EXHIBIT (C)(1)
AGREEMENT AND PLAN OF MERGER
dated as of
October 30, 1997
by and among
CREATIVE TECHNOLOGY LTD.
CSW ACQUISITION CORPORATION
AND
CAMBRIDGE SOUNDWORKS, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I THE OFFER....................................................... 1
1.1 The Offer......................................................... 1
1.2 Company Action.................................................... 3
1.3 Directors......................................................... 4
ARTICLE II THE MERGER..................................................... 5
2.1 Merger............................................................ 5
2.2 Conversion of Shares.............................................. 6
2.3 Exchange of Certificates.......................................... 6
2.4 Dissenting Shares................................................. 7
2.5 Articles of Organization and Bylaws of the Surviving Corporation.. 8
2.6 Directors and Officers of the Surviving Corporation............... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER..... 8
3.1 Corporate Organization............................................ 9
3.2 Authority......................................................... 9
3.3 Consents And Approvals; No Violation.............................. 9
3.4 Brokers and Finders............................................... 10
3.5 Financing......................................................... 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 10
4.1 Corporate Organization............................................ 10
4.2 Capitalization.................................................... 11
4.3 Subsidiaries...................................................... 11
4.4 Authority......................................................... 11
4.5 Consents and Approvals; No Violation.............................. 12
4.6 Proxy or Information Statement.................................... 12
4.7 Conduct of Business............................................... 13
4.8 SEC Documents..................................................... 14
4.9 Litigation........................................................ 14
4.10 Labor Agreements and Actions..................................... 15
4.11 Certain Agreements and Employee Benefit Plans.................... 15
4.12 Taxes............................................................ 17
4.13 Absence of Certain Changes or Events............................. 18
4.14 Title to Properties: Absence of Liens and Encumbrances:
Condition of Equipment........................................... 18
4.15 Intellectual Property............................................ 19
4.16 Material Contracts............................................... 20
4.17 Proprietary Information and Inventions Agreements................ 20
4.18 No Conflict of Interest.......................................... 20
4.19 Takeover Statutes Inapplicable................................... 21
4.20 Brokers and Finders.............................................. 21
SECTION V COVENANTS OF THE COMPANY AND PARENT............................. 21
5.1 Conduct of Business of the Company................................ 21
5.2 Stockholder Meeting; Proxy Material............................... 23
5.3 Third Party Acquisitions.......................................... 24
ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 26
6.1 Access to Information............................................. 26
6.2 Legal Conditions to Offer and Merger.............................. 26
6.3 Confidentiality Agreement......................................... 27
6.4 Public Announcements.............................................. 27
6.5 Indemnification and Directors' and Officers' Insurance............ 27
6.6 Company Stock Option Plans........................................ 28
6.7 Certain Employee Benefits Matters................................. 28
6.8 Notice of Certain Events.......................................... 29
6.9 Obligations of Purchaser.......................................... 29
6.10 Voting of Shares................................................. 29
6.11 Expenses......................................................... 29
6.12 Takeover Statutes................................................ 29
ARTICLE VII CONDITIONS.................................................... 30
7.1 Conditions of Each Party's Obligation to Effect the Merger........ 30
7.2 Conditions to Obligations of Parent and the Purchaser............. 30
7.3 Conditions to Obligations of the Company.......................... 31
ARTICLE VIII TERMINATION.................................................. 31
8.1 Termination....................................................... 31
8.2 Effect of Termination............................................. 32
8.3 Certain Payments.................................................. 33
ARTICLE IX GENERAL PROVISIONS............................................. 34
9.1 Nonsurvival of Representations, Warranties and Agreements......... 34
9.2 Amendments and Waivers............................................ 34
9.3 Severability...................................................... 34
9.4 Interpretation.................................................... 34
9.5 Assignment........................................................ 35
9.6 Counterparts...................................................... 35
9.7 Titles and Subtitles.............................................. 35
9.8 Notices........................................................... 35
9.9 Entire Agreement.................................................. 36
9.10 No Third Party Beneficiaries..................................... 36
9.11 Governing Law and Venue; Waiver of Jury Trial.................... 36
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INDEX OF DEFINED TERMS
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DEFINED TERM REFERENCE
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Agreement Preamble
CERCLA (S) 4.7(c)
Certificates (S) 2.3(a)
Closing Date (S) 2.1(b)
Code (S) 4.11(a)
Common Stock Recitals
Company Preamble
Company Advisors (S) 5.3(a)
Company Disclosure Schedule Article IV
Company Financial Statements (S) 4.8
Company IP Rights (S) 4.15(a)
Confidentiality Agreement (S) 6.3
Constituent Corporation (S) 2.1(a)
Cut-off Date (S) 1.3(a)
Dissenting Shares (S) 2.4(a)
Dissenting Stockholder (S) 2.4(a)
Effective Time (S) 2.1(b)
Environmental Laws (S) 4.7(c)
ERISA (S) 4.11(b)
Exchange Act (S) 1.1(a)
Exchange Agent (S) 2.3(a)
Financial Advisor (S) 1.2(a)
Fully Diluted Shares (S) 4.2
Governmental Entity (S) 3.3
Hazardous Materials (S) 4.7(c)
HSR Act (S) 3.3
Independent Directors (S) 1.3(c)
Information Statement (S) 4.6
IRS (S) 4.11(b)
ISO (S) 4.11(c)
Material Adverse Effect (S) 4.1
Material Contracts (S) 4.16
Material Plans (S) 4.11(b)
MBCL Recitals
Merger Recitals
Merger Agreement Annex I
Merger Price (S) 2.2(a)
Minimum Share Condition (S) 1.1(a)
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DEFINED TERM REFERENCE
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Notice of Superior Proposal (S) 5.3(b)
Offer Recitals
Offer Documents (S) 1.1(b)
Parent Preamble
Parent Disclosure Schedule Article III
Permits (S) 4.7(b)
Preferred Stock (S) 4.2
Proxy Statement (S) 4.6
Purchaser Preamble
Schedule 13E-3 (S) 1.1(b)
Schedule 14D-1 (S) 1.1(b)
Schedule 14D-9 (S) 1.2(b)
SEC (S) 1.1(a)
SEC Documents (S) 4.8
Securities Act (S) 4.8
Shares Recitals
Stock Option Plan (S) 4.2
Stock Options (S) 4.2
Stockholders' Meeting (S) 5.2(a)
Superior Proposal (S) 5.3(b)
Surviving Corporation (S) 2.1(a)
Takeover Statutes Inapplicable (S) 4.19
Taxes (S) 4.12(a)
Tendered Shares (S) 1.1(a)
Third Party (S) 5.3(b)
Third Party Acquisition (S) 5.3(b)
Warrants (S) 4.2
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
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30, 1997, is entered into by and among Creative Technology Ltd., a Singapore
corporation ("Parent"), CSW Acquisition Corporation, a Massachusetts corporation
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and a wholly owned subsidiary of Parent (the "Purchaser"), and Cambridge
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SoundWorks, Inc., a Massachusetts corporation (the "Company").
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RECITALS
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A. Parent presently owns an aggregate of 912,294 shares of common stock,
no par value ("Common Stock") of the Company and holds a warrant to purchase an
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additional 257,314 shares of Common Stock.
B. The respective Boards of Directors of the Company, Parent and the
Purchaser have approved the acquisition of the Company by the Purchaser and, in
furtherance of such acquisition, Parent proposes to cause the Purchaser to make
a cash tender offer (the "Offer") for all of the outstanding shares of Common
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Stock (the "Shares") on the terms specified herein.
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C. The Board of Directors of the Company has approved the Offer and
recommended that it be accepted by the stockholders of the Company.
D. The Boards of Directors of the Company and the Purchaser deem it
advisable and in the best interests of the stockholders of such corporations to
effect the merger (the "Merger") of the Purchaser with and into the Company
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following the consummation of the Offer, all pursuant to this Agreement and in
accordance with the Business Corporation Law of the Commonwealth of
Massachusetts (the "MBCL").
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The parties hereby agree as follows:
ARTICLE I
THE OFFER
1.1 THE OFFER.
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(a) Subject to the provisions of this Agreement and provided that none
of the conditions identified in subparagraphs (a) - (i) in Annex I hereto shall
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have occurred and be continuing, Parent shall cause the Purchaser to, as
promptly as reasonably practicable after the date hereof, but in no event later
than five (5) business days following the initial public announcement of the
Purchaser's intention to commence the Offer, commence (within the meaning of
Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) the Offer for all of the outstanding Shares at a price of
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$10.68 per Share, net to the seller in cash. The obligation of the Purchaser to
accept for payment and to pay for any Shares tendered shall be subject only (i)
to such number of Shares, when added to the number of Shares already owned by
Parent, the Purchaser or any direct or indirect wholly owned subsidiary
of Parent, as shall constitute two-thirds of the Company's Fully Diluted Shares
(as defined in Section 4.2) being validly tendered prior to the expiration or
termination of the Offer and not withdrawn (the "Minimum Share Condition") and
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(ii) to the other conditions to the Offer set forth in Annex I. The Purchaser
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may at anytime transfer or assign to one or more corporations directly or
indirectly wholly owned by Parent the right to purchase all or any portion of
the Shares tendered pursuant to the Offer (the "Tendered Shares"), but no such
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assignment shall relieve the Purchaser of its obligations hereunder. The
Purchaser expressly reserves the right to waive any of the conditions to the
Offer set forth in Annex I and to modify the terms and conditions of the Offer;
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provided, however, that, without the prior written consent of the Company, the
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Purchaser shall not amend or modify the terms of the Offer to (i) reduce the
cash price to be paid pursuant to the Offer, (ii) reduce the number of Shares as
to which the Offer is made, (iii) change the form of consideration to be paid in
the Offer, (iv) modify or waive the Minimum Share Condition, or (v) impose
conditions to its obligation to accept for payment or pay for the Tendered
Shares other than those set forth in Annex I. Subject to the terms and
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conditions thereof, the Offer shall expire at midnight, New York City time, on
the date that shall be 20 business days after the date the Offer on which shall
be commenced. The Offer may not be extended without the Company's prior written
consent; provided, however, that the Purchaser may (x) from time to time extend
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(and re-extend) the Offer, if at the scheduled expiration date of the Offer any
of the conditions to the Offer shall not have been satisfied or waived, until
such time as such conditions shall be satisfied or waived; (y) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the Securities and Exchange Commission (the "SEC") or the staff thereof
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applicable to the Offer; or (z) extend (and re-extend) the Offer for any reason
on one or more occasions for an aggregate period of not more than 20 business
days beyond the latest expiration date that would otherwise be permitted under
clause (x) or (y) above if on such expiration date there shall not have been
tendered at least that number of Shares necessary to permit the Merger to be
effected without a meeting of the Company's stockholders in accordance with the
MBCL.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Purchaser shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer and (ii) a Rule 13e-3 Transaction
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Statement on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3") with respect to the Offer and the other
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transactions contemplated hereby. The Schedule 14D-1 and the Schedule 13E-3
shall contain or shall incorporate by reference an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1,
Schedule 13E-3 and Offer to Purchase and the documents included therein or
incorporated therein by reference pursuant to which the Offer shall be made,
together with any supplements or amendments thereto, the "Offer Documents").
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The Company shall execute and join in the filing of the Schedule 13E-3. Parent
and the Purchaser agree that the Offer Documents shall comply as to form in all
material respects with the Exchange Act and the rules and regulations
promulgated thereunder and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is
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made by Parent or the Purchaser with respect to information supplied by the
Company or any of its representatives which is included in the Offer Documents.
Each of Parent, the Purchaser and the Company agrees to correct promptly any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading, and each of Parent
and the Purchaser further agrees to take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. Parent and the Purchaser agree to provide the Company and its
counsel any comments Parent, the Purchaser or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
(c) Subject to the terms and conditions of the Offer, the Purchaser
shall pay for Shares which have been validly tendered and not withdrawn pursuant
to the Offer as promptly as practicable following expiration of the Offer.
1.2 COMPANY ACTION.
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(a) The Company hereby approves of and consents to the Offer and
represents that at a meeting duly called and held the Board of Directors of the
Company has (i) by unanimous vote of all directors present and voting (with all
directors who are designees of Parent abstaining), approved and adopted this
Agreement and the transactions contemplated hereby and determined that the Offer
and the Merger are in the best interests of the Company and its stockholders
(other than Parent and the Purchaser) and on terms that are fair to such
stockholders, and (ii) recommended that the Company's stockholders (other than
Parent and the Purchaser) accept the Offer and tender all of their Shares in
connection therewith and, if required under the MBCL, approve this Agreement and
the transactions contemplated hereby. The Company represents that its Board of
Directors has received the written opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC (its
"Financial Advisor") that the consideration to be received by the holders of
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Shares (other than Parent and the Purchaser and Dissenting Stockholders (as
defined in Section 2.4)) pursuant to each of the Offer and the Merger is fair to
such holders from a financial point of view, and that a complete and correct
signed copy of such opinion has been delivered on or prior to the date hereof by
the Company to Parent. The Company hereby consents to the inclusion in the
Offer Documents the recommendation of the Company's Board of Directors described
in the immediately preceding sentence. The Company has been authorized by its
Financial Advisor to permit, subject to the prior review by its Financial
Advisor, the inclusion of the fairness opinion (or a reference thereto) in the
Offer Documents, the Schedule 14D-9 (as defined in Section 1.2(b)) and the Proxy
Statement (as defined in Section 4.6).
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
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recommendation of the Company's Board of
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Directors described above in Section 1.2(a) and shall mail the Schedule 14D-9 to
the stockholders of the Company. The Company agrees that the Schedule 14D-9
shall comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or the
Purchaser or any of their respective representatives which is included in the
Schedule 14D-9. Each of the Company, Parent and the Purchaser agrees to correct
promptly any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading, and the
Company further agrees to take all steps necessary to amend or supplement the
Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to
be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable federal securities laws. Parent
and its counsel shall be given a reasonable opportunity to review the Schedule
14D-9 and all amendments and supplements thereto prior to their filing with the
SEC or dissemination to stockholders of the Company. The Company agrees to
provide Parent and its counsel with any comments the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments.
(c) In connection with the Offer, the Company shall, or shall cause
its transfer agent to, furnish the Purchaser promptly with mailing labels
containing the names and addresses of the record holders of Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Common Stock, and shall
furnish to the Purchaser such information and assistance (including updated
lists of stockholders, security position listings and computer files) as the
Purchaser may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and the
Purchaser and their agents shall hold in confidence the information contained in
any such labels, listings and files, will use such information only in
connection with the Offer and the other transactions contemplated hereby and, if
this Agreement shall be terminated, will deliver, and will use their reasonable
efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
1.3 DIRECTORS.
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(a) Promptly upon the purchase by the Purchaser of Shares in the
Offer, and from time to time thereafter, the Purchaser shall be entitled to
designate that number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to the election of
any additional directors pursuant to this Section 1.3) and (ii) the
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percentage that the number of Shares owned by the Purchaser, Parent and any
direct or indirect wholly owned subsidiary of Parent (including Shares purchased
in the Offer) bears to the total number of Shares outstanding at such time, and
to effect the foregoing the Company shall upon request by the Purchaser, at the
Company's election, either increase the number of directors comprising the
Company's Board of Directors or seek and accept resignations of incumbent
directors. The first date on which designees of the Purchaser shall constitute a
majority of the Company's Board of Directors is referred to in this Agreement as
the "Cut-Off Date." At such times, the Company will use its reasonable best
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efforts to cause individuals designated by the Purchaser to constitute the same
percentage as such individuals represent on the Company's Board of Directors of
each committee of the Board.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill such obligations. The
Purchaser will supply to the Company and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the Cut-Off Date and prior to the Effective Time (as
defined below), the Board of Directors of the Company shall have at least one
director who is neither designated by the Purchaser, an employee of the Company
nor otherwise affiliated with the Purchaser (one or more of such directors, the
"Independent Directors") and any amendment of this Agreement or the Articles or
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Organization or Bylaws of the Company, any termination or amendment of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or the Purchaser
or any exercise or waiver of any of the Company's rights hereunder, will require
the concurrence of a majority of the Independent Directors.
ARTICLE II
THE MERGER
2.1 MERGER.
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(a) At the Effective Time (as defined in Section 2.1(b) below) and
subject to the terms and conditions hereof and the provisions of the MBCL, the
Purchaser will be merged with and into the Company in accordance with the MBCL,
the separate existence of the Purchaser shall thereupon cease and the Company
shall continue as the surviving corporation (the "Surviving Corporation"). The
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Purchaser and the Company are sometimes hereinafter referred to collectively as
the "Constituent Corporations."
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(b) Subject to the terms and conditions hereof, the Merger shall be
consummated as promptly as practicable after the expiration of the Offer and the
Stockholders' Meeting (as defined in Section 5.2), if any, by duly filing
appropriate articles of merger, in such form as is required by, and executed in
accordance with, the relevant provisions of the MBCL
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The Merger shall be effective at such time as the articles of merger are duly
filed with the Secretary of State of the Commonwealth of Massachusetts in
accordance with the MBCL or at such later time as is specified in the articles
of merger (the "Effective Time"). Prior to such filing, a closing shall take
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place at the offices of Venture Law Group, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, or at such other place as the parties shall agree, for the purpose
of confirming the satisfaction or waiver of the conditions contained in Article
VII hereof. The date on which such closing shall occur is referred to herein as
the "Closing Date."
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(c) The separate corporate existence of the Company, as the Surviving
Corporation, with all its purposes, objects, rights, privileges, powers,
certificates and franchises, shall continue unimpaired by the Merger. The
Surviving Corporation shall succeed to all the properties and assets of the
Constituent Corporations and to all debts, choses in action and other interests
due or belonging to the Constituent Corporations and shall be subject to and
responsible for all the debts, liabilities and duties of the Constituent
Corporations with the effect set forth in Section 80 of the MBCL.
2.2 CONVERSION OF SHARES. At the Effective Time and by virtue of the
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Merger and without any action on the part of the holders of the capital stock of
the Constituent Corporations:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) Shares to be canceled pursuant to Section 2.2(b)
below and (ii) Dissenting Shares (as defined in Section 2.4)) shall be converted
into the right to receive in cash an amount per Share equal to the highest price
paid per Share pursuant to the Offer (the "Merger Price");
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(b) Each Share held in the treasury of the Company and each Share
owned by Parent, the Purchaser or the Company, or by any direct or indirect
wholly owned subsidiary of any of them, shall be canceled and retired without
payment of any consideration therefor; and
(c) Each share of common stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into one validly issued, fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
2.3 EXCHANGE OF CERTIFICATES.
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(a) From and after the Effective Time, a bank or trust company to be
designated by Parent with the concurrence of the Company shall act as exchange
agent (the "Exchange Agent") in effecting the exchange of the Merger Price for
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certificates which prior to the Effective Time represented Shares and which as
of the Effective Time represent the right to receive the Merger Price (the
"Certificates"). Promptly after the Effective Time, the Exchange Agent shall
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mail to each record holder of Certificates a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Price therefor in a form approved by Parent and the Company. At or prior to the
Effective Time, the Purchaser
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shall deposit in trust with the Exchange Agent immediately available funds in an
amount sufficient to pay the Merger Price for all such Shares to the Company's
stockholders as contemplated by this Section 2.3. Upon the surrender of each
Certificate and the issuance and delivery by the Exchange Agent of the Merger
Price for the Shares represented thereby in exchange therefor, the Certificate
shall forthwith be canceled. Until so surrendered and exchanged, each
Certificate shall represent solely the right to receive the Merger Price for the
Shares represented thereby, without any interest thereon. Upon the surrender and
exchange of such an outstanding Certificate, the holder thereof shall receive
the Merger Price multiplied by the number of Shares represented by such
Certificate, without any interest thereon. If any cash is to be paid to a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment or exchange that the person
requesting such payment or exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of the payment of such cash to a name other
than that of the registered holder of the Certificate surrendered, or such
person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Certificates
for any part of the Merger Price payments made to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(b) Promptly following the sixth month after the Effective Time, the
Exchange Agent shall return to the Surviving Corporation all cash relating to
the transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Price for such Shares, without any interest thereon, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under applicable law. At and after the
Effective Time, holders of Certificates shall cease to have any rights as
stockholders of the Company except for the right to surrender such Certificates
in exchange for the Merger Price for such Shares or to perfect their right of
appraisal with respect to their Shares pursuant to the applicable provisions of
the MBCL and Section 2.4 below, and there shall be no transfers on the stock
transfer books of the Company or the Surviving Corporation of any Shares that
were outstanding immediately prior to the Merger.
2.4 DISSENTING SHARES.
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(a) Notwithstanding the provisions of Section 2.2 or any other
provision of this Agreement to the contrary, Shares that are issued and
outstanding immediately prior to the Effective Time and are held by stockholders
who shall have properly demanded appraisal of such Shares in accordance with the
MBCL ("Dissenting Shares") shall not be converted into the right to receive the
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Merger Price at the Effective Time, unless and until the holder of such
Dissenting Shares shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal and payment under the MBCL. If a
holder of Dissenting Shares (a "Dissenting Stockholder") shall have so failed to
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perfect or shall have effectively withdrawn or lost such right to appraisal and
payment, then, as of the Effective Time or the occurrence of such
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event, whichever last occurs, such Dissenting Shares shall be converted into and
represent solely the right to receive the Merger Price, without any interest
thereon, as provided in Section 2.2.
(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Section 89 of the MBCL received by the Company,
and (ii) the opportunity to direct all negotiations and proceedings with respect
to such demands for appraisal. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisal or settle or offer to settle any such demands.
2.5 ARTICLES OF ORGANIZATION AND BYLAWS OF THE SURVIVING CORPORATION.
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(a) Subject to the terms of Section 6.5(a), at the Effective Time the
Articles of Organization of the Purchaser, as in effect immediately prior to the
Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Organization; provided, however, that Article I of the Articles of Organization
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of the Surviving Corporation shall be amended to read as follows: "The name of
the corporation is Cambridge SoundWorks, Inc."
(b) Subject to the terms of Section 6.5(a), the Bylaws of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter amended as provided by law,
the Articles of Organization of the Surviving Corporation or such Bylaws.
(c) Following the Effective Time, the purpose of the Surviving
Corporation shall be to carry on the business of the Company as conducted prior
to the Effective Time. The Surviving Corporation shall only be authorized to
issue 1,000 shares of common stock, par value $.01 per share.
2.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
---------------------------------------------------
At the Effective Time, the directors of the Purchaser immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable provisions of the
Articles Organization and Bylaws of the Surviving Corporation, until the next
annual stockholders' meeting of the Surviving Corporation and until their
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Purchaser immediately prior to the Effective Time
shall become the officers of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby jointly and severally represent and warrant
to the Company that, except as and to the extent set forth in a Disclosure
Schedule (the "Parent Disclosure Schedule") delivered to the Company on or prior
--------------------------
to the date hereof setting forth
-8-
additional exceptions specified therein to the representations and warranties
contained in this Article III, which Disclosure Schedule shall identify
exceptions by specific Section references:
3.1 CORPORATE ORGANIZATION.
-----------------------
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of Singapore.
(b) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. The
Purchaser has not engaged in any business since it was incorporated other than
in connection with the transactions contemplated by this Agreement. Parent owns
all of the outstanding capital stock of the Purchaser.
3.2 AUTHORITY. Each of Parent and the Purchaser has the full corporate
---------
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to consummate
the transactions so contemplated (other than, with respect to the Merger, the
filing and recordation of the appropriate merger documents as required by the
MBCL). This Agreement has been duly executed and delivered by each of Parent and
the Purchaser and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser, enforceable against such parties in accordance with
its terms.
3.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
------------------------------------
and delivery of this Agreement by Parent and the Purchaser nor the consummation
by Parent and the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of their respective
charter documents, or (ii) assuming compliance with the matters referred to in
clause (iii) below, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation contained
in or to the loss of a benefit under, or result in the creation of any lien or
other encumbrance upon any of the properties or assets of Parent or the
Purchaser under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease agreement or other agreement,
instrument, obligation, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or the
Purchaser, or to which either of them or any of their respective properties or
assets may be subject, except for such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens or other
encumbrances, which, individually or in the aggregate, will not have a material
adverse effect on Parent and its subsidiaries taken as a whole or prevent or
materially delay consummation of the Offer or the Merger, or (iii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency, commission or other governmental or
regulatory authority or instrumentality, domestic or foreign (a "Governmental
------------
Entity"), except
-9-
(A) pursuant to the Exchange Act, (B) filing articles of merger pursuant to the
MBCL, (C) filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the termination or expiration of
-------
the waiting periods thereunder, (D) filings necessary to comply with state
securities or "blue sky" laws, or (E) consents, approvals, authorizations,
permits, filings or notifications which if not obtained or made will not,
individually or in the aggregate, have a material adverse effect on Parent and
its subsidiaries taken as a whole or prevent or materially delay consummation of
the Offer or the Merger.
3.4 BROKERS AND FINDERS. Neither Parent nor the Purchaser has
-------------------
employed any broker or finder or incurred any liability for any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
3.5 FINANCING. The Purchaser has or will have, prior to the
---------
expiration of the Offer and the Effective Time of the Merger, sufficient cash or
cash-equivalent funds available to purchase all of the Shares outstanding in the
Offer and the Merger, to provide adequate working capital for the Company
following the Effective Time and to pay all related fees and expenses incurred
in connection with the Offer and the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
that, except as and to the extent set forth in a Disclosure Schedule (the
"Company Disclosure Schedule") delivered to Parent on or prior to the date
-----------------------------
hereof setting forth additional exceptions specified therein to the
representations and warranties contained in this Article IV, which Disclosure
Schedule shall identify exceptions by specific Section references:
4.1 CORPORATE ORGANIZATION. The Company is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power and
authority and all necessary governmental approvals to own or lease and operate
its properties and assets 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 in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties owned or
leased by it makes such qualification or licensing necessary, except where the
failure to be so organized, existing, in good standing, qualified or licensed
would not have a Material Adverse Effect. As used herein, the term "Material
--------
Adverse Effect" means any change or effect that, individually or in the
--------------
aggregate, is or is reasonably likely to be materially adverse to the business,
operations, properties, prospects, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the
Company.
4.2 CAPITALIZATION . The authorized capital stock of the Company
--------------
consists of 10,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock, no par value ("Preferred Stock"). As of the close of business on October
---------------
23, 1997, (i) 3,804,824 shares of
-10-
Common Stock were issued and outstanding, (ii) no shares of Preferred Stock were
issued and outstanding, (iii) 576,753 shares of Common Stock were reserved for
issuance upon the exercise of outstanding options to acquire shares of Common
Stock ("Stock Options"), (iv) 257,314 shares of Common Stock were reserved for
-------------
issuance upon the exercise of outstanding warrants to acquire shares of Common
Stock ("Warrants"), and (v) no shares of Common Stock were held by the Company
--------
in its treasury. The number of issued and outstanding shares of Common Stock at
any time taken together with the number of shares of Common Stock reserved for
issuance upon the exercise of outstanding Stock Options, but excluding the
number of shares of Common Stock reserved for issuance upon the exercise of
outstanding Warrants, at such time is referred to herein as the "Fully Diluted
-------------
Shares." All Stock Options were issued by the Company pursuant to the terms of
------
its 1993 Stock Option Plan (as amended, the "Stock Option Plan"). All of the
-----------------
issued and outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Articles of Organization or Bylaws of the Company or any agreement to which the
Company is a party or by which the Company or its assets is bound. Except as
disclosed in this Section 4.2, there are no shares of capital stock of the
Company issued or outstanding, and except for the Stock Options and the
Warrants, there are no outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character
(including, without limitation, rights which will or could become exercisable as
a result of this Agreement or any transaction contemplated hereby) relating to
the issued or unissued capital stock or other securities of the Company
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or
obligating the Company to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
There are no voting trusts or other agreements or understandings to which the
Company is a party with respect to the voting of the capital stock of the
Company.
4.3 SUBSIDIARIES. The Company does not own, directly or
------------
indirectly, any equity or similar interest in, or any interest convertible into
or exchangeable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
4.4 AUTHORITY. The Company has the full corporate power and
---------
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
stockholders of the Company if and to the extent required by applicable law, and
the filing and recordation of the appropriate merger documents as required by
the MBCL). This Agreement has been duly executed and delivered by, and,
assuming the due authorization, execution and delivery thereof by Parent and the
Purchaser, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
-11-
4.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
------------------------------------
and delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or result
in any breach or violation of any provision of the Articles of Organization or
Bylaws of the Company, or (ii) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or give rise
to a right of termination, cancellation or acceleration of any obligation
contained in or to the loss of a benefit under, or result in the creation of any
lien or other encumbrance upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or to
which it or any of its properties or assets may be subject, except for such
violations, conflicts, breaches, terminations, accelerations or creations of
liens or other encumbrances, which will not have a Material Adverse Effect, or
(iii) require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity, except (A) pursuant to the Exchange
Act, (B) filing articles of merger pursuant to the MBCL, (C) filings under the
HSR Act and the termination or expiration of the waiting periods thereunder, (D)
filings necessary to comply with state securities or "blue sky" laws, or (E)
consents, approvals, authorizations, permits, filings or notifications which if
not obtained or made will not have a Material Adverse Effect or prevent or
materially delay consummation of the Offer or the Merger.
4.6 PROXY OR INFORMATION STATEMENT. If the MBCL shall require a
------------------------------
Stockholders' Meeting (as defined in Section 5.2 below) to be convened in
connection with the Merger, the proxy statement to be provided to stockholders
of the Company in connection with the Stockholders' Meeting (together with the
amendments and supplements thereto, the "Proxy Statement") and all amendments
---------------
thereof and supplements thereto shall, and if the MBCL shall not require a
Stockholders' Meeting to be convened in connection with the Merger, the
information statement to be provided to stockholders of the Company in
connection with the Merger, if any (together with the amendments and supplements
thereto, the "Information Statement") shall, comply as to form in all material
---------------------
respects with the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder, and shall not, at the time of (i) first
mailing thereof or (ii) in the case of the Proxy Statement, the Stockholders'
Meeting to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that (x) no
representation is made by the Company with respect to information supplied by
Parent or any affiliates or representatives of Parent or the Purchaser for
inclusion in the Proxy Statement or Information Statement, as the case may be,
and (y) no representation is made with respect to a Proxy Statement or
Information Statement, as the case may be, prepared by the Company and provided
to the Company's stockholders at any time following the Cut-Off Date.
4.7 CONDUCT OF BUSINESS.
-------------------
(a) The business of the Company, as presently conducted, is not being
conducted in default or violation of any term, condition or provision of (i) its
respective charter
-12-
or bylaws, or (ii) any note, bond, mortgage, indenture, deed of trust, lease,
agreement, or other instrument or obligation of any kind to which the Company is
a party or by which the Company or any of its properties or assets may be bound,
or (iii) any federal, state, local or foreign statue, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to the
Company, excluding from the foregoing clauses (ii) and (iii) defaults or
violations that could not reasonably be expected to have a Material Adverse
Effect.
(b) The Company has all licenses, permits, orders or approvals of, and
have made all required registrations with, all Governmental Entities that are
material to the conduct of the business of the Company (collectively,
"Permits"). To the Company's knowledge, (i) all Permits are in full force and
-------
effect; (ii) no material violations are or have been recorded in respect of any
Permit; and (iii) no proceeding is pending or threatened to revoke or limit any
Permit.
(c) The Company has not received any written communication from a
Governmental Entity that alleges that the Company is not in compliance with any
Environmental Law (as defined below). The Company has no knowledge of any
environmental materials or information, including on-site or off-site disposal
or releases of Hazardous Materials (as defined below), that could reasonably be
expected to have a Material Adverse Effect. As used in this Agreement, the term
"Environmental Laws" means any applicable treaties, laws, regulations,
------------------
enforceable requirements, orders, decrees or judgments issued, promulgated or
entered into by any Governmental Entity, which relate to (A) pollution or
protection of the environment or (B) the generation, storage, use, handling,
disposal or transportation of or exposure to Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Resource Conservation
-- --- ------
and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., the Federal Water
-- ---
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq., the Clean
-- ---
Air Act of 1970, as amended, 42 U.S.C. Section 7401 et seq., the Toxic
-- ---
Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Hazardous
-- ---
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., and any similar
-- ---
or implementing state or local law, and all amendments or regulations
promulgated thereunder; and the term "Hazardous Materials" means all explosive
-------------------
or regulated radioactive materials or substances, biological hazards, genotoxic
or mutagenic hazards, hazardous or toxic substances, medical wastes or other
wastes or chemicals, petroleum or petroleum distillates, asbestos or asbestos-
containing materials, and all other materials or chemicals regulated pursuant to
any Environmental Law, including materials listed in 49 C.F.R. Section 172.101
and materials defined as hazardous pursuant to Section 101(14) of CERCLA.
4.8 SEC DOCUMENTS. The Company has filed all required reports,
-------------
schedules, forms, statements and other documents with the SEC since July 2, 1995
(the "SEC Documents"). As of their respective dates, the SEC Documents complied
-------------
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
--------------
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and, at the time of filing, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be
-13-
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents (the "Company
-------
Financial Statements") comply as to form in all material respects with
--------------------
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the financial position of the Company as of the dates thereof and its
statements of operations, stockholders' equity and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments which were and are not expected to be
material). Except as and to the extent set forth on the balance sheet of the
Company as at June 29, 1997, including the notes thereto, the Company has no
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise) which would be required to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since June 29, 1997 which could
not reasonably be expected to have a Material Adverse Effect. The Company has
heretofore delivered to Parent complete and correct copies of all of the SEC
Documents and all amendments and modifications thereto, as well as, to the
extent any shall exist, all amendments and modifications that have not been
filed by the Company with the SEC to all agreements, documents and other
instruments that previously had been filed by the Company with the SEC and are
currently in effect.
4.9 LITIGATION. There is no suit, action or proceeding pending or,
----------
to the knowledge of the Company, threatened against the Company that,
individually or in the aggregate, could reasonably be expected to (i) have a
Material Adverse Effect, (ii) materially impair the ability of the Company to
perform its obligations under this Agreement, or (iii) prevent the consummation
of any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company having, or that could reasonably be expected to
have, any such effect.
4.10 LABOR AGREEMENTS AND ACTIONS.
----------------------------
(a) The Company is not bound by or subject to (and none of its assets
or properties is bound by or subject to) any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, has sought to represent
any of the employees, representatives or agents of the Company. There is no
strike or other labor dispute involving the Company pending, or to the knowledge
of the Company threatened, which could have a Material Adverse Effect, nor is
the Company aware of any labor organization activity involving its employees.
(b) The employment of each officer and employee of the Company is
terminable at the will of the Company, and the Company has not entered into any
oral or written agreements with any of its officers or employees that provide
for severance or termination pay or acceleration of vesting on stock options or
restricted stock.
-14-
(c) The Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment.
(d) The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate such officer's or employee's
employment with the Company, nor does the Company have any present intention to
terminate the employment of any officer or key employee. Each officer and key
employee of the Company is currently devoting 100% of his or her business time
attending to the affairs of the Company.
4.11 CERTAIN AGREEMENTS AND EMPLOYEE BENEFIT PLANS.
----------------------------------------------
(a) The Company is not a party to any written (i) employment,
severance, collective bargaining or consulting agreement not terminable on 60
days' or less notice, (ii) agreement with any executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee
extending for a period longer than one year, or (C) providing severance benefits
or other benefits after the termination of employment of such executive officer
or key employee regardless of the reason for such termination of employment,
(iii) agreement, plan or arrangement under which any person may receive payments
subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or (iv) agreement or plan, including, without
----
limitation, any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, the benefits of which would be increased, or
the vesting of 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 the transactions
contemplated by this Agreement.
(b) Schedule 4.11(b) contains a true and complete summary or list of,
or otherwise describes (i) all employee benefit plans (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
-----
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company is a party, with respect to which the Company
has any obligations which are material in amount and which are maintained,
contributed to or sponsored by the Company for the benefit of any current or
former employee, officer or director of the Company and (ii) each employee
benefit plan for which the Company could incur liability under Section 4069 of
ERISA, in the event such plan were terminated, or under Section 4212(c) of
ERISA, or in respect of which the Company remains secondarily liable under
Section 4204 of ERISA (collectively, the "Material Plans"). Each Material Plan
--------------
is in writing and the Company has previously provided to Parent a true and
complete copy of each Material Plan and a true and complete copy of each
material document prepared in connection with each such Material Plan including,
without limitation: (i) a copy of each trust or other funding arrangement, (ii)
the most current summary plan
-15-
description and summary of material modifications, (iii) the most recently filed
Internal Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
---
determination letter for each such Material Plan, and (v) the most recently
prepared actuarial report and financial statement in connection with each such
Material Plan. The Company has no express or implied commitment (i) to create,
incur liability with respect to or cause to exist any other employee benefit
plan, program or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual, or (iii) to modify, change
or terminate any Material Plan, other than with respect to a modification,
change or termination required by ERISA or the Code. To the extent applicable,
the Material Plans comply with the requirements of ERISA and the Code, and any
Material Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and has been so
qualified during the period from its adoption to date. No Material Plan is
covered by Title IV of ERISA or Section 412 of the Code. Neither the Company nor
any officer or director of the Company has incurred any liability or penalty
under Sections 4975 through 4980 of the Code or Title I of ERISA. To the
knowledge of the Company, each Material Plan has been maintained and
administered in all material respects in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Material Plans. There are no pending or anticipated claims against or otherwise
involving any of the Material Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of Material Plan
activities) has been brought, or to the knowledge of the Company is threatened,
against or with respect to any such Material Plan. All material contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Material Plans have been made or accrued.
(c) Schedule 4.11(c) contains a true and correct list of each person
who holds any Stock Option as of the date hereof, together with (i) the number
of shares of Common Stock subject to such Stock Option, (ii) the date of grant
of such Stock Option, (iii) the extent to which such Stock Option is currently
vested or scheduled to vest by December 15, 1997, (iv) the exercise price of
such Stock Option, (v) whether such Stock Option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and (vi) the expiration date of such Stock Option. Schedule 4.11(c)
---
also sets forth the aggregate number of ISO's and nonqualified Stock Options
outstanding as of the date hereof.
4.12 TAXES.
-----
(a) The Company (i) has filed when due (taking into account
extensions) with the appropriate federal, state, local, foreign and other
governmental agencies, all tax returns, estimates and reports required to be
filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued all requisite federal, state, local or foreign
taxes, levies, imposts, duties, licenses and registration fees and charges of
any nature whatsoever, and unemployment and social security taxes and income tax
withholding, including interest and penalties thereon ("Taxes") and there are
-----
and will be no tax deficiencies claimed in writing and received by the Company
in respect of any period preceding the Effective Time that, in the aggregate,
would result in any tax liability in excess of the amount of the reserves or
accruals, and (iii) have established or will establish in accordance with its
normal accounting practices and
-16-
procedures accruals and reserves that, in the aggregate, are adequate for the
payment of all Taxes not yet due and payable and attributable to any period
preceding the Effective Time.
(b) No taxes, interest, penalties, assessments or deficiencies have
been threatened or claimed in a writing and received by the Company by any
taxing authority in respect of any tax returns filed by the Company (or any
predecessor corporations). Neither the Company nor any predecessor corporation
has executed or filed with the IRS or any other taxing authority any agreement
or other document extending, or having the effect of extending, the period of
assessment or collection of any Taxes. The Company is not currently being
audited by any taxing authority nor has it received notice of a proposed audit
pertaining to Taxes. There are no tax liens on any assets of the Company or any
affiliate, except for Taxes not yet due and payable. The accruals and reserves
for taxes reflected in the balance sheet of the Company as at June 29, 1997 are
in all material respects adequate to cover all Taxes accruable through the date
thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
(c) The Company neither is a party to, is bound by, nor has any
obligation under any tax sharing or similar agreement.
(d) The Company is not required to include in income (i) any amount in
respect of any adjustment under Section 481 of the Code, (ii) any deferred
intercompany transaction, or (iii) any installment sale gain, where the
inclusion in income would result in a tax liability materially in excess of the
reserves therefor. The Company has not given a consent under Section 341(f) of
the Code. The Company is not, nor has it been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(e) The Company is not a party to any agreement, contract or
arrangement that may result, separately or in the aggregate, in the payment of
any "excess parachute payment" within the meaning of Section 280G of the Code by
reason of the consummation of the Offer or the Merger, determined without regard
to Section 280G(b)(4) of the Code. No acceleration of the vesting schedule for
any property that is substantially unvested within the meaning of the
regulations under Section 83 of the Code will occur in connection with the
transactions contemplated by this Agreement. The Company is not nor has it been
subject to any accumulated earnings tax or personal holding company tax. The
Company does not own stock in (i) a passive foreign investment company within
the meaning of Section 1296 of the Code or (ii) a controlled foreign corporation
within the meaning of Section 957 of the Code. The Company is not obligated
under any agreement with respect to industrial development bonds or other
obligations with respect to which the excludibility from gross income of the
holder for federal income tax purposes could be affected by the transactions
contemplated hereunder. The Company has no unrecaptured overall foreign loss
within the meaning of Section 904(f) of the Code and has not participated in or
cooperated with an international boycott within the meaning of Section 999 of
the Code. The Company does not own any property of a character the transfer of
which would give rise to (x) a revaluation of such property for purposes of any
ad valorem or similar tax, or (y) any documentary, stamp or other transfer tax.
The Company has no "excess
-17-
loss account" for purposes of the Treasury Regulations promulgated under Section
1502 of the Code.
4.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 29, 1997, except as
------------------------------------
contemplated by this Agreement or disclosed in any SEC Document filed since such
date and prior to the date of this Agreement, the Company has conducted its
business only in the ordinary course consistent with past practice, and there
has not been (i) any damage, destruction or loss, whether covered by insurance
or not, having or which, insofar as reasonably can be foreseen, in the future
would have a Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend (whether in cash, stock or property) with respect to
Common Stock, or any redemption, purchase or other acquisition of any of its
securities, (iii) any change in the business, operations, properties, prospects,
condition (financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) of the Company having a Material Adverse
Effect, (iv) any labor dispute, other than routine matters, none of which is
material to the Company, (v) any entry into any material commitment or
transaction (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent with past
practice, (vi) any material change by the Company in its accounting methods,
principles or practices, (vii) 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), or (viii) 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 officers or key employees of the Company.
4.14 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
--------------------------------------------------------------------
EQUIPMENT.
----------
(a) The Company does not own any real property.
(b) All of the existing real property leases to which the Company is a
party have been previously delivered to Buyer. Schedule 4.14(b) sets forth a
complete and accurate list of all real property leased by the Company.
(c) The Company owns or has valid leasehold interests in all of its
tangible properties and assets (real, personal and mixed) used in its business,
free and clear of any liens (other than liens for Taxes that are not yet
delinquent), charges, pledges, security interests or other encumbrances, except
as reflected in the Company Financial Statements and except for such
imperfections of title and encumbrances, if any, that are not substantial in
character, amount or extent, and that do not and are not reasonably likely to
materially detract from the value, or interfere with the use of the property
subject thereto or affected thereby. The Company has delivered to Buyer correct
and complete copies of each lease identified in Schedule 4.14(b) and such leases
are valid and enforceable by the Company in accordance with their terms. The
Company has received no notice that, and, to the Company's knowledge, no
-18-
circumstance exists which, with the passage of time or the giving of notice or
both, could constitute a default under any such leases.
(d) Each item of machinery and equipment owned or leased by the
Company is (i) adequate for the conduct of the business of the Company
consistent with its past practice, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition, ordinary wear and tear
excepted, and (iv) regularly and properly maintained.
4.15 INTELLECTUAL PROPERTY.
---------------------
(a) The Company either owns, or has a valid license with respect to,
all patents, copyrights, trademarks, trade secrets and other intellectual
property used in, by, or necessary to, the operation or conduct of its business
as presently conducted (such intellectual property and the rights thereto are
collectively referred to herein as the "Company IP Rights").
-----------------
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any patent, copyright,
trademark, trade secret or other intellectual property rights licensed by, or
to, the Company, will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of any Company IP Rights or materially impair
the right of the Company, the Surviving Corporation or Parent in or to use,
sell, enforce license or otherwise exploit any Company IP Rights or portion
thereof.
(c) Neither the operation of the Company's business, the Company IP
Rights nor the manufacture, marketing, license, sale or intended use of any
product, service or technology currently licensed, manufactured, created,
distributed, authored, used, sold or under development by the Company (i)
violates in any material respect any license or agreement between the Company
and any third party or (ii) infringes any patents, copyright trademark, trade
secret or other intellectual property right of any other party. There is no
pending or, to the knowledge of the Company, threatened claim or litigation
contesting the validity, ownership or right to use, sell, enforce, license or
dispose of any Company IP Rights, nor has the Company received any written
notice asserting that any Company IP Rights or the proposed use, sale, license
or disposition thereof conflicts or will conflict with the rights of any other
party.
4.16 MATERIAL CONTRACTS. Except as disclosed in the SEC Documents,
------------------
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any affiliate
thereof. Except as reflected in the SEC Documents, there are no agreements,
understandings, instruments, contracts or proposed transactions to which the
Company is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $25,000,
other than purchase orders in individual amounts of less than $100,000 received
in the ordinary course of business, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company, or (iii) the
grant of rights to manufacture, produce, assemble, license, market, or sell its
products to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products (the "Material
--------
Contracts"). To the knowledge of the Company: (i) each Material Contract is in
---------
full force and effect except as the same may have
-19-
expired in accordance with its terms; (ii) the Company has not received any
written assertion of default under any Material Contract; and (iii) the Company
does not reasonably expect nor has it received any notice related to any
termination or material change to, or proposal with respect to, any of the
Material Contracts as a result of the transactions contemplated by this
Agreement. The Company is not a party to, nor has it any obligation under, any
contract or agreement, written or oral, which contains any covenants, currently
or prospectively limiting the freedom of the Company to engage in any line of
business anywhere in the world or to compete with any entity anywhere in the
world.
4.17 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current and
-------------------------------------------------
former employee, consultant and officer of the Company has executed an agreement
with the Company regarding confidentiality and proprietary information
substantially in the form or forms attached to Schedule 4.17. The Company is not
aware that any of its employees or consultants is in violation thereof, and the
Company will use its best efforts to prevent any such violation. All consultants
to or vendors of the Company with access to confidential information of the
Company are parties to a written agreement substantially in the form or forms
attached to Schedule 4.17 under which, among other things, each such consultant
or vendor is obligated to maintain the confidentiality of confidential
information of the Company. The Company is not aware that any of its consultants
or vendors are in violation thereof, and the Company will use its best efforts
to prevent any such violation.
4.18 NO CONFLICT OF INTEREST. Except as expressly disclosed in the
-----------------------
SEC Documents, the Company is not indebted, directly or indirectly, to any of
its officers or directors or to their respective spouses or children, in any
amount whatsoever other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or relocation expenses of employees.
To the Company's knowledge, none of the Company's officers or directors, or any
members of their immediate families, directly or indirectly, are indebted to the
Company or have any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation which competes with the
Company except that officers, directors and/or stockholders of the Company may
own stock in (but not exceeding two percent of the outstanding capital stock of)
any publicly traded company that may compete with the Company. To the Company's
knowledge, none of the Company's officers or directors or any member of their
immediate families is, directly or indirectly, interested in any material
contract with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
4.19 TAKEOVER STATUTES INAPPLICABLE. No "fair price," "moratorium,"
------------------------------
"control share acquisition" or other similar anti-takeover statute or regulation
(each a "Takeover Statute") is applicable to the Company, the Shares, the Offer,
----------------
the Merger or any of the other transactions contemplated by this Agreement. The
Company has heretofore delivered to Parent a complete and correct copy of the
resolutions of the Board of Directors of the Company approving the Offer, the
Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated by this Agreement the provisions of Chapters 110C and 110F of the
Massachusetts Corporation-Related Laws to the
-20-
extent, if any, that such statutes are applicable to such transactions and this
Agreement. On or prior to the date hereof, the Company has taken all corporate
action necessary to cause the restrictions set forth in Chapters 110D and 110E
of the Massachusetts Corporation-Related Laws to be inapplicable to the Offer
and the Merger and other similar transactions involving the Company and its
stockholders.
4.20 BROKERS AND FINDERS. Except for ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC and the
-------------------
fees payable by the Company to such firm described in an engagement letter dated
September 29, 1997, a complete and correct copy of which has been provided to
Parent on or prior to the date hereof, the Company has not employed any broker
or finder or incurred any liability for any fee or commission to any broker,
finder or intermediary in connection with the transactions contemplated hereby.
SECTION V
COVENANTS OF THE COMPANY AND PARENT
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
----------------------------------
this Agreement, during the period commencing on the date of this Agreement and
continuing until the Cut-Off Date or until the termination of this Agreement in
accordance with its terms, the Company shall conduct its operations in the
ordinary and usual course consistent with past practice, and the Company will
endeavor to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory relations
with suppliers, contractors, distributors, licensors, licensees, customers and
others having business relationships with it. Without limiting the generality
of the foregoing and except as provided in this Agreement, prior to the Cut-Off
Date, the Company shall not directly or indirectly do, or propose to do, any of
the following, without the prior written consent of Parent:
(a) Declare or pay any dividends on or make any other distribution in
respect of any of the capital stock of the Company;
(b) Split, combine or reclassify any of the capital stock of the
Company or issue or authorize any other securities in respect of, in lieu of or
in substitution for, shares of the capital stock of the Company or repurchase,
redeem or otherwise acquire any shares of the capital stock of the Company;
(c) Issue, deliver, encumber, sell or purchase any shares of the
capital stock of the Company or any securities convertible into, or rights,
warrants, options or other rights of any kind to acquire, any such shares of
capital stock, other convertible securities or any other ownership interest
(including, without limitation, any phantom interest) (other than the issuance
of Common Stock upon the exercise of outstanding Stock Options and Warrants);
(d) Amend or otherwise change its Articles of Organization or Bylaws
(or other comparable organizational document);
-21-
(e) Acquire or agree to acquire 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, association or other business
organization or division thereof;
(f) Sell, lease, license or otherwise dispose of any of its assets
(including the Company IP Rights), other than in the ordinary course of business
consistent with its past practices;
(g) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others, other than in the ordinary course of business
consistent with past practice;
(h) Enter into any contract or agreement other than in the ordinary
course of business consistent with past practice;
(i) Authorize any single capital expenditure which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$150,000;
(j) Increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practices in
salaries or wages of employees of the Company who are not officers of the
Company, or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, officer or other employee
of the Company, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(k) Take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to cash management, the payment of accounts payable and the
collection of accounts receivable);
(l) Make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes;
(m) Amend or modify the warranty policy of the Company;
(n) Pay, discharge, satisfy, settle or compromise any suit, claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of liabilities
reflected or reserved against in the Company's balance sheet dated as of June
29, 1997 as filed by the Company with the SEC in its Annual Report on Form 10-K
for its fiscal year ended June 29, 1997 or subsequently incurred in the ordinary
course of business and consistent with past practice; or
-22-
(o) Take any action that would result in any of the representations
and warranties of the Company set forth in this Agreement becoming untrue in any
material respect or in any of the conditions to the Offer or any of the
conditions to the Merger set forth in Article VII not being satisfied.
5.2 STOCKHOLDER MEETING; PROXY MATERIAL.
-----------------------------------
(a) If this Agreement is required by the MBCL to be approved by the
Company's stockholders, then the Company shall cause a meeting of its
stockholders (the "Stockholders' Meeting") to be duly called and held as soon as
---------------------
reasonably practicable for the purpose of voting on the approval and adoption of
this Agreement and the transactions contemplated hereby. The Board of Directors
of the Company shall, subject to the terms of Section 5.3(b), recommend approval
and adoption of this Agreement and the Merger by the Company's stockholders. In
connection with such meeting, the Company (i) shall promptly prepare and file
with the SEC, use all reasonable efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Proxy
Statement and all other proxy materials for such meeting, (ii) shall notify
Parent of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC, (iii) shall give Parent and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give Parent and its
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC, (iv) shall,
subject to the fiduciary duties of its Board of Directors as advised by counsel,
use all reasonable efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby and (v) shall
otherwise comply with all legal requirements applicable to such meeting.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the then outstanding Shares, the parties hereto agree,
at the request of Purchaser, subject to the provisions of Article VII, to take
all necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 82 of the MBCL, as soon as reasonably practicable after
such acquisition, without a meeting of the stockholders of the Company.
5.3 THIRD PARTY ACQUISITIONS.
------------------------
(a) The Company agrees that neither it nor any of its employees or
directors shall, and it shall direct and use its best efforts to cause its
agents and representatives (including its Financial Advisor or any other
investment banker and any attorney or accountant retained by it (collectively,
"Company Advisors")), not to, directly or indirectly, initiate, solicit,
-----------------
encourage or otherwise facilitate any inquiries in respect of, or the making of
any proposal for, a Third Party Acquisition (as defined in Section 5.3(b)
below). The Company further agrees that neither it nor any of its employees or
directors shall, and it shall direct and use its best efforts to
-23-
cause all Company Advisors not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Third Party (as defined in Section 5.3(b) below)
relating to the proposal of a Third Party Acquisition, or otherwise facilitate
any effort or attempt to make or implement a Third Party Acquisition; provided,
--------
however, that if at any time prior to the acceptance for payment of Shares
-------
pursuant to the Offer, the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to an inquiry, proposal or offer
for a Third Party Acquisition which was not solicited subsequent to the date
hereof, (x) furnish only such information with respect to the Company to any
such person pursuant to a customary confidentiality agreement as was delivered
to Parent prior to the execution of this Agreement and (y) participate in the
discussions and negotiations regarding such inquiry, proposal or offer; and
further provided, that nothing contained in this Agreement shall prevent the
------- --------
Company or its Board of Directors from complying with Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any proposed Third Party
Acquisition. The Company shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Third Parties
conducted heretofore with respect to any of the foregoing. The Company shall
take the necessary steps to promptly inform all Company Advisors of the
obligations undertaken in this Section 5.3 (a). The Company agrees to notify
Parent promptly if (i) any inquiries relating to or proposals for a Third Party
Acquisition are received by the Company or any of the Company Advisors, (ii) any
confidential or other non-public information about the Company is requested from
the Company or any of the Company Advisors, or (iii) any negotiations or
discussions in connection with a possible Third Party Acquisition are sought to
be initiated or continued with the Company or any of the Company Advisors
indicating, in connection with such notice, the principal terms and conditions
of any proposals or offers, including the identity of the offering party, and
thereafter shall keep Parent informed in writing, on a reasonably current basis,
on the status and terms of any such proposals or offers and the status of any
such negotiations or discussions. The Company also agrees promptly to request
each person or entity that has heretofore executed a confidentiality agreement
in connection with its consideration of acquiring the Company, if any, to return
all confidential information heretofore furnished to such person or entity by or
on behalf of the Company.
(b) Except as permitted by this Section 5.3(b), the Board of Directors
of the Company shall not withdraw its recommendation of the Offer or the Merger
and other transactions contemplated hereby or approve or recommend, or cause the
Company to enter into any agreement with respect to, any Third Party
Acquisition. Notwithstanding the preceding sentence, if the Board of Directors
of the Company determines in its good faith judgment, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors may withdraw or alter its recommendation of the Offer or the Merger
and the other transactions contemplated hereby, or approve or recommend or cause
the Company to enter into an agreement with respect to a Superior Proposal (as
defined below), but in each case only (i) after providing written notice to
Parent (a "Notice of Superior Proposal") advising Parent that the Board of
---------------------------
Directors has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person or entity making
such Superior Proposal and (ii) if
-24-
Parent does not, within five (5) business days (or within two (2) business days
with respect to any amendment to any Superior Proposal which was noticed at
least five (5) days prior to such amendment) after Parent's receipt of the
Notice of Superior Proposal, make an offer which the Board of Directors of the
Company determines in its good faith judgment (based on the advise of its
Financial Advisor or another financial adviser of nationally recognized
reputation) to be as favorable to the Company's stockholders as such Superior
Proposal; provided, however, that the Company shall not be entitled to enter
-------- -------
into any agreement with respect to a Superior Proposal unless this Agreement is
concurrently terminated by its terms pursuant to Section 8.1(e)(i). For purposes
of this Agreement, "Third Party Acquisition" means the occurrence of any of the
-----------------------
following events: (i) the acquisition of the Company by merger or otherwise by
any person or entity (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent, the Purchaser or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
-----------
30% or more of the total assets of the Company (other than the purchase of the
Company's products in the ordinary course of business); (iii) the acquisition by
a Third Party of 30% or more of the outstanding Shares; (iv) the adoption by the
Company of a plan of partial or complete liquidation or the declaration or
payment of an extraordinary dividend; (v) the repurchase by the Company of 30%
or more of the outstanding Shares; or (vi) the acquisition by the Company by
merger, purchase of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment in any business whose annual revenues,
net income or assets is equal to or greater than 30% of the annual revenues, net
income or assets of the Company. For purposes of this Agreement, a "Superior
--------
Proposal" means any bona fide proposal to acquire directly or indirectly for
--------
consideration consisting of cash and/or securities more than 50% of the Shares
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company by a majority
vote determines in its good faith judgment (based on consultation with its
Financial Advisor or another financial adviser of nationally recognized
reputation) to be reasonably capable of being completed (taking into account all
legal, financial, regulatory and other aspects of the proposal and the person or
entity making the proposal, including the availability of financing therefor)
and more favorable to the Company's stockholders than the Offer and the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 ACCESS TO INFORMATION. Between the date of this Agreement and the
---------------------
Cut-Off Date, the Company will afford to Parent and its authorized
representatives for the transactions contemplated hereby reasonable access at
all reasonable times to the officers, employees, agents, properties, offices and
all other facilities, books and records of the Company as Parent may reasonably
request. Additionally, the Company will permit Parent and its authorized
representatives for the transactions contemplated hereby to make such
inspections of the Company and its operations at all reasonable times as it may
reasonably require and will cause its officers, employees and agents to furnish
Parent with such financial and operating data and other information with respect
to the business and properties of the Company as Parent may from time to time
reasonably request. No investigation pursuant to this Section 6.1 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the
-25-
obligations of the parties hereto. All activities contemplated by this Section
6.1 shall be deemed to be within the scope of the Confidentiality Agreement (as
defined in Section 6.3 below).
6.2 LEGAL CONDITIONS TO OFFER AND MERGER.
-------------------------------------
(a) The Company will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on the Company with
respect to the Offer and the Merger (including furnishing all information
required under the HSR Act) and will take all reasonable actions necessary to
cooperate promptly with and furnish information to the Purchaser or Parent in
connection with any such requirements imposed upon the Purchaser or Parent in
connection with the Offer and the Merger. The Company will take all reasonable
actions necessary to obtain (and will take all reasonable actions necessary to
cooperate promptly with the Purchaser and Parent in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity, or other third party, required to be obtained or made by the Company (or
by the Purchaser or Parent) in connection with the Offer or the Merger or the
taking of any action contemplated thereby or by this Agreement. In addition to
the foregoing, prior to the Effective Time, the parties shall take, or cause to
be taken, all such actions as may be necessary or appropriate in order to
effectuate, as expeditiously as practicable, the Offer and the Merger and the
other transactions contemplated by this Agreement, including any necessary
consents and waivers.
(b) The Purchaser and Parent will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the Offer and the Merger (including furnishing all
information required under the HSR Act) and will take all reasonable actions
necessary to cooperate promptly with and furnish information to the Company in
connection with any such requirements imposed upon the Company in connection
with the Offer and the Merger. The Purchaser and Parent will take all
reasonable actions necessary to obtain (and will take all reasonable actions
necessary to cooperate promptly with the Company in obtaining) any consent,
authorization, order or approval of, or exemption by, any Governmental Entity,
or other third party, required to be obtained or made by the Purchaser or Parent
(or by the Company) in connection with the Offer or the Merger or the taking of
any action contemplated thereby or by this Agreement.
6.3 CONFIDENTIALITY AGREEMENT. The Company and Parent acknowledge that the
-------------------------
Mutual Confidentiality and Non-Disclosure dated October 18, 1996 Agreement
between the Company and a wholly owned subsidiary of Parent (the
"Confidentiality Agreement") shall remain in full force and effect at all times
-------------------------
prior to the Effective Time and after any termination of this Agreement, and
such parties agree to comply with the terms of such Agreement.
6.4 PUBLIC ANNOUNCEMENTS. The Purchaser, Parent and the Company will
--------------------
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer, the Merger or any transaction
contemplated hereby and shall not issue any such press release or make any such
public statement except as they may mutually agree unless required so to do by
law or by obligations pursuant to any listing agreement with any national
securities exchange or the National Association of Securities Dealers, Inc. The
-26-
Company and Parent have agreed as to the form of joint press release announcing
execution of this Agreement.
6.5 INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE.
-------------------------------------------------------
(a) The Articles of Organization and the Bylaws of the Surviving
Corporation shall contain the respective provisions that are set forth, as of
the date of this Agreement, in Article 6B of the Articles of Organization of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who at or at any time
prior to the Effective Time were entitled to indemnification thereunder unless
such modification shall be required by law.
(b) The Surviving Corporation shall honor and fulfill in all respects
the obligations of the Company pursuant to indemnification agreements with the
Company's directors and officers existing at or before the Effective Time.
(c) The Surviving Corporation shall use commercially reasonable
efforts to maintain in effect for six years from the Effective Time (except as
otherwise contemplated by subsection (d) below) directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms
comparable to such existing insurance coverage (including coverage amounts);
provided, however, that in no event shall the Surviving Corporation be required
-------- -------
to expend pursuant to this Section 6.5 more than an amount per year equal to
125% of current annual premiums paid by the Company for such insurance (which
premiums the Company represents and warrants to be $36,000 in the aggregate)
and provided, further that if the annual premiums exceed such amount, the
-------- -------
Surviving Corporation shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(d) The parties acknowledge that the Surviving Corporation's
obligation to use reasonably commercial efforts to maintain insurance shall
terminate at such time following the first anniversary of this Agreement as
Parent, in its sole discretion, shall agree in writing to assume in all respects
the obligations of the Surviving Corporation with respect to those
indemnification rights contemplated by subsections (a) and (b) above. If
Parent shall elect to assume such obligations, it shall provide prompt written
notice thereof to each of the persons who shall be directors or executive
officers of the Company as of the Effective Time.
(e) This Section 6.5 shall survive the consummation of the Offer and
the Merger, is intended to benefit the Company, the Surviving Corporation and
each indemnified party, shall be binding on all successors and assigns of the
Surviving Corporation, and shall be enforceable by the indemnified parties.
6.6 COMPANY STOCK OPTION PLAN.
--------------------------
(a) At the Effective Time, each outstanding Stock Option heretofore
granted under the Stock Option Plan, outstanding immediately prior to the
consummation of the
-27-
Offer and fully vested shall be exchanged, in whole and not in part and in a
manner consistent with the terms of the Stock Option Plan, for a cash payment
from the Company in an amount (subject to any applicable withholding tax) equal
to the product of (i) the excess of the Merger Price over the per share exercise
price of the Stock Option, multiplied by (ii) the number of Shares covered by
the Stock Option immediately prior to the Effective Time.
(b) The Stock Option Plan shall terminate as of the Effective Time and
the Company shall use reasonable efforts to ensure that following the Effective
Time no holder of options or any participant in the Stock Option Plan shall have
any right thereunder to acquire any equity securities of the Company or the
Surviving Corporation.
6.7 CERTAIN EMPLOYEE BENEFITS MATTERS. Employees of the Company at the
---------------------------------
Effective Time will be provided with employee benefit plans by the Surviving
Corporation or Parent which are consistent with those employee benefits being
provided to such employees immediately prior to the Effective Time or, in the
discretion of Parent, are in the aggregate no less favorable to such employees
than those provided from time to time by Parent and its subsidiaries to
similarly situated employees. If any employee of the Company becomes a
participant in any employee benefit plan, program, policy or arrangement of
Parent or one of its subsidiaries, such employee shall be given credit for all
service prior to the Effective Time with the Company to the extent permissible
under such plan, program, policy or arrangement.
6.8 NOTICE OF CERTAIN EVENTS. The Company shall notify Parent, and
---------------------------
Parent shall promptly notify the Company, of:
(i) receipt of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement;
(iii) receipt of notice that any actions, suits, claims,
investigations or proceedings have been commenced or, to the knowledge of the
Company, threatened against, or involving the Company or Parent, as applicable,
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 4.9 or which relate to the consummation
of the transactions contemplated by this Agreement;
(iv) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of it (and, in the case of Parent, of the Purchaser) contained in this Agreement
to be untrue or inaccurate; and
(v) any failure of the Company, Parent or the Purchaser, as the case
may be, 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 6.8 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
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6.9 OBLIGATIONS OF PURCHASER. Parent will take all action necessary
---------------
to cause the Purchaser to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.10 VOTING OF SHARES. Parent agrees to cause Purchaser (i) to vote all
----------------
Shares beneficially owned by it in favor of adoption of this Agreement and the
Merger at the Stockholders' Meeting, if any such meeting shall be required by
the MBCL, and (ii) if no Stockholders' Meeting shall be required by the MBCL,
file the articles of merger providing for the Merger of Purchaser with and into
the Company as soon as reasonably practicable under applicable regulatory
requirements and law.
6.11 EXPENSES. Except as otherwise provided in Section 8.3, whether or not
--------
the Merger shall be consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated
hereby shall be paid by the party incurring such cost or expense.
6.12 TAKEOVER STATUTES. If any Takeover Statute is or may become
-----------------
applicable to the Offer, the Merger or the other transactions contemplated by
this Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS OF EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVAL. If required by the MBCL, this Agreement and
--------------------
the Merger shall have been approved and adopted by the affirmative vote or
consent of the stockholders of the Company to the extent required by the MBCL
and the Articles of Organization of the Company.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Entity, nor other legal
restriction, restraint or prohibition, preventing the consummation of the Merger
shall be in effect; provided, however, that each of the parties shall have used
-------- -------
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as practicable any injunction or other order that may
be entered.
-29-
(c) REGULATORY CONSENTS. The waiting period applicable to the
--------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated, and, other than filing the articles of merger, all filings with any
Governmental Entity required to be made prior to the Effective Time by the
Company or Parent or any of their respective subsidiaries, with, and all
government consents required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective subsidiaries in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company, Parent and the Purchaser shall
have been made or obtained (as the case may be), except where the failure to so
make or obtain will not result in a Material Adverse Effect.
(d) THE OFFER. Shares shall have been purchased pursuant to the
---------
Offer.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND THE PURCHASER. The
------------------------------------------------------
obligations of Parent and the Purchaser to effect the Merger are also subject to
the satisfaction or waiver by Parent prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
----------------------------------------
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of Parent and the Purchaser set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND THE PURCHASER. Each of
------------------------------------------------------
Parent and the Purchaser shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
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ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the transactions contemplated hereby by
the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and the Purchaser;
(b) by either Parent or the Company if any court of competent
jurisdiction or other governmental authority shall have issued an order, decree,
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant to
the Offer or the Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
(c) by either Parent or the Company if (i) the Offer shall have
terminated or expired in accordance with its terms without the Purchaser having
accepted for payment any Shares pursuant to the Offer; or (ii) the Purchaser
shall not have accepted for payment any Shares pursuant to the Offer within 120
days following the commencement of the Offer; provided, however, that the right
-------- --------
to terminate this Agreement pursuant to this Section 8.1(c) shall not be
available to any party the failure of which (or the failure of the affiliates of
which) to perform in any material respect any of its obligations under this
Agreement results in the failure of any condition set forth in Annex I or if the
------
failure of such condition results from facts or circumstances that constitute a
material breach of a representation or warranty under this Agreement by such
party;
(d) by Parent if (i) prior to the purchase of Shares pursuant to the
Offer, (A) the Board of Directors of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent its
approval or recommendation of the Offer, this Agreement, the Merger or any other
transaction contemplated by this Agreement; (B) the Board of Directors of the
Company or any committee thereof shall have recommended to the stockholders of
the Company acceptance of a Third Party Acquisition; (C) the Company shall have
entered into any definitive agreement with respect to a Third Party Acquisition;
or (D) the Board of Directors of the Company or any committee thereof shall have
resolved to do any of the foregoing; or (ii) the Company shall have breached in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement which breach cannot be or has not been
cured 20 days after the giving of written notice to the Company; or
(e) by the Company if (i) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent its
approval or recommendation of the Offer, this Agreement or the Merger in order
to approve the execution by the Company of a definitive agreement providing for
the transactions contemplated by a Superior Proposal, provided that the Company
--------
shall have complied with the provisions of Section 5.3,
-31-
including the notice provisions therein, and shall have made simultaneous
payment of the fee contemplated by Section 8.3 below; or (ii) Parent or the
Purchaser shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in this
Agreement which breach cannot be or has not been cured 20 days after the giving
of written notice to Parent or the Purchaser, as applicable, except, in any
case, for such breaches which are not reasonably likely to affect adversely
Parent's or the Purchaser's ability to complete the Offer or the Merger.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
---------------------
Section 8.1, this Agreement shall become void and of no effect with no liability
on the part of any party hereto, except for fraud and for willful breach of a
material obligation contained herein and except that the agreements contained in
Sections 6.3, 6.11 and 8.3 shall survive the termination hereof.
8.3 CERTAIN PAYMENTS.
----------------
(a) In the event that:
(i) this Agreement is terminated (A) pursuant to
Section 8.1(d)(i) or Section 8.1(e)(i), or (B) pursuant to Section 8.1(c) or
8.1(d)(ii) to the extent that the termination or the failure to accept any
Shares for payment, as the case may be, shall relate to the intentional failure
of the Company to perform in any material respect any material covenant or
agreement of it contained in this Agreement or the intentional material breach
by the Company of any material representation or warranty of it contained in
this Agreement; or
(ii) any person shall have commenced, publicly
proposed or communicated to the Company a proposal with respect to a Third Party
Acquisition and (A) the Offer shall have remained open for at least 20 business
days, (B) the Minimum Share Condition shall not have been satisfied, (C) this
Agreement shall have been terminated pursuant to Section 8.1 and (D) the Company
shall have consummated a Third Party Acquisition with any person other than
Parent or any of its affiliates before or within 12 months after the date of
such termination, then, in any such event, the Company shall pay Parent promptly
(but in no event later than one business day after the first of such events
shall have occurred) a fee of $1,250,000, plus an amount, not to exceed
----
$750,000, equal to Parent's actual and reasonably documented out-of-pocket fees
and expenses incurred by Parent and the Purchaser in connection with the Offer,
the Merger, this Agreement and the consummation of the transactions contemplated
hereby, which amounts shall be payable in immediately available funds.
(b) In the event that (i) Parent or the Purchaser shall willfully or
intentionally breach in any material respect any of their respective
representations, warranties, covenants or other agreements contained in this
Agreement and as a result thereof the Company shall terminate this Agreement
pursuant to Section 8.1 (e)(ii) or (ii) Parent shall elect to terminate this
Agreement and fail to proceed to consummate the Offer or the Merger after all
applicable conditions shall have been satisfied, then, in either of such events,
Parent shall pay to the Company promptly (but in no event later than one
business day after the date of such termination) a fee of $1,250,000, plus an
----
amount, not to exceed $400,000, equal to the Company's actual and reasonably
documented out-of-pocket fees and expenses incurred by the Company in
connection with the Offer, the Merger, this Agreement and the consummation of
the transactions contemplated hereby, which amounts shall be payable in
immediately available funds.
-32-
Such payment by Parent to the Company shall represent the sole and exclusive
remedy at law or in equity to which the Company and its officers, directors,
representatives and other affiliates shall be entitled in the event this
Agreement shall be terminated in the circumstances contemplated by clauses (i)
and (ii) of this subsection.
(c) In the event that the Company or Parent shall fail to pay any
amounts owing pursuant to the foregoing when due, interest shall be paid on such
unpaid amounts, commencing on the date such amounts became due, at a rate equal
to the rate of interest publicly announced by Bank of America NT&SA from time to
time in San Francisco, California, as such bank's "reference rate" plus 3%.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger or
termination of this Agreement, as the case may be, except for the agreements
contained in Sections 6.5, 6.6 and 6.7 of this Agreement, each of which shall
survive the Merger, and the agreements contained in Sections 6.3, 6.11 and 8.3,
each of which shall survive termination of this Agreement.
9.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or
----------------------
waived only with the written consent of the parties. Any amendment or waiver
effected in accordance with this Section 9.2 shall be binding upon the parties
and their respective successors and assigns.
9.3 SEVERABILITY. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provisions shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, the
application thereof, in any other jurisdiction.
9.4 INTERPRETATION. The table of contents and Article, Section and
--------------
subsection headings herein are for convenience of reference only, do not
constitute a part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Schedule, Annex or Exhibit, such reference shall
be to a Section of, or Schedule, Annex or Exhibit to, this Agreement, unless
otherwise
-33-
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or if any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statues and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns and, in
the case of an individual, to his or her heirs and estate, as applicable.
9.5 ASSIGNMENT. Except as set forth in Section 1.1(a), this Agreement
----------
shall not be assignable by operation of law or otherwise and any attempted
assignment of this Agreement in violation of this sentence shall be void.
9.6 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.7 TITLES AND SUBTITLES. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.8 NOTICES. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail with postage prepaid, if such notice is addressed to the party
to be notified at such party's address or facsimile number as set forth below,
or as subsequently modified by written notice in accordance with this Section
9.8:
(a) If to Parent or the Purchaser:
Creative Technology Ltd.
31 International Business Park
Creative Resource
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: Ng Keh Long
Vice President, Treasurer and
Acting Chief Financial Officer
Telecopy: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇
with a copy to:
-34-
Creative Labs, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President and General Counsel
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
Venture Law Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company:
Cambridge SoundWorks, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Peabody & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
9.9 ENTIRE AGREEMENT. This Agreement (and the Schedules, Annexes
----------------
and Exhibits), together with the Confidentiality Agreement the product of all of
the parties hereto, and constitutes the entire agreement between such parties
pertaining to the subject matter hereof, and merges all prior negotiations and
drafts of the parties with regard to the transactions contemplated herein. Any
and all other written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.
9.10 NO THIRD PARTY BENEFICIARIES. Except as provided in Section 6.5(d),
----------------------------
this Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
-35-
9.11 GOVERNING LAW; WAIVER OF JURY TRIAL
-----------------------------------
(a) EXCEPT TO THE EXTENT THAT THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS SHALL BE MANDITORILY APPLICABLE TO THE MERGER AND THE RIGHTS OF
THE STOCKHOLDERS OF THE COMPANY, THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER (III) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.11.
-36-
The parties have caused this Agreement to be signed by their respective
duly authorized officers, all as of the date first written above.
CREATIVE TECHNOLOGY LTD.
By: /s/ Sim ▇▇▇▇ Hoo
-------------------------------------
Name: Sim ▇▇▇▇ Hoo
--------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
By: /s/ Ng Keh Long
-------------------------------------
Name: Ng Keh Long
--------------------------------------
Title: Vice President, Corporate Treasurer
-------------------------------------
and Acting Chief Financial Officer
-------------------------------------
CSW ACQUISITION CORPORATION
By: /s/ Ng Keh Long
-------------------------------------
Name: Ng Keh Long
--------------------------------------
Title: Vice President and Treasurer
-------------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President and Secretary
-------------------------------------
CAMBRIDGE SOUNDWORKS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: President and Chief Executive
-------------------------------------
Officer
-------------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President, Finance, and
-------------------------------------
Chief Financial Officer
-------------------------------------
-37-
ANNEX I
CONDITIONS OF THE OFFER
DEFINED TERMS. Capitalized terms used in this Annex I and not otherwise
defined shall have the meanings attributed thereto in the Agreement and Plan of
Merger, dated as of October 30, 1997 (the "Merger Agreement"), by and among
----------------
Parent, the Purchaser and the Company.
CONDITIONS OF THE OFFER. Subject to the terms of the Offer and this
Agreement, the Purchaser shall not be required to accept for payment or pay for
any Shares tendered pursuant to the Offer, and may terminate or amend the Offer
and may postpone the acceptance for payment of and payment for Shares tendered,
if (i) the Minimum Share Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer, or (iii) at any time on or
after the date of the Merger Agreement and before the acceptance of such Shares
for payment or the payment therefor, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order by any
federal, state or foreign court which prevents the acceptance for payment of, or
payment for, some of or all the Shares shall have been issued and shall remain
in effect;
(b) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity (i) challenging the acquisition by the
Purchaser of Shares or otherwise seeking to restrain, materially delay or
prohibit the consummation of the Offer or the Merger or seeking damages that
would make the Offer, the Merger or any other transaction contemplated hereby
materially more costly to Parent or the Purchaser, (ii) seeking to prohibit or
limit materially the ownership or operation by the Purchaser or Parent of all or
a material portion of the business or assets of the Company, or to compel the
Purchaser or Parent to dispose of or hold separate all or a material portion of
the business or assets of the Company or the Purchaser or Parent, as a result of
the Offer or the Merger, (iii) seeking to impose or confirm limitations on the
ability of Parent or the Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote the
Shares purchased by it on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption of the
Merger Agreement and the transactions contemplated hereby, or (iv) seeking to
require divestiture by Parent, the Purchaser or any other affiliate of Parent of
any Shares;
(c) there shall have been any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Offer, the Merger or any other transaction contemplated hereby, Parent, the
Company or any affiliate of Parent or the Company by any Governmental Entity,
except for the waiting period provisions of the HSR Act, which is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (iv) of paragraph (b) above;
(d) any change or effect that, individually or in the aggregate, is or
is reasonably likely to constitute a Material Adverse Effect shall have occurred
following the date of the Merger Agreement;
(e) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement; or
(f) any representation or warranty of the Company in the Merger
Agreement that is qualified as to materiality shall not be true and correct or
any such representation or warranty that is not so qualified shall not be true
and correct in any material respect, in each case when made and at and as of
such time as if made at and as of such time.
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National Market;
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or Canada; (iii) a commencement of a war
or armed hostilities or other national or international calamity directly or
indirectly involving the United States or Canada; or (iv) in the case of any of
the foregoing existing on the date hereof, a material acceleration or worsening
thereof;
(h) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
a majority of the then outstanding Shares have been acquired by any person other
than Parent or any of its affiliates, or (ii)(A) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified in a manner
adverse to Parent or the Purchaser the approval or recommendation of the Offer,
the Merger or the Merger Agreement, or approved or recommended any Third Party
Acquisition or any other acquisition of Shares other than the Offer and the
Merger, or (B) the Board of Directors of the Company or any committee thereof
shall have resolved to do any of the foregoing;
(i) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent. The foregoing rights of the Purchaser shall be available regardless of
the circumstances giving rise to any such conditions (including any action or
omission to act of the Purchaser) and, subject to Section 1.1(a) of the Merger
Agreement, may be waived by Purchaser or Parent in whole or in part at any time
and from time to time in their sole discretion. Any determination by the
Purchaser will be final and binding upon all parties including tendering
stockholders.
The failure by the Purchaser or Parent at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.