Exhibit 10.1
MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is made on this 12th day
of
March, 2004, among Evenstar, Inc., a Kansas
corporation ("Company"), Joel A.
Butler, David L. Butler and Patrick D.
Butler (collectively, "Shareholders"),
Evenstar Mergersub, Inc., a Nevada
corporation ("Mergersub"), and SLS
International, Inc., a Delaware corporation
("Purchaser").
RECITALS
A. Company, through its Hyperion Amplification division, owns
all
rights to the trade name "Hyperion
Amplification" and all rights in various
inventions concerning digital amplification
technologies, which are disclosed
and described in one U.S. Patent No.
6,563,377 B2 (the "Patent"), U.S. Patent
Application Serial No. 10/377,559 (the
"Patent Application"), and expired U.S.
Provisional Patent Application No.
60/390,242 ("Provisional Patent
Application"), all of which are set forth
on Schedule A attached hereto
(collectively, the "Purchased Proprietary
Rights," as further defined in Section
5(q)).
B. Shareholders own 100% of the issued and outstanding shares
of
capital stock of Company (the "Company
Stock").
C. Purchaser owns 100% of the issued and outstanding shares of
capital
stock of Mergersub.
D. The parties desire that Company merge with and into Mergersub,
as
herein provided and on the terms and
conditions
hereinafter set forth.
E.
Company, Shareholders and Purchaser previously entered into an
Asset
Purchase Agreement, dated February 6, 2004,
as amended by the First Amendment to
Asset Purchase Agreement, dated as of
February 20, 2004 (collectively, the
"Asset Purchase Agreement"), which shall be
terminated in accordance with
Section 9(n) upon the parties entering into
this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally
bound
hereby, in consideration of the foregoing
recitals and the mutual promises,
covenants and representations herein
contained, agree as follows:
1. MERGER.
(A) MERGER OF COMPANY INTO MERGERSUB. On and subject to the terms
and
conditions of this Agreement, Company will
merge with and into Mergersub
("Merger") at the Effective Time (as
defined below). Mergersub shall be the
corporation surviving the Merger
("Surviving Corporation").
(B) ACTIONS AT THE CLOSING. At the Closing (as defined in
Section
4(a)), (i) Shareholders will deliver to
Mergersub the various certificates,
instruments, and documents referred to in
Section 4(c) below, (ii) Mergersub
will deliver to Company the various
certificates, instruments, and documents
referred to in Section 4(d) below, (iii)
Company and Mergersub will file with
the Secretary of State of Nevada Articles
of Merger in the form attached hereto
as Exhibit A ("Articles of Merger
(Nevada)") and (iv) Company and Mergersub will
file with the Secretary of State of Kansas
a Certificate of Merger in the form
attached hereto as Exhibit B ("Certificate
of Merger (Kansas)").
(C) EFFECT OF MERGER.
(i) General. The Merger shall become effective at the time
("Effective
Time") (A) Mergersub and Company file the Articles of Merger
(Nevada)
with the Secretary of State of Nevada and (B) Mergersub and
Company
file the Certificate of Merger (Kansas) with the Secretary of State
of
Kansas. The Merger shall have the effect set forth in the
Nevada
General Corporation Law and in the Kansas General Corporation Code.
The
Surviving Corporation may, at any time after the Effective Time,
take
any action (including executing and delivering any document) in
the
name and on behalf of either Mergersub or Company in order to carry
out
and effectuate the transactions contemplated by this Agreement.
(ii) Articles of Incorporation. The Articles of Incorporation
of
Mergersub in effect at and as of the Effective Time will remain
the
Articles of Incorporation of the Surviving Corporation without
any
modification or amendment in the Merger.
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(iii) Bylaws. The Bylaws of Mergersub in effect at and as of
the
Effective Time will remain the Bylaws of the Surviving
Corporation
without any modification or amendment in the Merger.
(iv) Directors and Officers. The directors and officers of
Mergersub in
office at and as of the Effective Time will remain the directors
and
officers of the Surviving Corporation (retaining their
respective
positions and terms of office).
(v) Conversion of Company Stock. At and as of the Effective Time,
each
share of Company Stock shall be converted into the right to receive
the
Purchase Price (as defined below) divided by the number of shares
of
Company Stock issued and outstanding at the Effective Time. No
share of
Company Stock shall be deemed to be outstanding or to have any
rights
other than those set forth in this Section 1(c)(v) after the
Effective
Time.
(vi) Mergersub Shares. Each share of Mergersub's capital stock
issued
and outstanding at and as of the Effective Time will remain issued
and
outstanding.
(vii) Addresses. The address of the Company is 12722 W. 101st
Street,
Lenexa, KS 66215. The address of the Surviving Corporation will be
3119
South Scenic, Springfield, Missouri 65807.
(D) COOPERATION. To the extent that any of the Company's
third-party
contracts (including any real property
leases) contain change-in-control (or
similar) provisions, Mergersub shall
cooperate with Shareholders in obtaining
any third party consents as may be required
to consummate the transactions
contemplated by this Agreement, including
the provision of such information of
Mergersub as may be reasonably requested by
such third parties in the context of
their review of requests for consent;
provided that Mergersub or Purchaser shall
not be obligated to expend any sum or
advance any costs, or commence any
litigation or other legal proceedings, in
connection with such cooperation.
Shareholders acknowledge and agree that any
and all costs and fees charged by
such third parties in connection with such
consents, whether charged prior to or
following the Closing Date, shall be the
responsibility of Shareholders.
2. PURCHASE PRICE AND PAYMENT.
(A) PAYMENT TO SHAREHOLDERS. In consideration for the Company
Stock, at
the Closing, Purchaser shall deliver to
Shareholders an aggregate amount of cash
and stock as set forth in (ii) and (iii)
below ("Purchase Price"). The Purchase
Price shall be delivered to Shareholders
through a combination of cash and
shares of the Purchaser's Common Stock (the
"Purchaser Stock"), as more
specifically set forth below.
(i) Initial Deposit. Simultaneously with the execution of the
Asset
Purchase Agreement, Purchaser deposited with Company an amount
equal to
$30,000 in cash (the "Initial Deposit"). Shareholders will
cause
Company to transfer the Initial Deposit to the Shareholders at
Closing
and the Initial Deposit shall be applied towards the Purchase
Price.
(ii) Cash Portion. At the Closing, Shareholders will receive an
aggregate amount of cash equal to $300,000 less the Initial
Deposit.
(iii) Stock Issuance. At the Closing, Shareholders will receive
300,000
shares of Purchaser Stock (the "Shares"). Each Shareholder agrees
that
he will sell no more than 1,667 Shares in any one trading day;
provided
that if the twenty-day average daily trading volume in
Purchaser's
Shares equals or exceeds 500,000 shares, then each Shareholder
will
sell no more
than 8,333 Shares in any one trading day (in each case
subject to any restrictions of applicable law, including Rule 144
of
the U.S. Securities and Exchange Commission). The certificate(s)
issued
to each Shareholder evidencing the Shares shall contain a legend
giving
notice of the restrictions on such Shares provided in this
Section
2(a).
(B) TAXES. Shareholders agree that Shareholders shall pay all
transfer
or similar taxes required to be paid by
reason of the Merger.
3. COVENANT NOT TO COMPETE.
(A) To assure that Mergersub and Purchaser will realize the value
and
goodwill inherent in the Purchased
Proprietary Rights, Shareholders agree that
they shall not (i) directly or indirectly
engage in (as an owner, partner,
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employee, agent, consultant or otherwise),
for a period of five (5) years
following the Closing Date, any business
that designs, manufactures, distributes
or sells commercial, professional or
residential loudspeakers, amplifiers or
other stereo or sound equipment (the
"Business") in the United States (the
"Territory"); (ii) directly or indirectly,
for a period of five (5) years
following the Closing Date, request or
advise any individual or company which is
a customer of Company at the Closing Date
to withdraw, curtail or cancel any
such customer's relationship with Mergersub
or Purchaser; or (iii) solicit or
cause, directly or indirectly, to be
solicited, nor attempt to induce, for a
period of five (5) years after the Closing
Date, any person employed by Company
at or at any time within 180 days prior to
the Closing Date, unless such person
was either not offered employment by
Mergersub or Purchaser immediately
following the Closing or was terminated
thereafter, (A) to refuse an offer of
employment from Mergersub or Purchaser; or
(B) if such an offer is accepted, to
terminate his or her employment with
Mergersub or Purchaser.
(B) Shareholders agree and acknowledge that the restrictions
contained
in Section 3(a) are reasonable in scope and
duration and are necessary to
protect Mergersub and Purchaser after the
Closing Date. If, however, any
provision of Section 3(a), as applied to
any party or to any circumstances, is
adjudged by a court to be invalid or
unenforceable, the same will in no way
affect any other provision of Section 3(a)
or any other part of this Agreement,
the application of such provision in any
other circumstances or the validity or
enforceability of this Agreement. If any
such provision, or any part thereof, is
held to be unenforceable because of the
duration of such provision or the area
covered thereby, the parties agree that the
court making such determination will
have the power to reduce the duration
and/or area of such provision, and/or to
delete specific words or phrases, and in
its reduced form such provision will
then be enforceable and will be enforced.
Upon breach of any provision of
Section 3(a), Mergersub and Purchaser will
be entitled to injunctive relief
(without posting bond or other security),
since the remedy at law would be
inadequate and insufficient. In addition,
Mergersub and Purchaser will be
entitled to such damages as it can show it
has sustained by reason of such
breach.
4. CLOSING.
(A) TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated by this Agreement (the
"Closing") shall take place at the offices
of Freeborn & Peters LLP, 311 S. Wacker
Drive, Suite 3000, Chicago, Illinois, on
March 12, 2004, or by mail or facsimile
transmission of the applicable
documents, certificates and instruments
required to consummate the transactions
contemplated by this Agreement, or at such
other place and time as agreed upon
by the parties. The date on which the
Closing occurs is referred to herein as
the "Closing Date."
(B) CLOSING TRANSACTIONS. Subject to the conditions set forth in
this
Agreement, the parties shall consummate the
following transactions (the "Closing
Transactions") on the Closing Date:
(i) Shareholders shall deliver to Mergersub all certificates
representing the Company Stock endorsed for transfer;
(ii) Purchaser shall deliver the Purchase Price to Shareholders
(by
wire transfer of immediately available funds to an account
designated
by Shareholders) and shall instruct its transfer agent to issue
and
deliver to Shareholder the certificates representing the Shares;
and
(iii) Purchaser and Joel Butler shall enter into a two-year
employment
agreement substantially in the form hereto attached as Exhibit C
(the
"Joel Butler Employment Agreement").
(C) SHAREHOLDERS' CLOSING DELIVERIES. Subject to and conditioned
upon
the Closing, on or prior to the Closing
Date, Shareholders shall have delivered
to Mergersub all of the following:
(i) a certificate of the Secretary of State or such other
appropriate
governmental body of the State in which Company is organized
providing
that Company is in good standing;
(ii) certificates representing 100% of the issued and
outstanding
Company Stock;
(iii) Joel Butler Employment Agreement executed by Joel Butler;
(iv) copies of all third-party (including landlords) and
governmental
consents, approvals, filings, releases and terminations required
in
connection with the consummation of the transactions
contemplated
herein;
(v) an opinion, dated the Closing Date, of counsel to Company, in
form
and substance reasonably satisfactory to Mergersub and Purchaser;
and
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(vi) such other documents or instruments as Mergersub or Purchaser
may
reasonably request to
effect the transactions contemplated hereby.
(D) CLOSING DELIVERIES OF MERGERSUB AND PURCHASER. Subject to
and
conditioned upon the Closing, on or prior
to the Closing Date, Purchaser and
Mergersub shall have delivered to
Shareholders all of the following:
(i) articles of incorporation certified by the Secretary of State
of
Nevada dated within ten days of Closing;
(ii) the Purchase Price;
(iii) Joel Butler Employment Agreement executed by Purchaser;
and
(iv) such other documents or instruments as Shareholders may
reasonably
request to effect the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES. Shareholders each, jointly
and
severally, make the following
representations and warranties to Mergersub and
Purchaser, upon which Mergersub and
Purchaser have relied:
(A) ORGANIZATION, POWER AND AUTHORITY; SUBSIDIARIES. Company is
a
corporation duly organized, validly
existing and in good standing under the laws
of the State of Kansas and has all
requisite corporate power and authority to
own or lease its properties and to carry on
its business as it is now being
conducted. Company is legally qualified to
transact business as a foreign
corporation in each of the jurisdictions in
which its business or property is
such as to require that it be thus
qualified, and it is in good standing in each
of the jurisdictions in which it is so
qualified. Company does not own, of
record or beneficially, any capital stock
or equity interest or investment in
any corporation, partnership, joint
venture, association or business entity.
Company and Shareholders have the power and
authority and capacity to enter into
this Agreement, and upon execution of this
Agreement by Company and Shareholders
this Agreement shall be binding upon and
enforceable against Company and
Shareholders according to the terms
hereof.
(B) CAPITALIZATION. The Company Stock are the only shares of
capital
stock of Company which are issued and
outstanding. All of the shares of Company
Stock (i) have been duly authorized and
validly issued and are fully paid and
non-assessable, (ii) were issued in
compliance with all applicable state and
federal securities laws, and (iii) were not
issued in violation of any
preemptive rights or rights of first
refusal. No preemptive rights or rights of
first refusal exist with respect to the
Company Stock, and no such rights arise
by virtue of or in connection with the
transactions contemplated hereby. There
are no outstanding or authorized rights,
options, warrants, convertible
securities, subscription rights, conversion
rights, exchange rights or other
agreements or commitments of any kind that
could require Company to issue or
sell any shares of its capital stock (or
securities convertible into or
exchangeable for shares of its capital
stock). There are no outstanding stock
appreciation, phantom stock, profit
participation or other similar rights with
respect to Company. There are no proxies,
voting rights or other agreements or
understandings with respect to the voting
or transfer of Company Stock. Company
is not obligated to redeem or otherwise
acquire any of its outstanding shares of
capital stock. As of the date hereof,
Shareholders constitute all of the holders
of all issued and outstanding shares of
capital stock of Company, and
Shareholders own such shares free and clear
of all liens, restrictions and
claims of any kind.
(C) EXECUTION AND DELIVERY; NON-CONTRAVENTION. Neither the
execution
and delivery of this Agreement nor the
consummation of the transactions
contemplated hereby will (x) contravene any
provision of the articles of
incorporation or bylaws of Company; (y)
violate or conflict with any federal,
state or local law, statute, ordinance,
rule, regulation or any decree, writ,
injunction, judgment or order of any court
or administrative or other
governmental body or of any arbitration
award which is either applicable to,
binding upon or enforceable against Company
or any of the Shareholder; or (z)
conflict with, result in any breach of or
default (or an event which would, with
the passage of time or the giving of notice
or both, constitute a default) under
any material contract, agreement, lease,
license, indenture, trust or other
instrument which is either binding upon or
enforceable against Company or any of
the Shareholders.
(D) RECORDS OF COMPANY. The copies of the articles of incorporation
and
bylaws of Company which were provided to
Purchaser are true, accurate and
complete and reflect all amendments made
through the date of this Agreement. The
minute books for Company made available to
Purchaser for review were correct and
complete in all material respects as of the
date of such review, no further
entries have been made through the date of
this Agreement, such minute books
contained the true signatures of the
persons purporting to have signed them, and
such minute books contain an accurate
record of all material corporate actions
of the shareholders and directors (and any
committees thereof) of Company taken
by written consent or at a meeting within
the past 10 years. All material
corporate actions taken by Company have
been duly authorized or ratified. All
accounts, books, ledgers and official and
other records of Company have been
fully, properly and accurately kept and
completed in all material respects, and
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there are no material inaccuracies or
discrepancies of any kind contained
therein. The stock ledgers of Company, as
previously made available to
Purchaser, contain accurate and complete
records of all issuances, transfers and
cancellations of shares of the capital
stock of Company.
(E) FINANCIAL STATEMENTS. Shareholders have furnished to Purchaser
the
financial statements which are attached
hereto on Schedule 5(e), including the
notes pertaining thereto ("Financial
Statements"). The Financial Statements
present fairly and are true, correct and
complete statements of the financial
position of Company, in all material
respects, at each of said balance sheet
dates and the results of its operations for
each of said periods covered, and
they have been prepared in accordance with
generally accepted accounting
principles consistently applied. The books
and records of Company properly and
accurately reflect all transactions,
properties, assets and liabilities of
Company. Shareholders are not aware of
changes in generally accepted accounting
principles that could materially and
adversely affect Company's financial
condition or results of operations as set
forth on the Financial Statements.
(F) LIABILITIES. Company has no liabilities or obligations,
either
accrued, absolute, contingent or
otherwise.
(G) ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule
5(g)
attached hereto and except as expressly
contemplated by this Agreement, since
the date of the Last Balance Sheet, Company
has not:
(i) suffered any change in the business, assets or properties
of
Company or in the financial condition or results of operations
of
Company other than in the ordinary course of business consistent
with
past practice;
(ii) suffered any theft, damage, destruction or casualty to any
material assets, whether or not covered by insurance, or suffered
any
substantial destruction of its books and records; (iii) redeemed
or
repurchased,
