EXHIBIT 99.10
__________________________________________________________________
__________________________________________________________________
AGREEMENT AND PLAN OF MERGER
BETWEEN
AGROBIOS S.A. de C.V.
AUTHENTIC ACQUISITION CORPORATION
AND
AUTHENTIC SPECIALTY FOODS, INC.
DATED AS OF MAY 7, 1998
__________________________________________________________________
__________________________________________________________________
TABLE OF CONTENTS
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Page
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ARTICLE I THE OFFER...................................................... 3
1.1 The Offer...................................................... 3
1.1.1 General................................................. 3
1.1.2 Securities Law Compliance............................... 5
1.1.3 Termination of the Offer................................ 5
1.2 Action by Company.............................................. 5
1.2.1 Approval and Recommendation of the Board................ 5
1.2.2 Securities Law Compliance............................... 6
1.2.3 Shareholder Lists....................................... 6
1.2.4 Directors............................................... 7
ARTICLE II THE MERGER..................................................... 9
2.1 The Merger..................................................... 9
2.2 Closing........................................................ 9
2.3 Effective Time of the Merger................................... 9
2.4 Effects of the Merger.......................................... 9
2.5 Articles of Incorporation; Bylaws.............................. 9
2.6 Directors...................................................... 10
2.7 Officers....................................................... 10
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS................................... 10
3.1 Effect on Capital Stock........................................ 10
3.2 Stock Options and Warrants..................................... 11
3.3 Exchange of Certificates....................................... 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY...................... 15
4.1 Organization, Standing and Corporate Power..................... 15
4.2 Subsidiaries................................................... 15
4.3 Capital Structure.............................................. 16
4.4 Authority; Noncontravention.................................... 17
4.5 SEC Documents; Undisclosed Liabilities......................... 18
4.6 Information Supplied........................................... 19
4.7 Absence of Certain Changes or Events........................... 20
4.8 Litigation; Labor Matters; Compliance with Laws................ 20
4.9 Employee Benefit Plans......................................... 22
4.10 Taxes.......................................................... 24
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4.11 Environmental Matters.......................................... 25
4.12 Material Contracts............................................. 27
4.13 Brokers........................................................ 27
4.14 Opinion of Financial Advisor................................... 27
4.15 Required Company Vote.......................................... 28
4.16 State Takeover Statutes........................................ 28
4.17 Intellectual Property.......................................... 28
4.18 Title to Properties............................................ 29
4.19 Products Liability............................................. 29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND
MERGERCO....................................................... 29
5.1 Organization, Standing and Corporate Power..................... 29
5.2 Authority; Noncontravention.................................... 30
5.3 Brokers........................................................ 31
5.4 Offer Documents and Schedule 14D-9............................. 31
5.5 Information Supplied........................................... 31
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER................................................ 31
6.1 Conduct of Business of Company................................. 31
6.2 Changes in Employment Arrangements............................. 34
6.3 Severance...................................................... 34
6.4 Advisory Agreement............................................. 35
6.5 WARN........................................................... 35
ARTICLE VII ADDITIONAL AGREEMENTS.......................................... 35
7.1 Preparation of Proxy Statement: Shareholder Meeting............ 35
7.2 Access to Information, Confidentiality......................... 37
7.3 Additional Undertakings........................................ 37
7.4 Indemnification................................................ 38
7.5 Public Announcements........................................... 39
7.6 No Solicitation................................................ 39
7.7 Resignation of Directors....................................... 42
7.8 Employee Benefits.............................................. 42
7.9 Notification of Certain Matters................................ 43
7.10 State Takeover Laws............................................ 43
ARTICLE VIII CONDITIONS PRECEDENT........................................... 44
8.1 Conditions to Each Party's Obligation.......................... 44
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8.2 Condition to Buyer's and MergerCo's Obligation................. 44
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................. 44
9.1 Termination.................................................... 44
9.2 Effect of Termination.......................................... 46
9.3 Amendment...................................................... 46
9.4 Extension; Waiver.............................................. 46
9.5 Procedure for Termination, Amendment, Extension or Waiver...... 46
ARTICLE X GENERAL PROVISIONS............................................. 47
10.1 Nonsurvival of Representations and Warranties.................. 47
10.2 Fees and Expenses.............................................. 48
10.3 Notices........................................................ 48
10.4 Interpretation................................................. 49
10.5 Counterparts................................................... 49
10.6 Entire Agreement; No Third-Party Beneficiaries................. 50
10.7 GOVERNING LAW.................................................. 50
10.8 Assignment..................................................... 50
10.9 Enforcement.................................................... 50
ANNEX I CONDITIONS OF THE OFFER........................................ 52
APPENDIX A DEFINITIONS.................................................... 55
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
this 7th day of May, 1998 by and between Agrobios S.A. de C.V., a corporation
organized under the laws of the United Mexican States ("Buyer"), Authentic
Acquisition Corporation, a Texas corporation and wholly-owned subsidiary of
Buyer ("MergerCo"), and Authentic Specialty Foods, Inc., a Texas corporation
("Company"). All capitalized terms not defined herein are defined in Appendix A
hereto.
RECITALS
WHEREAS, the respective Boards of Directors of Company, Buyer and MergerCo
have determined that the merger of MergerCo with and into Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, is advisable and in the best interests of their respective companies
and shareholders, and such Boards of Directors have approved such Merger,
pursuant to which each share of common stock, par value $1.00 per share, of
Company ("Company Common Stock") issued and outstanding immediately prior to the
Effective Time of the Merger (other than shares of Company Common Stock owned,
directly or indirectly, by Company or any Subsidiary of Company, Buyer or
MergerCo) will be converted into the right to receive cash;
WHEREAS, subject to the terms and conditions of this Agreement and in
furtherance of the Merger, Buyer will make, or will cause MergerCo to make, a
tender offer to acquire any and all shares of Company Common Stock (the
"Offer");
WHEREAS, consummation of the Merger contemplated by this Agreement
requires the vote of 66 2/3 % of the issued and outstanding shares of Company
Common Stock for the approval thereof (the "Company Shareholder Approval"); and
WHEREAS, Buyer, MergerCo and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of, and conditions to,
the Offer and the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
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ARTICLE I
THE OFFER
1.1 The Offer.
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1.1.1 General. Provided that this Agreement shall not have been
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terminated in accordance with Article IX, Buyer shall commence, within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or shall cause MergerCo to commence, the Offer to acquire any
and all shares of Company Common Stock for a cash price per share equal to the
Merger Consideration (the "Offer Price"), as promptly as reasonably practicable
after the date hereof, but in no event later than five Business Days from and
including the initial public announcement of Offeror's intention to commence the
Offer. For purposes of this Article I, the party which makes the Offer, whether
Buyer or MergerCo, shall be referred to as the "Offeror." Offeror may not accept
any shares of Company Common Stock tendered for purchase in response to the
Offer unless it accepts all such shares that are properly tendered in accordance
with the terms thereof. Acceptance by Offeror of shares of Company Common Stock
for payment pursuant to the Offer shall be irrevocable. The Offer shall be
subject only: (i) to the condition that there shall be validly tendered in
accordance with the terms of the Offer prior to the expiration date of the Offer
and not withdrawn, a number of shares of Company Common Stock which, together
with the aggregate number of shares of Company Common Stock then owned by Buyer
and MergerCo, represents at least 66 2/3% of the total number of outstanding
shares of Company Common Stock, assuming the exercise of all outstanding
options, rights and convertible securities (if any) and the issuance of all
shares of Company Common Stock that Company is then obligated to issue after
giving effect to agreements not to exercise, or to cancel, warrants (such total
number of outstanding or issuable shares of Company Common Stock being
hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition")
and (ii) to the other conditions set forth in Annex I attached hereto
(collectively, the "Offer Conditions"). Buyer and MergerCo expressly reserve the
right to waive any of the conditions to the Offer; provided that,
notwithstanding any provision in this Agreement to the contrary, without the
express written consent of Company, neither Buyer nor MergerCo may waive the
Minimum Condition. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ agree that upon the expiration date of
the Offer, as the same may be extended in accordance with this paragraph, if the
Offer Conditions have been satisfied or waived, Offeror shall promptly accept
and pay for the shares of Company Common Stock properly tendered for purchase.
Without the prior written consent of Company, no change may be made by Offeror
which (i) reduces the maximum number of shares of Company Common Stock to be
purchased in the Offer, (ii) reduces the Offer Price, (iii) changes the form of
consideration to be paid in the Offer, (iv) reduces the Minimum Condition, (v)
imposes conditions to the Offer in addition to the Offer Conditions
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or modifies the Offer Conditions in a manner adverse to the holders of shares of
Company Common Stock (provided that a waiver of a condition may be made subject
to terms or conditions which are no more onerous than the condition being
waived), or (vi) amends any other term of the Offer in a manner adverse to the
holders of shares of Company Common Stock. Notwithstanding the foregoing,
Offeror may, subject to Company's right to terminate this Agreement pursuant to
Article IX, without the consent of Company, (i) extend the Offer on one or more
occasions for up to 10 business days for each such extension beyond the then
scheduled expiration date (the initial scheduled expiration date being 20
business days following commencement of the Offer), if at the then scheduled
expiration date of the Offer any of the conditions to Offeror's obligation to
accept for payment and pay for the shares of Company Common Stock shall not be
satisfied or waived and (ii) 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 applicable to the Offer and (iii)
extend the Offer for an aggregate of not more than five business days beyond the
latest expiration date that would otherwise be permitted under clause (i) or
(ii) of this sentence if there shall not have been validly tendered and not
withdrawn sufficient shares of Company Common Stock so that the Merger could be
effected without a meeting of Company's shareholders in accordance with Article
5.16 of the Texas Business Corporation Act, as amended (the "TBCA"). At the
request of the Company, if at the then scheduled expiration date of the Offer,
any of the conditions to Offeror's obligation to accept for payment, and pay
for, the tendered shares of Company Common Stock have not been satisfied or
waived, Offeror agrees to extend the Offer for additional periods not to exceed
60 days from the date of commencement of the Offer unless Offeror is entitled to
terminate this Agreement in accordance with the terms of Article IX and
exercises this right or waives any conditions not satisfied and accepts for
payment, and pays for, all shares of Company Common Stock validly tendered;
provided that, without the express written consent of Company, neither Buyer nor
MergerCo may waive the Minimum Condition. The Offer Price shall, subject to
reduction for applicable withholding of taxes, be net to the seller in cash,
payable upon the terms and subject to the conditions of the Offer. Subject to
the terms and conditions of the Offer, Offeror shall pay, as promptly as
practicable after expiration of the Offer, for all shares of Company Common
Stock validly tendered and not withdrawn. At or prior to the expiration of the
Offer, Offeror will take all steps necessary to provide its paying agent any
funds necessary to make the payments contemplated by the Offer. Upon the
execution of this Agreement, the Merger Consideration shall be the amount set
forth in Section 3.1(c) payable without interest thereon, and such initial
Merger Consideration shall be adjusted only in accordance with the following
provisions: (a) the Merger Consideration and the Offer Price payable in
connection with the Offer shall automatically be adjusted appropriately for any
stock dividend, split or any conversion or reclassification in respect of
Company Common Stock occurring after the date hereof and prior to the date of
consummation of the Offer, which shall occur only in accordance with the terms
of this Agreement; and (b) Buyer and
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MergerCo shall have the right to increase the Merger Consideration in effect
hereunder at any time, in which case the Offer Price shall also be so increased
to be identical with the Merger Consideration.
1.1.2 Securities Law Compliance. On the date of commencement of the
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Offer, Offeror shall file with the SEC a Tender Offer Statement on Schedule
14D-1 (together with all amendments and supplements thereto, the "Schedule
14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to herein
collectively as the "Offer Documents"). The Offer Documents will comply in all
material respects as to form with the requirements of applicable federal
securities laws. Offeror and Company agree to promptly correct any information
provided by either of them for use in the Offer Documents which shall have
become false or misleading in any material respect, and Offeror further agrees
to take all steps necessary to cause the Schedule 14D-1 as so corrected to be
filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of shares of Company Common Stock, in each case as and
to the extent required by applicable federal securities laws. Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents and any amendments or supplements thereto, in each case prior to
the filing thereof with the SEC or, if applicable, the dissemination thereof to
any shareholders of Company. Offeror agrees to provide Company with a written
copy of any comments or other communications it or its counsel may receive from
time to time from the SEC or its staff with respect to the Offer Documents
promptly after receipt of such comments. ▇▇▇▇▇ also agrees to file or cause to
be filed all securities and merger documents and filings required to be filed by
Buyer under the laws of the United Mexican States.
1.1.3 Termination of the Offer. Offeror shall not, without the prior
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written consent of Company, (i) terminate the Offer, except in accordance with
the terms of Annex I attached hereto, or (ii) extend the expiration date of the
Offer, except as specifically provided herein, and in no event to a date later
than July 31, 1998.
1.2 Action by Company.
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1.2.1 Approval and Recommendation of the Board. Company hereby
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approves of and consents to the making of the Offer and represents that the
Board of Directors of Company, at a meeting duly called and held on May 7, 1998,
unanimously adopted resolutions (i) determining that this Agreement and the
transactions contemplated hereby, including each of the Merger and the Offer,
taken together, are fair to, and in the best
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interests of, Company and the holders of Company Common Stock, (ii) approving
and adopting this Agreement and the Articles of Merger and the transactions
contemplated hereby (including but not limited to the Offer), and (iii)
recommending that the shareholders of Company accept the Offer and tender their
shares of Company Common Stock pursuant to the Offer, and, if required, approve
and adopt this Agreement and the transactions contemplated hereby, subject to
the Board's right to withdraw, modify or amend such recommendation if the Board
determines in good faith, based on advice of its outside counsel, that such
action is necessary in order for the Board to comply with its fiduciary duties
under applicable law. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation has
delivered to the Board of Directors of the Company its opinion on May 7, 1998 to
the effect that, as of such date, the consideration to be received by the
holders of shares of Company Common Stock pursuant to the Offer and the Merger,
taken together, is fair to the holders of shares of Company Common Stock from a
financial point of view. Subject to the provisions of Section 7.6 hereof and the
other provisions of this Agreement, Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Board of Directors of Company
described in the immediately preceding sentence, subject to the Board of
Directors' right to withdraw, modify or amend its recommendation, as described
above.
1.2.2 Securities Law Compliance. Promptly following the filing of the
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Offer Documents with the SEC, Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, subject to
the provisions of Section 7.6 hereof and the other provisions of this Agreement,
the recommendation of the Board of Directors of Company described in Section
1.2.1 and shall mail the Schedule 14D-9 to the shareholders of Company. The
Schedule 14D-9 will comply in all material respects as to form with the
requirements of applicable federal securities laws. Company and Offeror agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading in any material respect, and
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to holders of shares
of Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Buyer and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and all
amendments and supplements thereto prior to their filing with the SEC or, if
applicable, dissemination to any shareholders of Company. Company agrees to
provide Offeror with a written copy of any comments or other communications it
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9, promptly after receipt of such comments.
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1.2.3 Shareholder Lists. In connection with the Offer and the Merger,
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Company shall furnish Offeror with mailing labels containing the names and
addresses of all record holders of shares of Company Common Stock and with
security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, and of those persons becoming record
holders subsequent to such date. Company shall furnish Offeror with all such
additional information (including, but not limited to, updated lists of holders
of shares of Company Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Offeror or its agents may
reasonably request in communicating the Offer to the record and beneficial
owners of shares of Company Common Stock. 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, Offeror shall hold in confidence in accordance with the terms of the
Confidentiality Agreement the information contained in such labels, listings and
files, and shall use such information only in connection with the Offer and the
Merger. If this Agreement is terminated, Offeror will deliver to Company all
copies of such information (and extracts and summaries thereof) then in their or
their agent's or advisor's possession in accordance with the terms of the
Confidentiality Agreement.
1.2.4 Directors.
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(a) Effective upon the acceptance for payment and payment (as evidenced by
delivery of cash sufficient to pay the Offer Price with respect to each
share of Company Common Stock tendered to the Exchange Agent with
irrevocable instructions to pay to tendering shareholders in accordance
with this Agreement) by Offeror of shares pursuant to the Offer such that
Offeror shall own at least 66 2/3% of the Fully Diluted Shares, the Offeror
shall be entitled to designate the number of Directors, rounded up to the
next whole number, on Company's Board of Directors that equals the product
of (i) the total number of directors on Company's Board of Directors
(giving effect to the election of any additional directors pursuant to this
Section) and (ii) the percentage that the number of shares of Company
Common Stock owned by Offeror (including shares of Company Common Stock
accepted for payment and paid for) bears to the total number of Fully
Diluted Shares and Company shall take all action necessary to cause
Offeror's designees to be elected or appointed to Company's Board of
Directors, including, without limitation, increasing the number of
directors (to the extent permitted under Article 2.34(C) of the TBCA), and
seeking and accepting resignations of incumbent directors. At such times,
Company will use its best efforts to cause individuals designated by
Offeror to constitute the same percentage as such individuals represent on
Company's Board of Directors of (x) each committee of such Board (other
than any committee of such Board established to take action under this
Agreement), (y) each Board of Directors
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of each Subsidiary of Company and (z) each committee of each such
Subsidiary's Board; provided however, that in the event that Offeror's
designees are elected or appointed to the Board of Directors of Company,
until the Effective Time of the Merger, such Board of Directors shall have
at least two directors who are directors of Company on the date of this
Agreement and who are not employees of Company or any of its Subsidiaries
(the "Independent Directors") and provided further that, in such event, if
the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a
person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no Independent Directors
then remain, the other directors of Company on the date hereof shall
designate two persons to fill such vacancies who shall not be officers or
affiliates of Company or any of its Subsidiaries, or officers or affiliates
of Buyer or any of its Subsidiaries, and such Persons shall be deemed to be
Independent Directors for purposes of this Agreement. Notwithstanding
anything in this Agreement to the contrary, until the Effective Time of the
Merger the affirmative vote of a majority of the Independent Directors
shall be required to (i) amend or otherwise modify the Certificate of
Incorporation of Company, (ii) approve any amendment, modification or
waiver by Company of any provisions of this Agreement or (iii) approve any
other action by Company that adversely affects the interests of the
shareholders of Company (other than Buyer, MergerCo or any affiliate
thereof) with respect to the transactions contemplated hereby, including
without limitation, any actions which would constitute a breach by Company
of its representations, warranties or covenants contained herein. The
provisions of this Section 1.2.4(a) are in addition to and shall not limit
any rights which Buyer, MergerCo or any of their affiliates may have as a
holder or beneficial owner of shares of Company Common Stock as a matter of
law with respect to the election of directors or otherwise.
(b) Company's obligations to appoint designees of Offeror to the Company's
Board of Directors shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. Subject to applicable law, Company
shall promptly take all action requested by Offeror necessary to effect any
such election, including mailing to its shareholders the information
statement containing the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, and Company agrees to
make such mailing with the mailing of the Schedule 14D-9 (provided that
Offeror shall have provided to Company on a timely basis all information
required to be included in such information statement with respect to
Offeror's designees). Offeror will supply to Company in writing 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.
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ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth
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in this Agreement, and in accordance with the TBCA, MergerCo shall be merged
with and into Company at the Effective Time of the Merger. Upon the Effective
Time of the Merger, the separate existence of MergerCo shall cease and Company
shall continue as the surviving corporation (the "Surviving Corporation").
2.2 Closing. Unless this Agreement shall have been terminated and the
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transactions herein contemplated shall have been abandoned pursuant to Section
9.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VIII, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on the second business day after satisfaction or waiver of the conditions
set forth in Article VIII (the "Closing Date"), at the offices of ▇▇▇▇,
Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is agreed to in writing by
the parties hereto.
2.3 Effective Time of the Merger. On the Closing Date, the Surviving
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Corporation shall file articles of merger or a plan of merger, as applicable
(collectively, the "Articles of Merger") executed in accordance with the TBCA
with the Secretary of State of the State of Texas, and the Merger shall become
effective at such time as the Articles of Merger are duly filed with the
Secretary of State of the State of Texas or at such other time as is specified
in the Articles of Merger to which MergerCo and Company shall have agreed (the
time the Merger becomes effective being the "Effective Time of the Merger").
2.4 Effects of the Merger. The Merger shall have the effects set forth in
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the TBCA, including, without limitation, that at the Effective Time of the
Merger, all the properties, rights, privileges, powers and franchises for
Company and MergerCo shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Company and MergerCo shall become the debts,
liabilities and duties of the Surviving Corporation.
2.5 Articles of Incorporation; Bylaws.
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(a) The Articles of Incorporation of MergerCo, as in effect immediately
prior to the Effective Time of the Merger, shall become the Articles of
Incorporation of the Surviving Corporation and, as so amended, until
thereafter further amended as provided therein and under the TBCA, it shall
be the Articles of Incorporation of the Surviving Corporation following the
Merger.
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(b) The Bylaws of MergerCo as in effect at the Effective Time of the Merger
shall be the Bylaws of Surviving Corporation following the Merger until
thereafter changed or amended as provided therein or by applicable law.
2.6 Directors. The directors of MergerCo at the Effective Time of the
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Merger shall be the directors of Surviving Corporation following the Merger,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
2.7 Officers. The officers of MergerCo at the Effective Time of the
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Merger shall be the officers of Surviving Corporation following the Merger,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
3.1 Effect on Capital Stock. As of the Effective Time of the Merger, by
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virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of MergerCo:
(a) Common Stock of MergerCo. Each share of common stock of MergerCo
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issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of the common stock, par value
$.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
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that is owned by Company or by any wholly owned Subsidiary of Company shall
automatically be canceled and retired and shall cease to exist, and no cash
or other treasury stock consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
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herein and subject to Section 3.3, each issued and outstanding share of
Company Common Stock, other than shares owned by Buyer, MergerCo or any
other direct or indirect Subsidiary of Buyer, Company or any wholly owned
Subsidiary of Company (collectively, the "Excluded Shares"), and other than
treasury stock, shall be converted into the right to receive in cash from
the Surviving Corporation following the Merger an amount equal to $17 (the
"Merger Consideration"), without interest,
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upon surrender of the certificates formerly representing such shares
pursuant to Section 3.3. The term "Merger Consideration" shall mean the per
share amount in reference to the consideration designated on a per share
basis, and otherwise shall refer to the aggregate consideration represented
by the per share amount multiplied by the total number of shares of Company
Common Stock then outstanding.
(d) Cancellation and Retirement of Excluded Shares. Each Excluded Share
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issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(e) Cancellation and Retirement of Company Common Stock. As of the
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Effective Time of the Merger, all shares of Company Common Stock (other
than shares referred to in Section 3.1(b) and (c)) issued and outstanding
immediately prior to the Effective Time of the Merger, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall, to the extent such certificate represents such
shares, cease to have any rights with respect thereto, except the right to
receive the Merger Consideration applicable thereto, without interest, upon
surrender of such certificate in accordance with Section 3.3.
3.2 Stock Options and Warrants.
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(a) Stock Options. As soon as practicable following the date of this
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Agreement, the Board of Directors of Company (or, if appropriate, any
committee administering the Stock Option Plan) shall adopt such resolutions
or take such other actions as may be required to effect the following:
(i) adjust the terms of all outstanding stock options to purchase
shares of Company Common Stock ("Company Stock Options") granted under
Company's 1997 Stock Plan (the "Stock Option Plan") or otherwise to
provide that, at the Effective Time of the Merger, each Company Stock
Option outstanding immediately prior to the Effective Time of the
Merger shall vest as a consequence of the Merger and shall be canceled
in exchange for a payment from Company after the Merger (subject to
any applicable withholding taxes) equal to the product of (1) the
total number of shares of Company Common Stock subject to such Company
Stock Option, multiplied by (2) the excess of the Merger Consideration
over the exercise price per
-11-
share of Company Common Stock subject to such Company Stock Option,
payable in cash immediately upon the Effective Time of the Merger; and
(ii) except as provided herein or as otherwise agreed to by the
parties, the Stock Option Plan and any other plan, program or
arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of Company or any of its Subsidiaries
shall terminate as of the Effective Time of the Merger, and Company
shall ensure that, following the Effective Time of the Merger, no
holder of a Company Stock Option nor any participant in the Stock
Option Plan shall have any right thereunder to acquire equity
securities of Surviving Corporation following the Merger.
(b) Warrants. As soon as practicable following the date of this Agreement,
--------
the Board of Directors of Company shall take all necessary actions to amend
Section 6(a) of the Warrant Agreement by and between Company and Shansby
Partners, L.L.C. dated September 2, 1997 to provide that the warrants
covered thereby shall be exercisable at the Effective Time of the Merger.
The outstanding warrants for shares of Company Common Stock (collectively
"Warrants" and individually, each "Warrant") governed by those certain
Warrant Agreements, dated September 2, 1997, September 30, 1997, October
29, 1997 and January 9, 1998, by and between Company and Shansby Partners,
L.L.C. (collectively, the "Shansby Warrant Agreements") shall at the
Effective Time of the Merger automatically without any further action of
Company or the holders thereof be canceled in exchange for the right to
receive at the Effective Time of the Merger an amount in cash equal to the
product of (i) the total number of shares of Company Common Stock subject
to such Warrant, multiplied by (ii) the excess of the Merger Consideration
over the exercise price per share of Company Common Stock subject to such
Warrant. The Company shall use its reasonable efforts to obtain the
consents (the "▇▇▇▇▇▇▇ Consents") of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇, who are each parties to that certain Warrant Agreement
dated October 30, 1997 with Company (the "▇▇▇▇▇▇▇ Warrant Agreement") to
have such warrants covered thereby canceled in accordance with the terms of
the immediately preceding sentence; provided, that if the ▇▇▇▇▇▇▇ Consents
are not so obtained the Company shall promptly redeem such warrants in
accordance with the current terms of the ▇▇▇▇▇▇▇ Warrant Agreement
following acceptance for payment of, and payment for, the shares in the
Offer. The Shansby Warrant Agreements and the ▇▇▇▇▇▇▇ Warrant Agreement
shall be collectively referred to herein as the "Warrant Agreements."
(c) No Post-Merger Rights. Company hereby represents and warrants that
---------------------
upon taking of the actions specified above, immediately following the
Effective Time of
-12-
the Merger, and after giving effect to the payments described in this
Section 3.2, no holder of a Company Stock Option nor any participant in any
Stock Option Plan nor the holder of any warrant to purchase Company Common
Stock (other than pursuant to the ▇▇▇▇▇▇▇ Warrant Agreement, which provides
for redemption of such warrants on the terms set forth therein) shall have
the right thereunder to acquire equity securities of Surviving Corporation,
or any other benefit, after the Merger, except for the right set forth in
paragraph (a)(i) above and the last sentence of paragraph (b).
3.3 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Effective Time of the Merger, Buyer shall
--------------
designate a bank or trust company to act as agent for the holders of
Company Common Stock in connection with the Merger (the "Exchange Agent")
(who shall be reasonably acceptable to Company) to receive the funds to
which holders of the shares of Company Common Stock are entitled to
pursuant to this Article III. Buyer shall, from time to time, make
available to the Exchange Agent funds in amounts and at times necessary for
the payment of the Merger Consideration as provided herein. Promptly after
the Effective Time of the Merger, the Exchange Agent shall mail to each
record holder, as of the Effective Time of the Merger, of an outstanding
certificate or certificates which immediately prior to the Effective Time
of the Merger represented shares of Company Common Stock (the
"Certificates"), a letter of transmittal and instructions for use in
effecting the surrender of the Certificates for payment therefor (or such
other documents as may reasonably be required in connection with such
surrender) in customary form to be agreed to by MergerCo and Company prior
thereto.
(b) Exchange Procedures.
-------------------
(i) After the Effective Time of the Merger, each holder of an
outstanding Certificate or Certificates shall, upon surrender to the
Exchange Agent of such Certificate or Certificates and acceptance
thereof by the Exchange Agent, be entitled to receive the amount of
cash into which such Certificate or Certificates surrendered shall
have been converted pursuant to this Agreement.
(ii) After the Effective Time of the Merger, there shall be no further
transfer on the records of Company or its transfer agent of
Certificates, and if Certificates are presented to Company for
transfer, they shall be canceled against delivery of cash. If ▇▇▇▇▇▇
Consideration is to be remitted to a name other than that in which the
Certificates surrendered for exchange is
-13-
registered, it shall be a condition of such exchange that the
Certificates so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the
person requesting such exchange shall pay to Company or its transfer
agent any transfer or other taxes required or establish to the
satisfaction of Company or its transfer agent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive
upon such surrender the Merger Consideration applicable thereto as
contemplated by Section 3.1. From and after the Effective Time of the
Merger, the holders of Certificates evidencing ownership of the shares
outstanding immediately prior to the Effective Time of the Merger
shall cease to have any rights with respect to such shares, except as
otherwise provided for herein or by applicable law. No interest will
be paid or will accrue on any cash payable as Merger Consideration or
in lieu of any fractional shares of Company Common Stock. The right of
any shareholder to receive the Merger Consideration shall be subject
to reduction to reflect any applicable withholding obligation for
taxes.
(iii) In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and,
if required by ▇▇▇▇▇, the posting by such person of a bond in such
amount as Buyer may direct as indemnity against any claim that may be
made against it with respect to such Certificate, or the provision of
other reasonable assurances requested by Buyer, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(c) No Further Ownership Rights in Company Common Stock Exchanged For
-----------------------------------------------------------------
Cash. The Merger Consideration paid upon the surrender for exchange of
----
Certificates in accordance with the terms of this Article III shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to such shares.
(d) Termination of Exchange Fund. Any portion of the Merger Consideration
----------------------------
deposited with the Exchange Agent pursuant to this Section 3.3 (the
"Exchange Fund") which remains undistributed to the holders of the
Certificates for 12 months after the Effective Time of the Merger shall be
delivered to Buyer, upon demand, and any holders of shares of Company
Common Stock prior to the Merger who have not theretofore complied with
this Article III shall thereafter look only to ▇▇▇▇▇ (who
-14-
shall thereafter act as Exchange Agent) and only as general creditors
thereof for payment of their claims for cash, if any, to which such holders
may be entitled.
(e) No Liability. None of Buyer, MergerCo, Company or the Exchange Agent
------------
shall be liable to any person in respect of any Merger Consideration from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
---------------------------
included in the Exchange Fund, as directed by ▇▇▇▇▇, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Buyer. Nothing in this paragraph (f) shall in any way limit the obligation
of Buyer and MergerCo to pay the full amount of the Merger Consideration in
accordance with the remaining provisions of this Agreement, and the risk of
any investments referred to in this paragraph (f) shall be borne solely by
Buyer and MergerCo.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Buyer and MergerCo as follows:
4.1 Organization, Standing and Corporate Power. Each of Company and each
------------------------------------------
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as it is now
being conducted. Each of Company and each of its Subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect. Company has provided to
Buyer complete and correct copies of the Restated Articles of Incorporation, as
amended, and Bylaws, as amended, of Company. Company has delivered to MergerCo
complete and correct copies of the Articles or Certificates of Incorporation and
Bylaws of each of its Subsidiaries, in each case as amended to the date of this
Agreement.
4.2 Subsidiaries. The only direct or indirect Subsidiaries of Company are
------------
those listed in Section 4.2 of the schedule delivered to MergerCo by Company at
the time of the execution of this Agreement (the "Disclosure Schedule"). All
the outstanding shares of capital stock of each such Subsidiary have been
validly issued and are fully paid and
-15-
nonassessable and, except as set forth in Section 4.2 of the Disclosure
Schedule, are owned (of record and beneficially) by Company, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens"). Except for the ownership
interests set forth in Section 4.2 of the Disclosure Schedule, Company does not
own, directly or indirectly, any capital stock or other ownership interest in
any corporation, partnership, business association, joint venture or other
entity.
4.3 Capital Structure. The authorized capital stock of Company consists
-----------------
of 20,000,000 shares of Company Common Stock, par value $1.00 per share, and
5,000,000 shares of preferred stock of Company, par value $.01 per share (the
"Company Preferred Stock"). Subject to any Permitted Changes (as defined in
Section 6.1(d)) there were, as of the close of business on May 6, 1998: (i)
8,027,126 shares of Company Common Stock issued and outstanding; (ii) no shares
of Company Preferred Stock issued and outstanding; (iii) no shares of Company
Common Stock or Company Preferred Stock held in the treasury of Company; (iv)
336,000 shares of Company Common Stock reserved for issuance upon exercise of
outstanding Company Stock Options; and (v) 480,000 shares of Company Common
Stock issuable upon exercise of outstanding Warrants. Section 4.3 of the
Disclosure Schedule sets forth the exercise price for the outstanding Company
Stock Options and the Warrants. Except as set forth above or in Section 4.3 of
the Disclosure Schedule, no shares of capital stock or other equity securities
of Company are issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of Company are, and all shares which may be issued
pursuant to the Stock Option Plan including any increases pursuant to existing
contractual obligations will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except as set
forth on Section 4.3 of the Disclosure Schedule, there are no outstanding bonds,
debentures, notes or other indebtedness or other securities of Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of Company may vote.
Except as set forth above, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Company or any of its Subsidiaries is a party or by which
any of them is bound obligating Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities of Company or of any of its
Subsidiaries or obligating Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Other than as disclosed in
the most recent balance sheet of Company included in the SEC Documents or as set
forth in Section 4.3 of the Disclosure Schedule, no indebtedness for borrowed
money of Company or its Subsidiaries contains any restriction upon the
incurrence of indebtedness for borrowed money by Company or any of its
Subsidiaries or restricts the ability of Company or any of its Subsidiaries to
grant any Liens on its properties or assets. Other than Company Stock Options
and Warrants, and other
-16-
than as disclosed in Section 4.3 of the Disclosure Schedule; (x) there are no
outstanding contractual obligations, commitments, understandings or arrangements
of Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
or make any payment in respect of any shares of capital stock of Company or any
of its Subsidiaries and (y) to the knowledge of Company, there are no
irrevocable proxies with respect to shares of capital stock of Company or any of
its Subsidiaries. Section 4.3 of the Disclosure Schedule sets forth the record
and, to the knowledge of Company, beneficial ownership of, and voting power in
respect of, the capital stock of Company held by Company's directors, officers
and shareholders owning five percent (5%) or more of Company's outstanding
common stock. Except as set forth on Section 4.3 of the Disclosure Schedule or
filed as an exhibit to any of the SEC Documents, there are no agreements or
arrangements pursuant to which Company is or could be required to register
shares of Company Common Stock or other securities under the Securities Act of
1933, as amended (the "Securities Act") or other agreements or arrangements with
or among any security holders of Company with respect to securities of Company.
4.4 Authority; Noncontravention. Company has the requisite corporate
---------------------------
power and authority to enter into this Agreement and, subject to Company
Shareholder Approval, to consummate the transactions contemplated hereby. The
Offer, the execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby and thereby have
been duly authorized by Company's Board of Directors, which constitutes all
necessary corporate action on the part of Company, subject, in the case of the
Merger, to Company Shareholder Approval. This Agreement has been duly executed
and delivered by Company and constitutes a valid and binding obligation of
Company, enforceable against Company in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles
(the "Enforceability Exception"). Except as disclosed in Section 4.4 of the
Disclosure Schedule, the execution and delivery by Company of this Agreement
does not, and the consummation by Company of the transactions contemplated by
the Offer and this Agreement and compliance by Company with the provisions
hereof will not, conflict with, or result in (a) any breach or violation of, or
default (with or without notice or lapse of time, or both) under, or right of
termination, cancellation, acceleration or "put", with respect to any obligation
or (b) the loss of a benefit or other right or (c) the creation of any Lien upon
any of the properties or assets of Company or any of its Subsidiaries under, (i)
the Restated Articles of Incorporation, as amended, or Bylaws, as amended, of
Company or the comparable organizational documents of any of its Subsidiaries,
(ii) any loan or credit agreement, note, note purchase agreement, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Company or any of its Subsidiaries or their
respective properties or
-17-
assets or (iii) subject to the governmental filings and other matters set forth
in Section 4.4 of the Disclosure Schedule or referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule, regulation
or arbitration award applicable to Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not have a Material Adverse
Effect or would not prevent or materially delay the ability of Company and/or
MergerCo to consummate the transactions contemplated by this Agreement if not
cured or waived by the Closing Date. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Federal, state or local government or any domestic court, administrative agency
or commission or other governmental authority or agency (a "Governmental
Entity"), or any other person under any material agreement, indenture or other
instrument to which Company or any Subsidiary is a party or to which any of its
properties is subject, is required by or with respect to Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Company or the consummation by Company of the transactions contemplated hereby,
except for (i) the filing of a pre-merger notification and report form by
Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing with the SEC of (x) a proxy statement
or other information statement under Section 14(c) of the Exchange Act relating
to Company Shareholder Approval (such proxy statement as amended or supplemented
from time to time, the "Proxy Statement"), and (y) such reports under the
Exchange Act as may be required in connection with the Offer and this Agreement
and the transactions contemplated by this Agreement, (iii) the filing of the
Articles of Merger with the Secretary of the State of Texas and appropriate
documents with the relevant authorities of other states in which Company is
qualified to do business and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices as are set forth
in Section 4.4 of the Disclosure Schedule and which the failure to obtain or
make would not, individually or in the aggregate, have a Material Adverse
Effect.
4.5 SEC Documents; Undisclosed Liabilities. Except as disclosed in
--------------------------------------
Section 4.5 of the Disclosure Schedule, Company has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
September 2, 1997 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, as amended,
the "SEC Documents"). As of their respective dates, and taking into account any
amendments or supplements thereto, the SEC Documents complied in all material
respects with the requirements of 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 none of the SEC Documents as of such
dates, and taking into account any amendments or supplements thereto, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in
-18-
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
Company included in all SEC Documents (the "SEC 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 consolidated quarterly 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
consolidated financial position of Company and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations,
shareholders' equity, and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments,
none of which, individually or in the aggregate, is material). Except as set
forth in Section 4.5 of the Disclosure Schedule or in any other Section of the
Disclosure Schedule and except as set forth in the SEC Documents filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the SEC Documents filed and publicly available prior
to the date of this Agreement (the "Balance Sheet"), neither Company nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of Company
and its consolidated Subsidiaries or in the notes thereto.
4.6 Information Supplied. The Proxy Statement will not, at the date it is
--------------------
first mailed to Company's shareholders or at the time of the Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, except that no representation or warranty is made by Company
with respect to the information supplied or to be supplied by MergerCo or any
affiliate of MergerCo in writing specifically for inclusion in the Proxy
Statement. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder. Neither the Schedule 14D-9 nor any information supplied
by Company for inclusion in the Offer Documents will, at the respective times
the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to shareholders of
Company, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (except to the extent information supplied by MergerCo or any
affiliate of MergerCo in writing specifically for inclusion therein). The
Schedule 14D-9 shall comply in all material
-19-
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
4.7 Absence of Certain Changes or Events. Except as disclosed in the SEC
------------------------------------
Documents or in Section 4.7 of the Disclosure Schedule, since the date of the
Balance Sheet, Company has conducted its business only in the ordinary course
consistent with past practice, and there is not and has not been: (i) any fact
or circumstance which has had a Material Adverse Effect on or with respect to
Company; (ii) any events set forth in Sections 6.1(a), (i), (j), (k), (m)
(without regard to the exceptions set forth therein), (n), (q) and (r); or (iii)
any condition, event or occurrence which would reasonably be expected to prevent
or materially delay the ability of Company to consummate the transactions
contemplated by this Agreement. Except as set forth in Section 4.7 of the
Disclosure Schedule, the Company has not incurred any single capital expenditure
in excess of $10,000 from December 31, 1997 to the date hereof.
4.8 Litigation; Labor Matters; Compliance with Laws.
-----------------------------------------------
(a) Except as disclosed in the SEC Documents or as disclosed in Section 4.8
of the Disclosure Schedule, filed and publicly available prior to the date
of this Agreement, there is no suit, action or proceeding or investigation
pending against Company, or, to the knowledge of Company, no suit, action
or proceeding or investigation threatened against or affecting Company or
any of its Subsidiaries that (i) individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or (ii) prevent or
materially delay the ability of Company to consummate the transactions
contemplated by this Agreement nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Company or any of its Subsidiaries having, or which in
the future could have, any such effect.
(b) Except as disclosed in Section 4.8 of the Disclosure Schedule, (i)
neither Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) neither
Company nor any of its Subsidiaries is the subject of any proceeding
asserting that it or any Subsidiary has committed an unfair labor practice
or seeking to compel it to bargain with any labor organization as to wages
or conditions of employment; (iii) there is no strike, work stoppage or
other labor dispute involving it or any of its Subsidiaries pending or, to
its knowledge, threatened, nor has there been in the three year period
prior to the date of this Agreement and, to the knowledge of Company, there
are no current union organizing activities among the Employees of Company
or any of its Subsidiaries which are
-20-
reasonably likely to result in a Material Adverse Effect; (iv) there is no
grievance arising out of any collective bargaining agreement or other
grievance procedure against Company or any of its Subsidiaries, except such
grievances that have not and will not prevent Company from carrying on its
business substantially as now conducted and that cannot reasonably be
expected to result in a Material Adverse Effect; (v) no charges with
respect to or relating to Company or any of its Subsidiaries are pending
before the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices, except
such charges that have not and will not prevent Company from carrying on
its business substantially as now conducted and that cannot reasonably be
expected to result in a Material Adverse Effect; (vi) neither of Company or
any of its Subsidiaries has received notice during the previous 18 months,
of the intent of any Federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an investigation
which is reasonably likely to result in a Material Adverse Effect; and
(vii) Company is not liable for any severance pay or other payments to any
employee or former employee, or any other person, arising from the
termination of employment, or other change in the legal relationship with
such person, under any benefit or severance policy, practice, agreement,
plan, or program of Company, nor will Company have any liability which
exists or arises, or may be deemed to exist or arise, under any applicable
law or otherwise, as a result of or in connection with the transactions
contemplated hereunder or as a result of the termination by Company of any
persons employed by Company or any of its Subsidiaries on or prior to the
Effective Time of the Merger.
(c) The ownership of the assets of and the conduct of the business of
Company and each of its Subsidiaries have not been in violation of, and
comply with all statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees or arbitration awards applicable thereto, except for
violations or failures so to comply, if any, that, individually or in the
aggregate, cannot reasonably be expected to have a Material Adverse Effect.
(d) Each of Company and its Subsidiaries has in effect all material
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchise, licenses, notices, permits and rights
("Permits"), necessary for it to own, lease or operate its properties and
assets and to carry on its business substantially as now conducted, and
there are no actions pending to revoke any such Permit and there has
occurred no default or violation under any such Permit which is reasonably
likely to have a Material Adverse Effect.
-21-
(e) Notwithstanding the foregoing, the representations and warranties of
Company with respect to the matters covered by Section 4.11 are limited to
the representations set forth therein, and no representation or warranty
with respect to such matters is made by Company in this Section 4.8.
4.9 Employee Benefit Plans. With respect to the employee benefit plans
----------------------
(as that phrase is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and any other benefit or
compensation plan, program, or arrangement (including, but not limited to, each
deferred compensation and each bonus or other incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, and each employment, termination
or severance agreement) maintained for the benefit of any current or former
employee, officer, or director of Company, any of its Subsidiaries or any ERISA
Affiliate ("Benefit Plans"), except as set forth in Section 4.9 of the
Disclosure Schedule:
(a) none of the Benefit Plans is a "multiemployer plan" within the meaning
of ERISA nor has Company or any such Subsidiary ever maintained or
contributed to such a Plan;
(b) no Benefit Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees or former employees
of Company or any such Subsidiary for periods extending beyond their
retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any pension plan, or
(iii) benefits the full cost of which is borne by the current or former
employee (or his or her beneficiary).
(c) none of the Benefit Plans or any other agreement with any employee of
Company or any such Subsidiary provides for payment of a benefit, the
increase of a benefit amount, the payment of a contingent benefit, or the
acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement;
(d) each Benefit Plan intended to be qualified under section 401 (a) of the
Internal Revenue Code of 1986, as amended ("Code"), has received a
favorable determination letter from the Internal Revenue Service that it is
so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to result in the revocation of such
determination letter;
(e) each Benefit Plan has been operated in all material respects in
accordance with its terms and the requirements of all applicable law;
-22-
(f) no liability under Title IV or section 302 of ERISA has been incurred
by Company, any such Subsidiary or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to
Company, any such Subsidiary or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation ("PBGC") (which premiums have been paid when due).
Insofar as the representation made in this section 4.9(f) applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with respect
to any employee benefit plan within the meaning of Section 3(3) of ERISA
subject to Title IV of ERISA to which Company, any such Subsidiary or any
ERISA Affiliate made, or was required to make, contributions during the
five (5)-year period ending on the last day of the most recent plan year
ended prior to the Effective Time of the Merger;
(g) Company has provided to Buyer or MergerCo (i) true and complete copies
of all Benefit Plans, (ii) the most recent annual actuarial valuation, if
any, prepared for each Benefit Plan, and (iii) the most recent annual
report (Form 5500), if any, required under ERISA with respect to each
Benefit Plan;
(h) no payment that is owed or may become due to any director, officer,
employee, or agent of Company or any such Subsidiary will be non-deductible
to Company or such Subsidiary or subject to tax under I.R.C. Section 280G
or Section 4999, respectively, nor will Company or such Subsidiary be
required to "gross up" or otherwise compensate any such person because of
the imposition of any excise tax on a payment to such person;
(i) as of the date hereof, subject to the requirements of Section 412 of
the Code or Section 302 of ERISA, no Benefit Plan has incurred an
accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code) nor has any sponsor of such a Benefit Plan
obtained a funding waiver (as such terms are defined in such applicable
sections and any regulations thereunder) with respect thereto;
(j) neither Company, any such Subsidiary nor any ERISA Affiliate has
engaged in, and neither Company, any such Subsidiary nor any ERISA
Affiliate knows of any other person who or which has engaged in, any
"prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975 of the Code, excluding any transactions which are exempt under
Section 408 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan, which could reasonably be expected to subject Company, any
such Subsidiary, Buyer or MergerCo to any material liability;
-23-
(k) no reportable event (as defined in ERISA and the regulations
thereunder, but excluding any such event for which all disclosure
requirements have been waived) has occurred or is continuing with respect
to any Benefit Plan;
(l) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of Company, any actions, suits or
claims (other than routine claims for benefits) which can reasonably be
expected to be asserted, against Company or any such Subsidiary with
respect to any Benefit Plan or other plan or arrangement, or against any
such Benefit Plan or other plan or the assets thereof;
(m) Company, each such Subsidiary and each ERISA Affiliate is, and at all
relevant times, has been in material compliance with the provisions of
COBRA (as defined below); and
(n) except as specifically set forth herein, Company has not taken any
action or made any statement, promise or representation to, or agreement
with, any of its employees, officers or directors that after the Closing,
Buyer will continue or establish any Benefit Plan or other plan or
arrangement or provide any particular benefits or compensation to
employees. To the knowledge of Company, the PBGC has not instituted
proceedings to terminate any Benefit Plan subject to Section 302 or Title
IV of ERISA or Section 412 of the Code (each, a "Title IV Plan") and no
condition exists that presents a material risk that such proceedings will
be instituted.
For purposes of this Agreement, "ERISA Affiliate" shall mean any
corporation, trade or business which controls, is controlled by, or is under
common control with, Company or any of its Subsidiaries within the meaning of
Sections 414(b), 414(c) or 414(m) of the Code or Section 4001(a)(14) of ERISA
and "COBRA" shall mean Part 6 of Subtitle B of Title I of ERISA and Section
4980B(f) of the Code.
Section 4.9 of the Disclosure Schedule sets forth a complete and accurate
list of all Benefit Plans currently in effect.
4.10 Taxes. Except as disclosed in Section 4.10 of the Disclosure
-----
Schedule, Company and each of its Subsidiaries, and any affiliated,
consolidated, combined, unitary or aggregate group for tax purposes of which
Company or any of its Subsidiaries is or has been a member (a "Consolidated
Group") has (a) timely filed (or has had timely filed on its behalf) all Tax
Returns required to be filed by it and all such Tax Returns are true, correct
and complete in all material respects, (b) paid (or has had paid on its behalf)
all Taxes shown thereon to be due and (c) provided adequate reserves in its
financial statements, in accordance with generally accepted accounting
principles, for any Taxes that have not been
-24-
paid, whether or not shown as being due on any Tax Returns. Except as disclosed
in Section 4.10 of the Disclosure Schedule (i) no claim for unpaid Taxes has
become a Lien (other than any Liens arising by operation of law for Taxes not
yet due) against the assets of Company or any of its Subsidiaries or is being
asserted against Company or any of its Subsidiaries, (ii) no audit of any Tax
Return that includes Company or any of its Subsidiaries is being conducted by
any Governmental Entity, (iii) no extension or waiver of the statute of
limitations on the assessment of any Taxes or with respect to any Tax Return has
been granted by Company or any of its Subsidiaries and is currently in effect
and (iv) there is no arrangement with respect to sharing or allocating Taxes
that will require any payment by Company or any of its Subsidiaries after the
date of this Agreement. As used in this Agreement, "Taxes" shall mean (x) all
taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, back-up withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any Governmental Entity, domestic or foreign, and
(y) any liability for the payment of any amount of the type described in (x) as
a result of being a member of a Consolidated Group. As used in this Agreement,
"Tax Return" shall mean any return, report or statement required to be filed
with any Governmental Entity with respect to Taxes. Except as set forth in
Section 4.10 of the Disclosure Schedule, there are no written or proposed
assessments of Taxes against Company or any of its Subsidiaries or written or
proposed adjustments to any Tax Return filed, pending against Company or any of
its Subsidiaries, or written or proposed adjustments to the manner in which any
Tax of Company or any of its Subsidiaries is determined.
4.11 Environmental Matters. Except as disclosed in Section 4.11 of the
---------------------
Disclosure Schedule:
(a) Company and its Subsidiaries hold and have continuously held, and are,
and have always been, in material compliance with, all Environmental
Permits, and Company and its Subsidiaries are, and have always been, in
compliance with all applicable Environmental Laws, except for any failure
to comply that would not have a Material Adverse Effect;
(b) None of Company or any of its Subsidiaries has received any
Environmental Claim, and to the knowledge of Company, there is no
threatened Environmental Claim or any circumstances, conditions or events
that could reasonably be expected to give rise to an Environmental Claim,
against Company or any of its Subsidiaries and, to the knowledge of
Company, as of the date of this Agreement, there are no circumstances or
conditions that could reasonably be expected to prevent or interfere
-25-
with compliance by Company or its Subsidiaries with Environmental Permits
or Environmental Laws in effect as of the date of this Agreement, except
such circumstances or conditions that have not and are not reasonably
likely to result in a Material Adverse Effect;
(c) No modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or approval of,
any third party of the Environmental Permits is required in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby or the continuation of the business of
Company or its Subsidiaries as currently conducted; and
(d) Company and its Subsidiaries have not assumed, contractually or by
operation of law, any liabilities or obligations under any Environmental
Laws except, in the case of those assumed by operation of law, those
assumed which in and of themselves (and irrespective of any contribution or
indemnification rights) could not reasonably be expected to have a Material
Adverse Effect.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Claim" means any written notice, claim, demand, action,
complaint, proceeding, request for information or other communication by
any Person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damage, personal injury, fines or penalties) arising out of,
relating to, based on or resulting from (i) the presence, discharge,
emission, release or threatened release of any Hazardous Materials at any
location, whether or not owned, leased or operated by Company or any of its
Subsidiaries or (ii) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or Environmental Permit or (iii)
otherwise relating to obligations or liabilities under any Environmental
Laws.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for Company or any of its
Subsidiaries and the operations of such Person's facilities or otherwise to
conduct its business under Environmental Laws.
"Environmental Laws" means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders and
decrees relating in any
-26-
manner to contamination, pollution or protection of human health or the
environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste Disposal Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and Community-
Right-to-Know Act, the Safe Drinking Water Act, all as amended, and similar
state, local and foreign laws.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials or substances,
regulated pursuant to, or that could form the basis of liability under, any
Environmental Law.
4.12 Material Contracts. Company has provided or otherwise made available
------------------
to Buyer or filed with the SEC true and complete copies of all written
contracts, agreements (including, but not limited to, distribution agreements
and licensing agreements), commitments, arrangements, employment agreements
providing for annual payments in excess of $50,000 and which cannot be canceled
at will, for leases (including with respect to personal property), insurance
policies and other instruments to which it or any of its Subsidiaries is a party
or by which it or any such Subsidiary is bound which would be required to be
filed as an exhibit to the SEC Documents ("Material Contracts"). Except as set
forth in Section 4.12 of the Disclosure Schedule, neither Company nor any of its
Subsidiaries is, or has received any notice or has any knowledge that any other
party is, in breach or default in any material respect under any such Material
Contract; and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute a breach or default under any such
Material Contract, other than any breach or default that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Section 4.12 of the Disclosure Schedule, all Material
Contracts are valid and subsisting and in full force and effect in accordance
with their terms, subject to the Enforceability Exceptions, and Company or its
respective Subsidiary has duly performed its obligations thereunder in all
material respects, except for any of the foregoing that could not reasonably be
expected to have a Material Adverse Effect.
4.13 Brokers. Except as set forth in Section 4.13 of the Disclosure
-------
Schedule, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Company.
-27-
4.14 Opinion of Financial Advisor. Company has received the opinion of
----------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation dated May 7, 1998 to the
effect that the consideration to be received in the Offer and the Merger by
Company's shareholders is fair to holders of Company Common Stock from a
financial point of view, a signed copy of which opinion has been delivered to
Buyer.
4.15 Required Company Vote. Company Shareholder Approval, being the
---------------------
affirmative vote of 66 2/3 % of the outstanding shares of Company Common Stock,
is the only vote of the holders of any class or series of Company's securities
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby.
4.16 State Takeover Statutes. Company has taken all actions necessary to
-----------------------
satisfy or render inapplicable the restrictions on business combinations
contained in Part 13 (Articles 13.01 et. seq.) of the TBCA with respect to the
transactions contemplated hereby, including each of the Offer and the Merger.
No other state takeover statute or similar statute or regulation of the State of
Texas (and, to the knowledge of Company, of any other domestic state or
jurisdiction) applies or purports to apply to Company or any of its
Subsidiaries, or to this Agreement, the Offer, the Merger, or any of the other
transactions contemplated hereby. Neither Company nor any of its Subsidiaries
has any rights plan, outstanding preferred stock or similar arrangement which
have any of the aforementioned consequences in respect of the transactions
contemplated hereby.
4.17 Intellectual Property. Section 4.17 of the Disclosure Schedule sets
---------------------
forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to Company and its Subsidiaries
(collectively, "Intellectual Property Rights"). The Intellectual Property Rights
are sufficient to allow each of Company and each of its Subsidiaries to conduct,
and continue to conduct, its business as currently conducted in all material
respects. To the knowledge of Company, each of Company and each of its
Subsidiaries owns or has sufficient unrestricted right to use the Intellectual
Property Rights in order to allow it to conduct its business as currently
conducted in all material respects, and the consummation of the transactions
contemplated hereby will not alter or impair such ability in any respect. Each
copyright registration, patent and registered trademark and application therefor
listed in Section 4.17 of the Disclosure Schedule (a) is in proper form, (b) has
not been disclaimed in whole and (c) has been duly maintained including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions, except for any
noncompliance with the foregoing which is not reasonably likely to result in a
Material Adverse Effect. To the knowledge of Company, there are no pending
oppositions, cancellations, invalidity proceedings, interferences or re-
examination proceedings with respect to the Intellectual Property Rights which
are reasonably likely to result in a Material
-28-
Adverse Effect. To the knowledge of Company, neither Company nor any of its
Subsidiaries has received any written notice from any other Person pertaining
to or challenging the right of Company or any of its Subsidiaries to use any of
the Intellectual Property Rights which is reasonably likely to result in a
Material Adverse Effect. Except as identified in Section 4.17 of the Disclosure
Schedule, no claims are pending by any Person with respect to the ownership,
validity, enforceability or use of any such Intellectual Property Rights
challenging or questioning the validity or effectiveness of any of the
foregoing which are reasonably likely to result in a Material Adverse Effect.
Except as set forth in Section 4.17 of the Disclosure Schedule, neither Company
nor any of its Subsidiaries has made any claim of a violation or infringement
by others of its rights to or in connection with the Intellectual Property
Rights during the preceding twenty-four (24) months.
4.18 Title to Properties. Each of Company and each of its Subsidiaries
-------------------
has good and valid title to, or an adequate leasehold interest in, its tangible
properties and assets (including real property) in order to allow it to conduct,
and continue to conduct, its business as currently conducted in all material
respects. Except as set forth in Section 4.18 of the Disclosure Schedule, such
tangible properties and assets (including real property) are free of Liens and,
to the knowledge of Company, the consummation of the transactions contemplated
by this Agreement will not alter or impair Company's or any of its Subsidiaries'
ability to conduct its business as currently conducted in any material respect.
4.19 Products Liability. Except as set forth in Section 4.19 of the
------------------
Disclosure Schedule, there is no pending or, to the knowledge of Company,
threatened claim, action, suit, inquiry, proceeding or investigation by any
individual or Governmental Entity in which a Product is alleged to have a Defect
and which is reasonably likely to result in a Material Adverse Effect. As used
in this Section 4.19, the term "Product" shall mean any product designed,
manufactured, shipped, sold, marketed, distributed and/or otherwise introduced
into the stream of commerce by or on behalf of Company or any of its
Subsidiaries, including, without limitation, any product sold in the United
States by Company or any of its Subsidiaries as the distributor, agent, or
pursuant to any other contractual relationship with a manufacturer; and the term
"Defect" shall mean a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a
Product, or the failure to warn of the existence of any defect, impurity, or
dangerous propensity.
-29-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
▇▇▇▇▇ and MergerCo hereby jointly and severally represent and warrant to Company
as follows:
5.1 Organization, Standing and Corporate Power. Buyer and MergerCo are
------------------------------------------
corporations duly organized, validly existing and in good standing under the
United Mexican States and in the State of Texas, respectively, and each has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Buyer and MergerCo has delivered to Company complete and
correct copies of its certificate of incorporation and bylaws (or other
organizational documents). Each of Buyer and MergerCo is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualifications or licensing necessary.
5.2 Authority; Noncontravention. Each of Buyer and MergerCo has all
---------------------------
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The Offer, the
execution and delivery of this Agreement by each of Buyer and MergerCo and the
consummation by each of Buyer and MergerCo of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of each of Buyer and MergerCo. This Agreement has been duly executed
and delivered by and constitutes a valid and binding obligation of each of Buyer
and MergerCo., enforceable against each of Buyer and MergerCo in accordance with
its terms, subject to the Enforceability Exception. Except as disclosed in
Section 5.2 of the Disclosure Schedule, the execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in (a) any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration or "put" with respect to any
obligation or (b) the loss of a benefit, or other right or the creation of any
Lien upon any of the properties or assets of either Buyer or MergerCo under (i)
the certificate of incorporation, bylaws or other organizational documents of
either Buyer or MergerCo, (ii) any loan or credit agreement, note, note purchase
agreement, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to either Buyer or MergerCo
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to either Buyer or MergerCo or its properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that would not prevent or
-30-
materially delay the ability of Buyer and/or MergerCo to consummate the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to,
any Governmental Entity (which, for purposes of Article V and for other
purposes when referring to Buyer or MergerCo shall include foreign
jurisdictions) or any other Person under any agreement, indenture or other
instrument to which Buyer or MergerCo is a party or to which any of its
properties is subject, is required by or with respect to either Buyer or
MergerCo in connection with the execution and delivery of this Agreement by
either Buyer or MergerCo or the consummation by ▇▇▇▇▇ and MergerCo of any of
the transactions contemplated by this Agreement, except for (x) the filing of a
pre-merger notification and report form under the HSR Act, and (y) the filing
with the SEC of (A) the Offer Documents and (B) such reports under the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby.
5.3 Brokers. Except for ▇. ▇. ▇▇▇▇▇▇ Securities Inc., no broker,
-------
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or an behalf of Buyer or MergerCo.
5.4 Offer Documents and Schedule 14D-9. None of the Offer Documents nor
----------------------------------
any of the information supplied by Buyer or any of its Subsidiaries in writing
specifically for inclusion in the Schedule 14D-9 shall, at the respective time
the Offer Documents or the Schedule 14D-9 or any amendments or supplements
thereto are filed with the SEC or are first published, sent or given to
shareholders of Company, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading (except to the extent
information contained therein is based upon information supplied in writing
solely by Company). The Offer Documents shall comply in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
5.5 Information Supplied. None of the information supplied or to be
--------------------
supplied by Buyer or MergerCo or its affiliates in writing specifically for
inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is first mailed to Company's shareholders or at the time of
the Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
-31-
5.6 Financing. Buyer and MergerCo have received binding, irrevocable
---------
commitments from their parent company, Desc, S.A. de C.V., to timely provide
sufficient funds in U.S. currency to (a) acquire all of the shares tendered
pursuant to the Offer, (b) pay the Merger Consideration pursuant to the Merger
and (c) pay related fees and Expenses.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 Conduct of Business of Company. During the period from the date of
------------------------------
this Agreement to the Effective Time of the Merger (except as otherwise
specifically required by the terms of this Agreement), Company shall, and shall
cause its Subsidiaries to, act and carry on their respective businesses in the
ordinary course of business consistent with past practice and use all its and
their respective reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, advertisers, distributors and others having business dealings with
them and to preserve goodwill. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time of the
Merger, Company shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a Subsidiary of Company to Company in accordance with
applicable law;
(b) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
(c) purchase, redeem or otherwise acquire any shares of capital stock of
Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
except for the cash-out (or in the case of the warrants issued under the
▇▇▇▇▇▇▇ Warrant Agreement, the redemption in accordance with the current
terms thereof) of Company Stock Options and Warrants (as provided in
Section 3.2) outstanding on the date of this Agreement;
(d) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any of its
Subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options
-32-
to acquire, any such shares, voting securities or convertible securities
or any other securities or equity equivalents (including without
limitation stock appreciation rights) other than the issuance of Company
Common Stock upon the exercise of Company Stock Options and Warrants
outstanding on the date of this Agreement and in accordance with their
present terms (such issuances, together with the acquisitions of shares of
Company Common Stock permitted under clause (c) above, being referred to
herein as "Permitted Changes");
(e) amend its certificate or articles of incorporation, bylaws or other
comparable charter or organizational documents;
(f) subject to the provisions of Section 7.6 hereof and except as set forth
in Section 6.1(f) of the Disclosure Schedule, acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization;
(g) other than as specifically described in Section 6.1 of the Disclosure
Schedule, mortgage or otherwise encumber or subject to any Lien (in each
case except as provided by the existing terms of Company's credit
agreements) or otherwise dispose of, sell, lease or license any of its
properties or assets, other than sales of inventory in the ordinary course
of business consistent with past practice;
(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Company or any
of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except for borrowings under
current credit facilities and for lease obligations, in each case incurred
in the ordinary course of business consistent with past practice;
(i) make any loans, advances or capital contributions to, or investments
in, any other Person, other than to Company or any Subsidiary of Company;
(j) pay, discharge or satisfy any claims (including claims of
shareholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction (i) of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as
in effect on the date hereof or (ii) claims settled or
-33-
compromised to the extent permitted by Section 6.1(n), or waive, release,
grant, or transfer any rights of material value or modify or change in any
material respect any existing license, lease, Permit, contract or other
document, other than in the ordinary course of business consistent with
past practice;
(k) adopt resolutions providing for or authorizing a liquidation or a
dissolution;
(l) enter into any new collective bargaining agreement;
(m) change any material accounting principle used by it, except to the
extent required by generally accepted accounting principles;
(n) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise is not greater than $50,000;
(o) make any new capital expenditure or expenditures, other than capital
expenditures not to exceed $200,000, in the aggregate;
(p) except in the ordinary course of business or otherwise permitted by
this Agreement, modify, amend or terminate any contract or agreement set
forth in the SEC Documents filed and publicly available prior to the date
of this Agreement to which Company or any Subsidiary is a party or waive,
release or assign any material rights or claims;
(q) except as set forth in Section 6.1(q) of the Disclosure Schedule, (i)
enter into any employment or other agreement with any officer, director or
key employee of Company or any of its Subsidiaries or (ii) hire or agree to
hire any new or additional key employees with annual compensation of
$50,000 or more or officers;
(r) make any Tax election or settle or compromise any material Tax
liability;
(s) voluntarily take, or voluntarily agree to commit to take, any action
that would make any representation or warranty of Company contained herein
inaccurate in any material respect at, or as of any time prior to, the
Effective Time of the Merger; or
(t) authorize any of, or commit or agree to take any of, the foregoing
actions.
-34-
6.2 Changes in Employment Arrangements. Except as set forth in Section
----------------------------------
6.2 of the Disclosure Schedule, neither Company nor any of its Subsidiaries
shall adopt or amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any employee, director or former
director or employee, or increase the compensation or fringe benefits of any
director, employee or former director or employee or pay any benefit not
required by any existing plan, arrangement or agreement, other than increases
for employees other than officers and directors in the ordinary course of
business consistent with past practice.
6.3 Severance. Except as set forth in Section 6.2 or 6.3 of the
---------
Disclosure Schedule, neither Company nor any of its Subsidiaries shall grant any
new or modified severance or termination arrangement or increase or accelerate
any benefits payable under its severance or termination pay policies in effect
on the date of this Agreement.
6.4 Advisory Agreement. Promptly following the execution of this
------------------
Agreement, in consideration for the payment of the amount set forth on Section
4.13 of the Disclosure Schedule to Shansby Partners, L.L.C., the Company shall
take all action necessary to cancel, as of the acceptance of, and payment for,
shares pursuant to the Offer, the Advisory Agreement with ▇▇▇▇▇▇▇ Partners,
L.L.C. dated August 15, 1997 (the "Advisory Agreement") on terms which provide
for the payment of no additional fees after such termination; provided, however,
that the indemnification obligations set forth therein on the date hereof shall
survive such cancellation.
6.5 WARN. Neither Company nor any of its Subsidiaries shall effectuate a
----
"plant closing" or "mass layoff", as those terms are defined in the Worker
Adjustment and Retraining Notification Act of 1988 or similar state law ("WARN")
affecting in whole or in part any site of employment, facility, operating unit
or employee of Company or any Subsidiary, without the prior written consent of
Buyer and without complying with the notice requirements and other provisions of
WARN.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Preparation of Proxy Statement: Shareholder Meeting.
---------------------------------------------------
(a) As promptly as practicable following the acceptance for payment of and
payment for shares (as evidenced by delivery of cash sufficient to pay the
Offer Price with respect to each share of Company Common Stock tendered to
the Exchange
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Agent with irrevocable instructions to pay to tendering shareholders) of
the Company Common Stock by Offeror pursuant to the Offer, and if required
by applicable law, Company shall prepare and file with the SEC a
preliminary proxy or information statement in accordance with the Exchange
Act relating to the Merger and this Agreement and use all reasonable
efforts to obtain and furnish the information required to be included by
the Exchange Act and the SEC in such preliminary proxy or information
statement and, after consultation with Buyer and MergerCo, to respond
promptly to any comments made by the SEC with respect to such preliminary
proxy or information statement and cause a definitive proxy or information
statement, including any amendment or supplement thereto, to be mailed to
Company's shareholders, provided that no amendment or supplement to such
preliminary proxy or information statement will be made by Company without
consultation with Buyer, MergerCo and their counsel. If, at any time
prior to the Shareholders Meeting, any event with respect to Company, its
Subsidiaries, directors, officers, and/or the Merger or the other
transactions contemplated hereby shall occur, which is required to be
described in the Proxy Statement, Company shall so describe such event
and, to the extent required by applicable law, shall cause it to be
disseminated to Company's shareholders.
(b) Company will promptly notify MergerCo and Buyer of (i) the receipt of
any comments from the SEC regarding the Proxy Statement and (ii) the
approval of the Proxy Statement by the SEC. MergerCo and Buyer shall be
given a reasonable opportunity to review and comment on all filings with
the SEC and all mailings to Company's shareholders in connection with the
Merger prior to the filing or mailing thereof, and Company shall use all
reasonable efforts to reflect all such comments.
(c) If adoption of this Agreement is required by applicable law, Company
will, as promptly as practicable following the acceptance for payment of
and payment for shares (as evidenced by delivery of cash sufficient to pay
the Offer Price with respect to each share of Company Common Stock tendered
to the Exchange Agent with irrevocable instructions to pay to tendering
shareholders) of the Company Common Stock by Offeror pursuant to the Offer
and in consultation with MergerCo and Buyer, duly call, give notice of,
convene and hold a meeting of the Company's shareholders (the "Shareholders
Meeting") for the purpose of approving this Agreement and the transactions
contemplated by this Agreement. Company will, through its Board of
Directors, recommend to its shareholders approval of the foregoing matters
and seek to obtain all votes and approvals thereof by the shareholders, as
set forth in Section 4.15; provided, however, that the obligations
contained herein shall be subject to the provisions of Section 7.6 of this
Agreement and, provided further that such recommendation and other action
may be withdrawn, modified or amended if
-36-
Company determines in good faith, based on advice of its outside counsel,
that such action is necessary in order for the Board of Directors of the
Company to comply with its fiduciary duties under applicable law. Subject
to the foregoing, such recommendation, together with a copy of the opinion
referred to in Section 4.14 shall be included in the Proxy Statement.
Company will use all reasonable efforts to hold such Shareholders Meeting
as soon as practicable after the date hereof. At the Shareholders
Meeting, Offeror shall cause all shares of Company Common Stock then owned
by Buyer, MergerCo or any affiliate thereof to be voted in favor of the
adoption of this Agreement and in favor of any other resolution necessary
to approve the transactions contemplated by this Agreement.
Notwithstanding the foregoing, if Offeror shall acquire at least 90% of
the outstanding Company Common Stock pursuant to the Offer, MergerCo may
cause the Merger to occur without a Shareholders Meeting and in accordance
with Article 5.16 of the TBCA; provided, however, that in such event, the
rights of shareholders of Company under this Agreement (including, without
limitation, the right to receive the Merger Consideration) shall not be
adversely affected thereby (other than the right to receive the Proxy
Statement, attend the Shareholders Meeting and vote on the Merger, which
shall no longer be applicable).
(d) Company will cause its transfer agent to make stock transfer records
relating to Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
7.2 Access to Information, Confidentiality. Company shall, and shall
--------------------------------------
cause its Subsidiaries, officers, employees, counsel, financial advisors and
other representatives to, afford to Buyer, MergerCo and their representatives
reasonable access during normal business hours, in a manner initially
coordinated with the chief executive officer of Company, and thereafter
coordinated with those persons designated in writing by the chief executive
officer, during the period prior to the earlier of the Effective Time of the
Merger and the Termination Date, to its properties, books, contracts,
commitments, personnel and records (including, without limitation, to the extent
available, the work papers of Company's and its Subsidiaries independent public
accountants) and, during such period, Company shall, and shall cause its
Subsidiaries, officers, employees, counsel, financial advisors and other
representatives to, furnish promptly to ▇▇▇▇▇ and MergerCo (i) a copy of each
report, schedule, registration statement and other document filed by such Person
during such period pursuant to the requirements of Federal or state securities
laws and (ii) all other information concerning its business, properties,
financial condition, operations and personnel as Buyer and MergerCo may from
time to time reasonably request. Notwithstanding the foregoing, nothing herein
shall require Company or any of its Subsidiaries to disclose any information
that would cause a violation of any contractual confidentiality obligation
existing on the date
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hereof. Except as required by law, each of Company, ▇▇▇▇▇
and MergerCo will hold, and will cause its respective directors, officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information in confidence to the extent
required by and in accordance with the confidentiality agreement dated February
26, 1998, as supplemented (the "Confidentiality Agreement").
7.3 Additional Undertakings.
-----------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger and the
other transactions contemplated by this Agreement. Buyer, MergerCo and
Company will use all reasonable efforts and cooperate with one another in
promptly (i) determining whether any filings are required to be made or
consents, approvals, waivers, licenses, Permits or authorizations are
required to be obtained (or, which if not obtained, would result in a
breach or violation, or an event of default, termination or acceleration of
any agreement or any put right under any agreement) under any applicable
law or regulation or from any Governmental Entity or third parties,
including parties to loan agreements or other debt instruments, in
connection with the transactions contemplated by this Agreement, including
the Offer and the Merger and (ii) making any such filings, in furnishing
information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations.
(b) Company shall make, subject to the condition that the transactions
contemplated herein actually occur, any undertakings (including
undertakings to make divestitures, provided, in any case, that such
divestitures need not themselves be effective or made until after the
transactions contemplated hereby actually occur) required in order to
comply with the antitrust requirements or laws of any Governmental Entity,
including the HSR Act, in connection with the transactions contemplated by
this Agreement. Notwithstanding the foregoing, or any other covenant
herein contained, in connection with the receipt of any necessary approvals
under the HSR Act, neither Company nor any of its Subsidiaries shall be
entitled to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, Company or any of its Subsidiaries or any material portions thereof
or any of the businesses, product lines, properties or assets of Company or
any of its Subsidiaries, without Buyer's prior written consent.
-38-
7.4 Indemnification. For six years after the Effective Time of the
---------------
Merger, the Surviving Corporation shall indemnify all present and former
directors or officers of Company and its Subsidiaries and Shansby Partners,
L.L.C. (but only to the extent of the indemnity provisions contained in the
Advisory Agreement) ("Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, penalties or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time of the Merger,
whether asserted or claimed prior to, at or after the Effective Time of the
Merger, to the fullest extent as would have been permitted in their respective
articles of organization or by-laws consistent with applicable law, to the
extent such Costs have not been paid for by insurance and shall, in connection
with defending against any action for which indemnification is available
hereunder, reimburse such Indemnified Parties from time to time upon receipt of
sufficient supporting documentation, for any reasonable costs and expenses
reasonably incurred by such Indemnified Parties; provided that any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth in the articles of organization or bylaws
of the Company or its Subsidiaries, as applicable, consistent with applicable
law shall be made by independent counsel mutually acceptable to Surviving
Corporation and the Indemnified Party; and provided, further, that such
reimbursement shall be conditioned upon such Indemnified Parties' agreement
promptly to return such amounts to Company if a court of competent jurisdiction
shall ultimately determine that indemnification of such Indemnified Parties is
prohibited by applicable law. Buyer shall not take any action to prevent (or
any action that is intended to significantly hinder) Surviving Corporation from
being capable (financially or otherwise) of performing its obligations under
this Section 7.4; provided, however, that nothing in this sentence shall be
deemed to require Buyer to contribute any funds to, or guarantee any obligations
of, Surviving Corporation. Surviving Corporation will maintain for a period of
not less than six years from the Effective Time of the Merger, Company's current
D&O Insurance and indemnification policy (or a policy providing substantially
similar coverage) (the "D&O Insurance") for all persons who are directors and
officers of Company on the date of this Agreement; provided that Surviving
Corporation shall not be required to spend as an annual premium for such D&O
Insurance an amount in excess of 200% of the annual premium paid for D&O
Insurance in effect prior to the date of this Agreement; and provided further
that Surviving Corporation shall nevertheless be obligated to provide such
coverage as may be obtained for such amount. The provisions of this Section are
intended for the benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives.
7.5 Public Announcements. Neither MergerCo nor Buyer, on the one hand,
--------------------
nor Company, on the other hand, will issue any press release or public statement
with respect to
-39-
the transactions contemplated by this Agreement, including the Offer and the
Merger, without the other party's prior consent, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with, or rule of, NASDAQ, and in any event, to the extent
practicable, Buyer, MergerCo and Company will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
such press release or other public statements with respect to such
transactions. The parties agree that the initial press release or releases to
be issued with respect to the transactions contemplated by this Agreement shall
be mutually agreed upon prior to the issuance thereof.
7.6 No Solicitation.
---------------
(a) From and after the date hereof until the termination of this Agreement,
neither Company, any of its Subsidiaries, nor any of their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or
accountant retained by Company or any of its Subsidiaries) (collectively,
"Responsible Parties") will directly or indirectly initiate, solicit or
knowingly encourage (including by way of furnishing non-public information
or assistance), or take any other action to facilitate knowingly, any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to any Transaction Proposal, or enter into or maintain
or continue discussions or negotiate with any Person in furtherance of such
inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal or authorize or permit any Responsible Party to take
any such action; provided, however, that nothing contained in this
Agreement shall prohibit the Board of Directors of Company (which for
purposes of this Section 7.6 shall include any Special Committee thereof)
from, prior to the acceptance for payment of, and payment for, Company
Common Stock pursuant to the Offer but subject to compliance with Sections
7.6(b): (i) furnishing information to or entering into discussions or
negotiations with, any Person that makes an unsolicited, bona fide
Transaction Proposal only to the extent that: (A) the Board of Directors of
Company, after consultation with their financial advisors and after receipt
of advice from independent outside legal counsel (who may be Company's
regularly engaged independent outside legal counsel) determines in good
faith that such action is necessary for the Board of Directors of Company
to comply with its fiduciary duties to shareholders under applicable law,
and (B) prior to taking such action Company provides prompt notice to Buyer
to the effect that it is furnishing such information to or entering into
discussions or negotiations with such Person and receives from such Person
an executed confidentiality agreement containing terms and provisions, when
taken in the aggregate, comparable to those in the Confidentiality
Agreement
-40-
in the reasonable judgment of the Board of Directors of Company;
(ii) failing to make or withdrawing or modifying its recommendation
referred to in Section 4.15 if there exists a Transaction Proposal and the
Board of Directors of Company, after consultation with its financial
advisors and after receipt of advice from independent outside legal counsel
(who may be Company's regularly engaged outside independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of Company to comply with its fiduciary duties to shareholders
under applicable law in connection with such Transaction Proposal; or (iii)
making to Company's shareholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with
respect to any tender offer, or taking any other legally required action
with respect to such tender offer (including, without limitation, the
making of public disclosures as may be necessary or reasonably advisable
under applicable securities laws) if the Board of Directors of Company,
after consultation with their financial advisors and receipt of advice from
independent outside legal counsel (who may be Company's regularly engaged
independent counsel), determines in good faith that such action is
necessary for the Board of Directors of Company to comply with its
fiduciary duties to shareholders under applicable law. Consistent with the
foregoing provisions of this Section 7.6, Company shall immediately cease
and terminate any currently existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Person
conducted heretofore by Company or any Responsible Parties with respect to
the foregoing. Company agrees not to release any third party from, or
waive any provisions of, any standstill agreement to which it is a party or
any confidentiality agreement between it and another Person who has made,
or who may reasonably be considered likely to make, a Transaction Proposal.
In the event of an exercise of Company's or its Board of Directors' rights
under clauses (i), (ii) or (iii) above and subject to compliance with this
Section 7.6, notwithstanding anything contained in this Agreement to the
contrary, such exercise of rights shall not constitute a breach of this
Agreement by Company. For purposes of this Agreement "Transaction Proposal"
shall mean any of the following (other than the transactions between
Company, Buyer and MergerCo contemplated by the Offer and this Agreement)
involving Company or any of its Subsidiaries: (w) any merger,
consolidation, share exchange, recapitalization, business combination, or
other similar transaction; (x) except in the ordinary course of business,
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 20% or more of the assets of Company and its Subsidiaries, taken as a
whole, in a single transaction or series of related transactions; (y) any
tender offer or exchange offer for, or the acquisition of (or right to
acquire) "beneficial ownership" by any person, "group" or entity (as such
terms are defined under Section 13 (d) of the Exchange Act), of 20% or more
of the outstanding shares of capital stock of Company or the filing of a
registration
-41-
statement under the Securities Act in connection therewith; or (z) any
public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing or
recapitalization, liquidation, dissolution or similar transaction
involving Company or any of its Subsidiaries.
(b) Prior to the Board of Directors withdrawing or modifying its approval
or recommendation of the Offer, this Agreement or the Merger, approving or
recommending a Transaction Proposal, or entering into an agreement with
respect to a Transaction Proposal, the Board of Directors shall provide
Buyer with a written notice (a "Notice of Takeover Proposal") advising
Buyer that the Board of Directors has received a Transaction Proposal,
specifying the material terms and conditions of such Transaction Proposal
and identifying the person making such Transaction Proposal, and neither
Company nor any Subsidiary shall enter into an agreement with respect to a
Transaction Proposal until 48 hours after the delivery of the first Notice
of Takeover Proposal with respect to a given third party was given to
Buyer. In addition, if Company or any Subsidiary proposes to enter into an
agreement with respect to any Transaction Proposal, Company shall, if
required in accordance with the terms hereof, concurrently with entering
into such agreement pay, or cause to be paid, to Buyer the expenses, fees
and the Termination Fee (as provided in and defined in Section 10.2).
(c) Notwithstanding anything in this Section 7.6 or any other provision to
the contrary in this Agreement, prior to the termination of this Agreement
in accordance with its terms, the Company shall not take any action which
would render invalid or ineffective, or otherwise vacate or withdraw, the
approval of the transactions contemplated hereby by the Board for purposes
of Part 13 (Articles 13.01 et. seq.) of the TBCA and shall not take any
action that would cause the Company to breach its representation and
warranty, as of the taking of such action, set forth in the first sentence
of Section 4.16 of this Agreement.
7.7 Resignation of Directors. Prior to the Effective Time of the Merger,
------------------------
Company shall use all reasonable efforts to deliver to Buyer and MergerCo
evidence satisfactory to Buyer and MergerCo of the resignation of all directors
of Company, effective at the Effective Time of the Merger.
7.8 Employee Benefits. Buyer agrees that, for a period of 12 months
-----------------
following the Effective Time of the Merger, the Surviving Corporation shall
maintain employee benefits plans and arrangements (directly or in conjunction
with Buyer or MergerCo) which, in the aggregate, will provide a level of
benefits to continuing employees of Company and its Subsidiaries substantially
comparable in the aggregate to those provided to similarly
-42-
situated employees of Buyer in the United States as in effect immediately prior
to the Effective Time of the Merger (other than discretionary benefits);
provided, however, that Buyer may cause modifications to be made to such
benefit plans and arrangements to the extent necessary to comply with
applicable law or to reflect widespread adjustments in benefits (or costs
thereof) provided to employees under compensation and benefit plans of Buyer
and its Subsidiaries, and no specific compensation and benefit plans need be
provided. For purposes of determining eligibility and vesting with respect to
any of Surviving Corporation's benefit plans, Buyer shall use the employee's
hire date with Company or such other date as has been previously determined by
Company for credit for prior employment with any predecessor or ERISA Affiliate
of Company. Surviving Corporation's benefit plans which provide medical,
dental, or life insurance benefits after the Effective Time of the Merger to
any individual who is an active or former employee of Company or any of its
Subsidiaries as of the Effective Time of the Merger or a dependent of such an
employee shall, with respect to such individuals, waive any waiting periods,
any pre-existing conditions, and any actively-at-work exclusions to the extent
so waived under present policy and shall provide that any expenses incurred on
or before the Effective Time of the Merger by such individuals shall be taken
into account under such plans for purposes of satisfying applicable deductible,
coinsurance, and maximum out-of- pocket provisions to the extent taken into
account under present policy. Nothing in this Section 7.8 shall prohibit
Company or the Surviving Corporation from terminating the employment of any
employee at any time with or without cause (subject to, and in accordance with,
the terms of any existing employment agreements), or shall be construed or
applied to restrict the ability of Buyer or Surviving Corporation and its
Subsidiaries to establish such types and levels of compensation and benefits as
they determine to be appropriate. Buyer agrees to cause the Surviving
Corporation (or the applicable Subsidiary employer) to honor the existing
employment agreements that are set forth in Section 7.8 of the Disclosure
Schedule.
7.9 Notification of Certain Matters. Company shall give prompt notice to
-------------------------------
Buyer and MergerCo, and Buyer and MergerCo shall give prompt notice to Company
of: (i) the occurrence or non-occurrence of any event, the occurrence or non-
occurrence of which does or would be likely to cause (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect, or (B) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied; and (ii) any material failure of Company
on the one hand, or Buyer or MergerCo on the other hand, 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 7.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
-43-
7.10 State Takeover Laws. If any "fair price" or "control share
-------------------
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated by this Agreement, including the
Offer or the Merger, Company and Buyer, and their respective Boards of Directors
shall use all reasonable efforts to grant such approvals and to take such other
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise use all reasonable efforts to eliminate the effects of any such
statute or regulation on the transactions contemplated hereby.
ARTICLE VII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation. The respective obligation of
-------------------------------------
each party to effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Company Shareholder Approval. Company Shareholder Approval shall have
----------------------------
been obtained if required by applicable law, provided that Buyer and
MergerCo shall vote all of their shares of Company Common Stock in favor of
the Merger and the transactions contemplated by this Agreement.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
-------
the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any
Governmental Entity or other legal restraint or prohibition shall be in
effect preventing or prohibiting the acceptance for payment of, or payment
for, shares of Company Common Stock pursuant to the Offer, or the
consummation of the Merger; provided, however, that the parties hereto
shall, subject to the last sentence of Section 7.3(a) hereof, use all
reasonable efforts to have any such injunction, order, restraint or
prohibition vacated.
(d) Statutes; Consents. No statute, rule, order, decree or regulation
------------------
shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction which prohibits the consummation of the Merger.
8.2 Condition to ▇▇▇▇▇'s and MergerCo's Obligation. The obligation of
----------------------------------------------
Buyer and MergerCo to effect the Merger is subject to Buyer or MergerCo having
been obligated
-44-
to purchase shares of Company Common Stock in the Offer in accordance with the
provisions hereof.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and abandoned at any
-----------
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the shareholders of
Company:
(a) by mutual written consent of Buyer and Company; or
(b) by either Buyer or Company, if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting, or if there shall be in
effect any other legal restraint or prohibition preventing or prohibiting,
the acceptance for payment of, or payment for, shares of Company Common
Stock pursuant to the Offer or the consummation of the Merger, and such
order, decree, ruling or other action shall have become final and
nonappealable (other than due to the failure of the party seeking to
terminate this Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Effective Time of the Merger);
or
(c) by Company, if Offeror shall not have (i) commenced the Offer within
five (5) Business Days after the initial public announcement of Offeror's
intention to commence the Offer, or (ii) accepted for payment any shares of
Company Common Stock pursuant to the Offer (other than due to the failure
of Company to perform its obligations under this Agreement) on or prior to
July 31, 1998 or, if any necessary approvals required under the HSR Act
shall not have been obtained by such date ten business days after receipt
of all necessary approvals under the HSR Act; or
(d) by Company, substantially concurrently with the execution, prior to
Offeror's purchase of shares of Company Common Stock pursuant to the Offer,
of a binding agreement with a third party with respect to a Transaction
Proposal, provided that it has complied with all provisions of this
Agreement, including the notice provisions herein, and that it pays the
Termination Fee as provided by and defined in Section 10.2 hereof; or
(e) by ▇▇▇▇▇, prior to Offeror's purchase of any shares of Company Common
Stock pursuant to the Offer, in the event of a material breach or failure
to perform
-45-
any material respect by Company of any covenant or other agreement
contained in this Agreement or in the event of a breach of any
representation or warranty of Company that could reasonably be expected to
have a material Adverse Effect, in each case which cannot be or has not
been cured within 15 days after the giving of written notice to Company;
or
(f) by Company, prior to Offeror's purchase of any shares of Company Common
Stock pursuant to the Offer, in the event of a material breach or failure
to perform in any material respect by MergerCo or Buyer of any covenant or
other agreement contained in this Agreement or in the event of a breach of
any representation or warranty of Company that could reasonably be expected
to have a Material Adverse Effect, in each case which cannot be or has not
been cured within 15 days after the giving of written notice to MergerCo or
Buyer; or
(g) by Buyer, if the Board of Directors of Company or any subcommittee of
the Board of Directors of Company established to take action under this
Agreement, shall (i) withdraw or modify in any adverse manner its approval
or recommendation of this Agreement, the Offer or the Merger, (ii) approve
or recommend any Transaction Proposal, or (iii) resolve to take any of the
actions specified in clause (i) above; or
(h) by Buyer or Company, in each case after two Business Day's notice to
the other party if the Offer expires pursuant to terms consistent with
Section 1.1.1.
9.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either Company or Buyer as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Buyer, MergerCo or Company, other than the provisions of the last
sentence of Section 7.2, this Section 9.2 and Article X. Nothing contained in
this Section shall relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in this Agreement.
9.3 Amendment. This Agreement may be amended by the parties at any time
---------
before or after any required approval of matters presented in connection with
the Merger by the shareholders of Company; provided, however, that after any
such approval, there shall be made no amendment that by law requires further
approval by such shareholders without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4 Extension; Waiver. Subject to the terms of this Agreement to the
-----------------
extent that they expressly restrict the following, at any time prior to the
Effective Time of the Merger,
-46-
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 9.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
9.5 Procedure for Termination, Amendment, Extension or Waiver. A
---------------------------------------------------------
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section
9.4 shall, in order to be effective, require in the case of MergerCo or Company,
action by its Board of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties.
---------------------------------------------
(a) None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time of the Merger and all such representations
and warranties will be extinguished on consummation of the Merger and none
of Company, Buyer and MergerCo, nor any officer, director or employee or
shareholder thereof shall be under any liability whatsoever with respect to
any such representation or warranty after such time. This Section 10.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger.
(b) Each of the parties is a sophisticated legal entity that was advised by
knowledgeable counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Accordingly, each of the
parties hereby acknowledges that (i) no party has relied or will rely upon
any document or written or oral information previously furnished to or
discovered by it or its representatives, other than this Agreement or in
the Disclosure Schedule or any certificates delivered at the Effective Time
of the Merger pursuant to this Agreement and (ii) there are no
representations or warranties by or on behalf of any party hereto or any of
its respective affiliates or representatives other than those expressly set
forth in this
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Agreement or in the Disclosure Schedule or in any certificates delivered
at the Effective Time of the Merger pursuant to this Agreement.
(c) The representations and warranties made in this Agreement by Company
will be deemed for all purposes to be qualified by the disclosures made in
any section of the Disclosure Schedule, whether or not in the case of any
particular representation or warranty such representation or warranty
refers to the Section in which the disclosure is made or to any other
Section. All references in this Agreement to the "knowledge of Company"
(or any similar phrase) will be deemed to be references solely to the
actual knowledge of the executive officers of Company. The inclusion of
any matter on any disclosure schedule will not be deemed an admission by
any party that such listed matter is material or that such listed matter
has or would have a Material Adverse Effect.
10.2 Fees and Expenses.
-----------------
(a) If any person (other than MergerCo or any of its affiliates) shall have
made, proposed, communicated or disclosed a Transaction Proposal in a
manner which is or otherwise becomes public and this Agreement is
terminated pursuant to any of the following provisions:
(i) by Company pursuant to Section 9.1(d) or
(ii) by Buyer under Section 9.1(g);
then Company shall, simultaneously with such termination of this Agreement,
pay MergerCo a fee of $3,700,000 in cash, which amount shall be payable in
same day funds (the "Termination Fee").
(b) Company agrees that the agreements contained in Section 10.2(a) above
are an integral part of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty. If Company fails to
promptly pay to Buyer any Termination Fee due under such Section 10.2(a),
Company shall pay the costs and expenses (including reasonable legal fees
and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment thereof, together
with interest on the amount of any unpaid Termination Fee at the annual
rate of four percent above the publicly announced prime rate of Citibank,
N.A. (or, if lower, the maximum rate permitted by law) from the date such
Termination Fee was required to be paid to the date of payment.
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(c) Except as provided otherwise in paragraphs (a) and (b) above and in
Section 9.2, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, except that Company shall pay all costs and
expenses (i) in connection with printing and mailing the Proxy Statement
and (ii) of obtaining any consents of any third party.
10.3 Notices. All notices, requests, claims, demands and other
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communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to MergerCo or Buyer, to
Desc, S.A. de C.V.
Paseo de los Tamarindos 400-B
Bosques de las Lomas
05120 Mexico, D.F.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(b) if to Company, to
Authentic Specialty Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇ ▇▇▇▇▇, Esq.
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10.4 Interpretation. When a reference is made in this Agreement to a
--------------
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
10.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
----------------------------------------------
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than Sections 7.4 and 7.8, is not intended to confer upon any
Person other than the parties hereto any rights or remedies.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, EXCEPT TO THE EXTENT THE
LAWS OF THE STATE OF TEXAS GOVERN THE MERGER, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. THE PARTIES
HERETO AGREE THAT ANY APPROPRIATE STATE OR FEDERAL COURT LOCATED IN THE STATE OF
DELAWARE SHALL HAVE JURISDICTION OVER ANY CASE OR CONTROVERSY ARISING HEREUNDER
OR IN CONNECTION HEREWITH AND SHALL BE THE PROPER AND EXCLUSIVE FORUM IN WHICH
TO ADJUDICATE SUCH CASE OR CONTROVERSY. EACH PARTY HERETO AGREES TO BE SUBJECT
TO SUCH JURISDICTION AND VENUE. EACH PARTY (AS WELL AS DESC, S.A. DE C.V.)
AGREES THAT IT WILL, WITHIN FIVE BUSINESS DAYS AFTER THE DATE HEREOF, ENTER INTO
ARRANGEMENTS (WHICH SHALL BE REASONABLY ACCEPTABLE TO THE OTHER PARTY) TO
APPOINT AN AGENT FOR SERVICE OF PROCESS IN EACH SUCH JURISDICTION, AND EACH
IRREVOCABLY SUBMITS TO EACH SUCH JURISDICTION.
10.8 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties.
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provided, however, that Buyer may assign its rights to purchase shares, but not
its obligations, to any wholly owned subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
10.9 Enforcement. The parties agree that irreparable damage would occur
-----------
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
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IN WITNESS WHEREOF, Buyer, MergerCo and Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
AGROBIOS, S.A. de C.V.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
General Counsel and Secretary
AUTHENTIC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
▇▇▇▇, S.A. de C.V., the parent company of Buyer, hereby unconditionally
guarantees the obligations of Buyer and MergerCo under this Agreement and hereby
confirms its binding, irrevocable obligation to provide the financing necessary
for the transactions contemplated by this Agreement and described in Section
5.6.
DESC, S.A. de C.V.
By: /s ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
General Counsel
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ANNEX I
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CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule 14e-
1(c) relating to MergerCo's obligation to pay for or return tendered shares
after termination of the Offer, Buyer and MergerCo shall not be required to
accept for payment or pay for any shares of Company Common Stock tendered
pursuant to the Offer and may delay acceptance for payment or may terminate the
Offer if:
(a) less than 66 2/3% of the Fully Diluted Shares of Company Common Stock
has been tendered pursuant to the Offer by the expiration of the Offer and
not withdrawn (the "Minimum Condition");
(b) any applicable waiting period under the HSR Act has not expired or
terminated; or
(c) at any time after the date of this Agreement, and before acceptance for
payment of any shares of Company Common Stock, any of the following events
shall occur and be continuing:
(i) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, promulgated or deemed applicable to the
Offer or the Merger pursuant to authoritative interpretation by or on
behalf of a Governmental Entity that (A) prohibits the acquisition by
Buyer or MergerCo of any shares of Company Common Stock under the
Offer, or restrains or prohibits the making or consummation of the
Offer or the Merger, (B) prohibits or materially limits the ownership
or operation by Company, Buyer or any of their respective Subsidiaries
of a material portion of the business or assets of such Person or
compels Company or Buyer or any of the respective Subsidiaries to
dispose of or hold separate any material portion of the business or
assets of such Person, in each case as a result of the Offer or the
Merger or (C) imposes material limitations on the ability of Buyer or
MergerCo to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock to be accepted for payment pursuant
to the Offer including, without limitation, the right to vote such
shares of Company Common Stock on all matters properly presented to
the shareholders of Company or (D) prohibits Buyer or any of its
Subsidiaries from effectively controlling in any material respect any
material portion of the business or operations of Company;
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(ii) any of the representations and warranties of Company contained in
the Agreement shall not be true and correct in all material respects
at and as of the date of consummation of the Offer (except to the
extent such representations and warranties speak to an earlier date),
as if made at and as of the date of consummation of the Offer, in each
case except as contemplated or permitted by this Agreement and with
respect to any representations or warranties not qualified by
"Material Adverse Effect," unless the inaccuracies under such
representations and warranties, taking all the inaccuracies under all
such representations and warranties together in their entirety, do not
individually or in the aggregate, result in a Material Adverse Effect
on Company.
(iii) Company shall have failed to perform in all material respects
the obligations required to be performed by it under the Agreement at
or prior to the date of expiration of the Offer, including but not
limited to its obligations pursuant to Section 7.6 hereof, except for
such failures to perform as have not had or would not individually or
in the aggregate, have a Material Adverse Effect or materially
adversely affect the ability of Company to consummate the Merger or
the Offeror to accept for payment or pay for shares of Company Common
Stock pursuant to the Offer;
(iv) the Board of Directors of Company shall have (A) withdrawn,
modified or amended in any respect adverse to Buyer or MergerCo its
approval or recommendation of the Agreement, the Offer or the Merger,
(B) recommended or approved any Transaction Proposal from a person
other than Buyer, MergerCo or any of their respective affiliates, or
(C) resolved to do any of the foregoing;
(v) the Agreement shall have been terminated in accordance with its
terms; or
(vi) Company shall have entered into a definitive agreement or
agreement in principle with any Person with respect to a Transaction
Proposal or similar business combination with Company or any
Subsidiary of Company, which in the reasonable judgment of Buyer or
MergerCo in any such case, and regardless of the circumstances giving
rise to such condition, makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment.
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The foregoing conditions (other than the Minimum Condition) are for
the sole benefit of Buyer and MergerCo and, subject to the Merger Agreement, may
be waived by Buyer or MergerCo, in whole or in part at any time and from time to
time in the sole discretion of Buyer or MergerCo.; provided that, without the
express written consent of Company, neither Buyer nor MergerCo may waive the
Minimum Condition.
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APPENDIX A
----------
DEFINITIONS
"Advisory Agreement" shall have the meaning given to it in Section 6.4
"Affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person.
"Agreement" shall have the meaning assigned to such term in the Preamble hereto
"Articles of Merger" shall have the meaning assigned to such term in Section 2.3
"Articles" shall have the meaning assigned to such term in Section 3.3(a)
"Balance Sheet" shall have the meaning assigned to such term in Section 4.5
"Benefit Plans" shall have the meaning assigned to such term in Section 4.9
"Business Day" means any day, other than Saturday, Sunday or a federal
holiday, and shall consist of the time period from 12:01 a.m. through 12:00
midnight Central time. In computing any time period under Section 14(d)(5) or
Section 14(d)(6) of the Exchange Act or under Regulation 14D or Regulation 14E,
the date of the event which begins the running of such time period shall be
included except that if such event occurs on other than a Business Day such
period shall begin to run on and shall include the first Business Day
thereafter.
"Buyer" shall have the meaning assigned to such term in the Preamble
"Certificate(s)" shall have the meaning assigned to such term in Section 3.3(a)
"Closing" shall have the meaning assigned to such term in Section 2.2
"Closing Date" shall have the meaning assigned to such term in Section 2.2
"COBRA" shall have the meaning assigned to such term in Section 4.9
"Code" shall have the meaning assigned to such term in Section 4.9(d)
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"Company" shall have the meaning assigned to such term in the Preamble
"Company Common Stock" shall have the meaning assigned to such term in the
Recitals to the Agreement
"Company Preferred Stock" shall have the meaning assigned to such term in
Section 4.3
"Company Shareholder Approval" shall have the meaning assigned to such term in
the Recitals
"Company Stock Options" shall have the meaning assigned to such term in Section
3.2(a)(i)
"Confidentiality Agreement" shall have the meaning assigned to such term in
Section 7.2
"Consolidated Group" shall have the meaning assigned to such term in Section
4.10
"Costs" shall have the meaning assigned to such term in Section 7.4
"Defect" shall have the meaning assigned to such term in Section 4.19
"Disclosure Schedule" shall have the meaning assigned to such term in Section
4.2
"D&O Insurance" shall have the meaning assigned to such term in Section 7.4
"Effective Time of Merger" shall have the meaning assigned to such term in
Section 2.3
"Environmental Claim" shall have the meaning assigned to such term in Section
4.11
"Enforceability Exception" shall have the meaning assigned to such term in
Section 4.4
"Environmental Laws" shall have the meaning assigned to such term in Section
4.11
"Environmental Permits" shall have the meaning assigned to such term in Section
4.11
"ERISA" shall have the meaning assigned to such term in Section 4.9
"ERISA Affiliate" shall have the meaning assigned to such term in Section 4.9
"Exchange Act" shall have the meaning assigned to such term in Section 1.1.1
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"Exchange Agent" shall have the meaning assigned to such term in Section 3.3(a)
"Exchange Fund" shall have the meaning assigned to such term in Section 3.3(d)
"Excluded Shares" shall have the meaning assigned to such term in Section 3.1(c)
"Fully Diluted Shares" shall have the meaning assigned to such term in Section
1.1.1
"Governmental Entity" shall have the meaning assigned to such term in Section
4.4
"Hazardous Materials" shall have the meaning assigned to such term in Section
4.11
"HSR Act" shall have the meaning assigned to such term in Section 4.4
"Indemnified Parties" shall have the meaning assigned to such term in Section
7.4
"Independent Directors" shall have the meaning assigned to such term in Section
1.2.4
"Intellectual Property Rights" shall have the meaning assigned to such term in
Section 4.17
"knowledge" shall have the meaning assigned to such term in Section 10.1(c)
"Liens" shall have the meaning assigned to such term in Section 4.2
"Material Adverse Effect" means, when used in connection with Company, any
effect that either individually or in the aggregate with all other such effects
is materially adverse to the business, financial condition, or results of
operations of Company and its Subsidiaries taken as a whole and the terms
"material" and "materially" shall have correlative meanings; provided, however,
that no Material Adverse Effect shall be deemed to have occurred as a result
solely of (i) general economic conditions affecting generally the industry in
which Company competes, (ii) general market conditions in the United States and
(iii) effects, events, circumstances or conditions attributable to the
transactions contemplated by this Agreement.
"Material Contracts" shall have the meaning assigned to such term in Section
4.12
"Merger" shall have the meaning assigned to such term in the Recitals
"MergerCo" shall have the meaning assigned to such term in the Preamble
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"Merger Consideration" shall have the meaning assigned to such term in Section
3.1(c)
"Minimum Condition" shall have the meaning assigned to such term in Annex I
"Notice of Takeover Proposal" shall have the meaning assigned to such term in
Section 7.6(b)
"Offer" shall have the meaning assigned to such term in the Recitals
"Offer Conditions" shall have the meaning assigned to such term in Section 1.1.1
"Offer Documents" shall have the meaning assigned to such term in Section 1.1.2
"Offer Price" shall have the meaning assigned to such term in Section 1.1.1
"Offer to Purchase" shall have the meaning assigned to such term in Section
1.1.2
"Offeror" shall have the meaning assigned to such term in Section 1.1.1
"PBGC" shall have the meaning assigned to such term in Section 4.9(f)
"Permits" shall have the meaning assigned to such term in Section 4.8(d)
"Permitted Changes" shall have the meaning assigned to such term in Section
6.1(d)
"Person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity
"Product" shall have the meaning assigned to such term in Section 4.19
"Proxy Statement" shall have the meaning assigned to such term in Section 4.4
"Put" shall have the meaning assigned to such term in Section 4.4
"Responsible Parties" shall have the meaning assigned to such term in Section
7.6(a)
"Schedule 14D-1" shall have the meaning assigned to such term in Section 1.1.2
"Schedule 14D-9" shall have the meaning assigned to such term in Section 1.2.2
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"SEC" shall have the meaning assigned to such term in Section 1.1.1
"SEC Documents" shall have the meaning assigned to such term in Section 4.5
"SEC Financial Statements" shall have the meaning assigned to such term in
Section 4.5
"Securities Act" shall have the meaning assigned to such term in Section 4.3
"Shansby Warrant Agreements" shall have the meaning assigned to such term in
Section 3.2(b)
"Shareholders Meeting" shall have the meaning assigned to such term in Section
7.1(c)
"Stock Option Plan" shall have the meaning assigned to such term in Section
3.2(a)(i)
"Subsidiary" of any person means another person an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors (or other
governing body) or, if there are no such voting interests, 50% or more of the
equity interests of which is owned directly or indirectly by such first person
or any entity, in which such first person is a general partner.
"Surviving Corporation" shall have the meaning assigned to such term in Section
2.1
"Taxes" shall have the meaning assigned to such term in Section 4.10
"Tax Return" shall have the meaning assigned to such term in Section 4.10
"TBCA" shall have the meaning assigned to such term in Section 1.1.1
"Termination Fee" shall have the meaning assigned to such term in Section
10.2(a)
"Title IV Plan" shall have the meaning assigned to such term in Section 4.9(n)
"Transaction Proposal" shall have the meaning assigned to such term in Section
7.6(a)
"WARN" shall have the meaning assigned to such term in Section 6.5
"Warrant Agreements" shall have the meaning assigned to such term in Section
3.2(b)
"Warrant" shall have the meaning assigned to such term in Section 3.2(b)
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