve any party for breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
(b) If (x) Parent or Merger Sub terminates this Agreement
pursuant to Section 8.1(g)(i), 8.1(g)(ii) or 8.1(g)(iii) or (y) the Company
terminates this Agreement pursuant to Section 8.1(f)(i), then in each case, the
Company shall pay, or cause to be paid to Parent, at the time of termination, an
amount equal to One Million Eight Hundred Thousand Dollars ($1,800,000.00) (the
"Termination Fee").
(c) If (x) Parent, Merger Sub or the Company terminates
this Agreement pursuant to Section 8.1(c), 8.1(d), 8.1(e) or 8.1(g)(iv), in each
case after the Company's receipt of a Takeover Proposal, and (y) within twelve
(12) months after such termination, the Company enters into an agreement with
respect to a Takeover Proposal, then the Company shall pay the Termination Fee
concurrently with entering into any such agreement.
(d) If (x) Parent, Merger Sub or the Company terminates
this Agreement pursuant to Section 8.1(c), 8.1(d), 8.1(e) or 8.1(g)(iv) and the
Company has not received a Takeover Proposal at the time of termination and (y)
within nine (9) months after such
42
termination, the Company enters into an agreement with respect to a Takeover
Proposal, then the Company shall not pay the Termination Fee but shall pay
Parent Nine Hundred Thousand Dollars ($900,000), for expenses incurred in
connection with the drafting, negotiation and execution of this Agreement and
the other Transaction Documents, concurrently with entering into any such
agreement.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.1, as the case may be, except as provided in Section 8.2
and except that the agreements set forth in Article II, Section 6.8 and Section
6.9 shall survive the Effective Time in accordance with their express terms and
those set forth in Article VIII and Section 9.3 shall survive termination
indefinitely.
SECTION 9.2. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made (i) as of the date delivered or sent by facsimile if
delivered personally or by facsimile, and (ii) on the third business day after
deposit in the U.S. mail, if mailed by registered or certified mail (postage
prepaid, return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) if to Parent or Merger Sub:
Grupo Sansborns, S.A. de C.V.
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ Col. Lomas de Chapultepec
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Acra
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
43
(b) if to the Company:
Good Guys, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Howard, Rice, Nemerovski, Canady, ▇▇▇▇ & ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3. Expenses. Except as set forth in Section 8.2(b),
all fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
SECTION 9.4. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a Person means a Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned Person;
(b) "control" (including the terms "controlled by" and
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise; and
(c) "knowledge" means the knowledge of any officer or
director of the party making the representation and warranty.
(d) "Person" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization or other entity.
(e) The following terms shall have the meanings ascribed
to them in the respective section of the Agreement:
"Agreement" - See the Preamble
"Benefits Continuation Date" - See Section 6.9
"Board of Directors" - See the Recitals
"Certificate of Merger" - See Section 1.3
"Certificate" - See Section 2.1(e)
"Closing" - See Section 1.2
"Closing Date" - See Section 1.2
"Code" - See Section 2.2(g)
"Company" - See the Preamble
"Company Common Stock" - See Section 2.1(b)
44
"Company Employee Benefit Plans" - See Section 4.8(a)
"Company ERISA Affiliate" - See Section 4.8(a)
"Company Material Contracts" - See Section 4.13(a)
"Company Material Leases" - See Section 4.9(b)
"Company Multiemployer Plan" - See Section 4.8(b)
"Company Preferred Stock" - See Section 4.2(a)
"Company Representatives" - See Section 5.2(a)
"Confidentiality Agreement" - See Section 5.2(a)
"Delaware Law" - See the Recitals
"Dissenting Shares" - See Section 2.1(d)
"Effective Time" - See Section 1.3
"Environmental Law" - See Section 4.12(e)
"Environmental Permit" - See Section 4.12(e) "
ERISA" - See Section 4.8(a)
"Exchange Act" - See Section 3.3(b)
"Exchange Agent" - See Section 2.2(a)
"Exchange Fund" - See Section 2.2(a)
"Excluded Shares" - See Section 2.1(b)
"GAAP" - See Section 4.5(b)
"Governmental Entity" - See Section 3.3(b)
"Hazardous Substances" - See Section 4.12(e)
"HSR Act" - See Section 3.3(b)
"Indemnified Parties" - See Section 6.8(a)
"Intellectual Property" - See Section 4.10(g)
"Intercreditor Agreement" - See Section 4.4(a)
"Leased Real Property" - See Section 4.9(d)
"Licenses and Permits" - See Section 4.14(b)
"Liens" - See Section 4.2(b)
"Listed Intellectual Property" - See Section 4.10(b)
"Material Adverse Effect" - See Section 4.1(a)
"Merger" - See the Recitals
"Merger Consideration" - See Section 2.1(b)
"Merger Sub" - See the Preamble
"Merger Sub Common Stock" - See 2.1(a)
"Note" - See Section 4.4(a)
"Option Plans" - See Section 2.3(a)
"Option Price" - See Section 2.3(a)
"Options" - See Section 2.3(b)
"Other Stock Plan" - See Section 2.3(d)
"Parent" - See the Preamble
"Post-November 2000 Options" - See Section 2.3(a)
"Pre-November 2000 Options" - See Section 2.3(b)
"Proxy Statement" - See Section 3.8
"Purchaser Information" - See Section 3.7
"Purchaser Material Adverse Effect" See Section 3.6
"Registration Rights Agreement" - See Section 4.4(a)
"Restated Certificate" - See Section 1.6
"SEC" - See Section 3.8
"SEC Reports" - See Section 4.5(a)
"Securities Act" - See Section 4.5(a)
"Special Meeting" - See Section 3.8
"Subsidiary" - See Section 4.1(c)
"Superior Proposal" - See Section 5.2(a)
"Surviving Corporation" - See Section 1.1
"Takeover Laws" - See Section 4.20
"Takeover Proposal" - See Section 5.2(a)
"Tax Return" -Section 4.16(b)
"Taxes" - See Section 4.16(b)
"Termination Date" - See Section 8.1(d)
"Termination Fee" - See Section 8.2(b)
"Third Party" - See Section 5.2
"Transaction Documents" - See Section 4.4(a)
"Transfer Taxes" - See Section 6.14
▇▇
"▇▇▇▇ ▇▇▇" - See Section 4.24
"Warrant Agreements" - See Section 2.3(c)
"Warrants and Other Rights" - See Section 2.3(c)
"Warrant Price" - See Section 2.3(c)
SECTION 9.5. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 9.6. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the maximum
extent possible.
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede any and all other prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder, except as otherwise provided
herein.
SECTION 9.8. Assignment. This Agreement shall not be assigned
by operation of law or otherwise, except that Parent and Merger Sub may assign
all or any of their rights hereunder to any affiliate of Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.9. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed entirely within that
State.
SECTION 9.10. Amendment. This Agreement may be amended by the
parties hereto by action taken by Parent and Merger Sub, and by action taken by
or on behalf of the Board of Directors at any time before the Effective Time;
provided, however, that, after approval of the Merger by the stockholders of the
Company, no amendment may be made which would reduce the amount or change the
type of consideration into which each share of Company Common Stock will be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.11. Waiver. At any time before the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other parties hereto with any of their agreements or
conditions contained
46
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only as against such party and only if set forth in an
instrument in writing signed by such party. The failure of any party hereto to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
SECTION 9.12. Counterparts. This Agreement may be executed in
one or more counterparts (including by facsimile), and by the different parties
hereto in separate counterparts, each of which when executed shall be deemed to
be an original but all of which shall constitute one and the same agreement.
47
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
GOOD GUYS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman & Chief Executive Officer
COMPUSA INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President/ Chief
Financial Officer
GLADIATOR ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
US Commercial Corp. De C.V. hereby
unconditionally agrees to cause Parent and
Merger Sub to pay the Merger Consideration
on or after the Closing in accordance with
the terms of this Agreement.
US COMMERCIAL CORP. DE C.V.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney In Fact
[Signature Page to Merger Agreement]