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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AUTHENTIC SPECIALTY FOODS, INC.
(Name of Subject Company)
AUTHENTIC ACQUISITION CORPORATION (TEXAS)
AUTHENTIC ACQUISITION CORPORATION (DELAWARE)
AGROBIOS, S.A. DE C.V.
DESC, S.A. DE C.V.
(Bidder)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
05266E 10 7 (Common Stock)
(CUSIP Number of Class of Securities)
ARTURO D'ACOSTA RUIZ
CORPORATE DIRECTOR (TREASURY AND ACCOUNTING)
DESC, S.A. DE C.V.
PASEO DE LOS TAMARINDOS 400-B
28TH FLOOR
BOSQUES DE LAS LOMAS
MEXICO, D.F. 05120
TELEPHONE: (525) 261-8000
FACSIMILE: (525) 261-8096
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidders)
------------
COPIES TO:
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PETER J. TENNYSON, ESQ. FREDERICK S. GREEN, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP WEIL, GOTSHAL & MANGES LLP
695 TOWN CENTER DRIVE, 17TH FLOOR 767 FIFTH AVENUE
COSTA MESA, CA 92626 NEW YORK, NY 10153
(714) 668-6200 (212) 310-8000
</TABLE>
CALCULATION OF FILING FEE
Transaction Valuation*: $142,173,142 Amount of Filing Fee: $28,435
- --------
* Estimated for purposes of calculating the amount of the filing fee only.
This amount assumes the purchase of 8,363,126 shares of common stock, $1.00
par value (the "Shares"), of Authentic Specialty Foods, Inc., at price of
$17.00 per Share in cash. Such number of Shares represents the 8,027,126
Shares outstanding as of May 6, 1998 and assumes the issuance prior to the
consummation of the Offer of 336,000 Shares upon the exercise of outstanding
options and warrants not subject to cancellation agreements. The amount of
the filing fee calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of
the value of the transaction.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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<PAGE>
14D-1
CUSIP NO. 05266E 10 7
- --------------------------------------------------------------------------------
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Authentic Acquisition Corporation
74-2877980
- ---------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- ---------------------------------------------------------------------------
3. SEC USE ONLY
- ---------------------------------------------------------------------------
4. SOURCES OF FUNDS
AF
- ---------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [_]
- ---------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- ---------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- ---------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [_]
- ---------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ---------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
2
<PAGE>
CUSIP NO. 05266E 10 7
- --------------------------------------------------------------------------------
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Authentic Acquisition Corporation
Applied For
- ---------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- ---------------------------------------------------------------------------
3. SEC USE ONLY
- ---------------------------------------------------------------------------
4. SOURCES OF FUNDS
AF
- ---------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [_]
- ---------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- ---------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [_]
- ---------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ---------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
3
<PAGE>
CUSIP NO. 05266E 10 7
- --------------------------------------------------------------------------------
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Agrobios, S.A. de C.V.
- ---------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- ---------------------------------------------------------------------------
3. SEC USE ONLY
- ---------------------------------------------------------------------------
4. SOURCES OF FUNDS
AF
- ---------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [_]
- ---------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United Mexican States
- ---------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- ---------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [_]
- ---------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ---------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
4
<PAGE>
CUSIP NO. 05266E 10 7
- -------------------------------------------------------------------------------
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1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Desc, S.A. de C.V.
- ---------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- ---------------------------------------------------------------------------
3. SEC USE ONLY
- ---------------------------------------------------------------------------
4. SOURCES OF FUNDS
WC
- ---------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [_]
- ---------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United Mexican States
- ---------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- ---------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [_]
- ---------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ---------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Authentic Acquisition Corporation, a Texas corporation
("Purchaser") and a wholly owned indirect subsidiary of Agrobios, S.A. de C.V.
("Parent"), a corporation organized under the laws of the United Mexican
States ("Mexico") and a wholly owned subsidiary of Desc, S.A. de C.V., a
corporation organized under the laws of Mexico ("Desc"), to purchase all of
the outstanding shares of common stock, par value $1.00 per share (the
"Shares"), of Authentic Specialty Foods, Inc., a Texas corporation (the
"Company"), at $17.00 per Share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated May 14,
5
<PAGE>
1998 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit
99.1, and in the related Letter of Transmittal, a copy of which is attached
hereto as Exhibit 99.2 (which together constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Authentic Specialty Foods, Inc. and
the address of its principal executive offices is 1313 Avenue R, Grand
Prairie, Texas 75050.
(b) The information set forth in the "INTRODUCTION" of the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of the Shares;
Dividends on the Shares") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser, Parent, Desc and
Authentic Acquisition Corporation, a Delaware corporation ("AAC Delaware") and
wholly owned subsidiary of Parent and sole shareholder of Purchaser. The
information set forth in the "INTRODUCTION" and Section 9 ("Certain
Information Concerning Desc, Parent and Purchaser") of the Offer to Purchase
is incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each
director and executive officer of Desc, Parent, AAC Delaware and Purchaser and
the name, principal business and address of any corporation or other
organization in which such occupations, positions, offices and employments are
or were carried on are set forth in Schedule I of the Offer to Purchase and
incorporated herein by reference.
(e)-(f) During the last five years none of Desc, Parent, AAC Delaware nor
Purchaser nor, to the best knowledge of Desc, Parent, AAC Delaware and
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase
have been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, none of
Desc, Parent, AAC Delaware nor Purchaser nor, to the best knowledge of Desc,
Parent, AAC Delaware and Purchaser, any of the persons listed in Schedule I of
the Offer to Purchase have entered into any transaction with the Company, or
any of the Company's affiliates which are corporations, since the commencement
of the Company's third full fiscal year preceding the date of this Statement,
the aggregate amount of which was equal to or greater than one percent of the
consolidated revenues of the Company for (i) the fiscal year in which such
transaction occurred or (ii) the portion of the current fiscal year which has
occurred if the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, none of
Desc, Parent, AAC Delaware nor Purchaser nor, to the best knowledge of Desc,
Parent, AAC Delaware and Purchaser, any of the persons listed in Schedule I of
the Offer to Purchase have entered into any transaction since the commencement
of the Company's third full fiscal year preceding the date of this Statement,
with the executive officers, directors or affiliates of the Company which are
not corporations, in which the aggregate amount involved in such transaction
or in a series of similar transactions, including all periodic installments in
the case of any lease or other agreement providing for periodic payments or
installments, exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," Section 9 ("Certain
Information Concerning Desc, Parent and Purchaser"), Section 11 ("Background
of the Offer; Purpose of the Offer and the Merger; The
6
<PAGE>
Merger Agreement and Certain Other Agreements") and Section 12 ("Plans for the
Company; Other Matters") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION," Section 11
("Background of the Offer; Purpose of the Offer and the Merger; The Merger
Agreement and Certain Other Agreements") and Section 12 ("Plans for the
Company; Other Matters") of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 ("Certain Information
Concerning Desc, Parent and Purchaser") and Section 11 ("Background of the
Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain
Other Agreements") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," Section 11 ("Background of
the Offer; Purpose of the Offer and the Merger; The Merger Agreement and
Certain Other Agreements"), Section 12 ("Plans for the Company; Other
Matters") and Section 16 ("Fees and Expenses") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Fees and Expenses") of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Desc, Parent and Purchaser") of the Offer to Purchase is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Purchaser, Parent or Desc, or to the best knowledge of Purchaser,
Parent or Desc, any of the persons listed in Schedule I of the Offer to
Purchase, and the Company, or any of its executive officers, directors,
controlling persons or subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," Section 14
("Conditions to the Offer") and Section 15 ("Certain Legal Matters") of the
Offer to Purchase is incorporated herein by reference.
7
<PAGE>
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations") and Section 15 ("Certain Legal Matters") of the Offer to
Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits 99.1 and 99.2,
respectively, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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99.1 Offer to Purchase dated May 14, 1998.
99.2 Letter of Transmittal.
99.3 Notice of Guaranteed Delivery.
99.4 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.5 Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.6 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.7 Summary Advertisement, as published in The Wall Street Journal on May
14, 1998.
99.8 Text of Press Release of Desc dated May 8, 1998.
99.9 Text of Press Release of Desc dated May 14, 1998.
99.10 Agreement and Plan of Merger, dated as of May 7, 1998, by and among
Parent, Purchaser and the Company.
99.11 Confidentiality Letter Agreement, dated February 26, 1998, by and
between Desc and the Company.
99.12 Supplemental Confidentiality Letter Agreement, dated March 31, 1998, by
and between Desc and the Company.
99.13 Letter Agreement, dated May 7, 1998, by and among Shansby Partners,
L.L.C., TSG2 L.P., TSG2 Management, L.L.C. and the Company.
</TABLE>
8
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: May 14, 1998
AUTHENTIC ACQUISITION CORPORATION,
a Texas Corporation
/s/ Ramon F. Estrada Rivero
By: ________________________________
Ramon F. Estrada Rivero
Secretary
AUTHENTIC ACQUISITION CORPORATION,
a Delaware Corporation
/s/ Ramon F. Estrada Rivero
By: ________________________________
Ramon F. Estrada Rivero
Secretary
AGROBIOS, S.A. DE C.V.
/s/ Ramon F. Estrada Rivero
By: ________________________________
Ramon F. Estrada Rivero
Secretary
DESC, S.A. DE C.V.
/s/ Ernesto Vega Velasco
By: ________________________________
Ernesto Vega Velasco
Secretary
9
<PAGE>
EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
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99.1 Offer to Purchase dated May 14, 1998.
99.2 Letter of Transmittal.
99.3 Notice of Guaranteed Delivery.
99.4 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
99.5 Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.6 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.7 Summary Advertisement, as published in The Wall Street Journal on May
14, 1998.
99.8 Text of Press Release of Desc dated May 8, 1998.
99.9 Text of Press Release of Desc dated May 14, 1998.
99.10 Agreement and Plan of Merger, dated as of May 7, 1998, by and among
Parent, Purchaser and the Company.
99.11 Confidentiality Letter Agreement, dated February 26, 1998, by and
between Desc and the Company.
99.12 Supplemental Confidentiality Letter Agreement, dated March 31, 1998,
by and between Desc and the Company.
99.13 Letter Agreement, dated May 7, 1998, by and among Shansby Partners,
L.L.C., TSG2 L.P., TSG2 Management, L.L.C. and the Company.
</TABLE>
<PAGE>
EXHIBIT 99.1
[LOGO OF DESC] OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
AT
$17.00 NET PER SHARE IN CASH
BY
AUTHENTIC ACQUISITION CORPORATION,
a wholly owned, indirect subsidiary
of
AGROBIOS, S.A. DE C.V.,
a wholly owned subsidiary
of
DESC, S.A. DE C.V.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JUNE 11, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF MAY 7, 1998 (THE "MERGER AGREEMENT"), BY AND AMONG AGROBIOS, S.A. DE
C.V. ("AGROBIOS" OR "PARENT"), A WHOLLY OWNED SUBSIDIARY OF DESC, S.A. DE C.V.
("DESC"), AUTHENTIC ACQUISITION CORPORATION ("PURCHASER") AND AUTHENTIC
SPECIALTY FOODS, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS DEFINED
HEREIN) AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER, TAKEN
TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES (AS DEFINED HEREIN) PURSUANT TO THE OFFER. THE OFFER
IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH,
WHEN ADDED TO THE NUMBER OF SHARES (IF ANY) BENEFICIALLY OWNED BY PARENT AND
PURCHASER, REPRESENTS AT LEAST TWO-THIRDS OF THE SHARES OUTSTANDING (ASSUMING
EXERCISE OF ALL OUTSTANDING OPTIONS AND WARRANTS, OTHER THAN WARRANTS SUBJECT
TO CANCELLATION AGREEMENTS) ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT. THE
OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO
PURCHASE. SEE SECTION 14.
IMPORTANT
Any shareholder who desires to tender all or any portion of such
shareholder's Shares should either (i) complete and sign the Letter of
Transmittal (or facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, have such shareholder's signature thereon guaranteed if
required by Instruction 1 to the Letter of Transmittal, mail or deliver the
Letter of Transmittal (or a facsimile thereof) and any other required
documents to the Depositary and either deliver the certificates for such
Shares to the Depositary or tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3 or (ii) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. Any shareholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee to tender such Shares.
A shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, or who cannot
deliver all required documents to the Depositary prior to the expiration of
the Offer, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be directed to the Information Agent or to the
Dealer Manager at their respective addresses and telephone numbers set forth
on the back cover of this Offer to Purchase. A shareholder also may contact
brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
THE SOLE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN SECURITIES INC.
May 14, 1998
<PAGE>
TABLE OF CONTENTS
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PAGE
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INTRODUCTION.............................................................. 1
THE OFFER................................................................. 2
1. Terms of the Offer.................................................... 2
2. Acceptance for Payment and Payment.................................... 4
3. Procedure for Tendering Shares........................................ 5
4. Withdrawal Rights..................................................... 8
5. Certain Federal Income Tax Consequences............................... 9
6. Price Range of the Shares; Dividends on the Shares.................... 9
7. Effect of the Offer on the Market for the Shares; Stock Listing; Ex-
change Act Registration; Margin Regulations........................... 10
8. Certain Information Concerning the Company............................ 11
9. Certain Information Concerning Desc, Parent and Purchaser............. 13
10. Source and Amount of Funds............................................ 15
11. Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements......................... 15
12. Plans for the Company; Other Matters.................................. 26
13. Dividends and Distributions........................................... 27
14. Conditions to the Offer............................................... 28
15. Certain Legal Matters................................................. 29
16. Fees and Expenses..................................................... 31
17. Miscellaneous......................................................... 32
SCHEDULE I --INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
DESC, PARENT, AAC DELAWARE AND PURCHASER.................................. I-1
ANNEX A--OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
DATED MAY 7, 1998......................................................... A-1
</TABLE>
<PAGE>
To the Holders of Common Stock of AUTHENTIC SPECIALTY FOODS, INC.:
INTRODUCTION
Authentic Acquisition Corporation, a Texas corporation ("Purchaser") and a
wholly owned, indirect subsidiary of Agrobios, S.A. de C.V. ("Parent"), a
corporation organized under the laws of the United Mexican States ("Mexico"),
and a wholly owned subsidiary of Desc, S.A. de C.V., a corporation organized
under the laws of Mexico ("Desc"), hereby offers to purchase all outstanding
shares of common stock, par value $1.00 per share (the "Shares"), of Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), at a price of
$17.00 per Share (the "Offer Price"), net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer.
Purchaser will pay all fees and reasonable out-of-pocket expenses of J.P.
Morgan Securities Inc. ("J.P. Morgan"), which is acting as the Dealer Manager
(the "Dealer Manager"), Citibank, N.A., which is acting as the Depositary (the
"Depositary"), and Morrow & Co., Inc., which is acting as the Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND HAS DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION ("DLJ"), THE COMPANY'S
FINANCIAL ADVISOR, HAS DELIVERED TO THE COMPANY BOARD ITS WRITTEN OPINION,
DATED MAY 7, 1998 (THE "DLJ OPINION"), TO THE EFFECT THAT, AS OF SUCH DATE AND
BASED UPON AND SUBJECT TO CERTAIN MATTERS STATED THEREIN, THE CONSIDERATION TO
BE RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO EACH OF THE OFFER AND THE
MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. A COPY OF THE
DLJ OPINION IS ATTACHED HERETO AS ANNEX A. HOLDERS OF SHARES ARE URGED TO, AND
SHOULD, READ THE DLJ OPINION CAREFULLY IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES (THE "MINIMUM SHARES") WHICH, WHEN ADDED TO THE NUMBER OF SHARES (IF
ANY) BENEFICIALLY OWNED BY PARENT AND PURCHASER, REPRESENTS AT LEAST TWO-
THIRDS OF THE SHARES OUTSTANDING (ASSUMING EXERCISE OF ALL OUTSTANDING OPTIONS
AND WARRANTS, OTHER THAN WARRANTS SUBJECT TO CANCELLATION AGREEMENTS) ON THE
DATE SHARES ARE ACCEPTED FOR PAYMENT (THE "MINIMUM CONDITION"). THE OFFER IS
ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE
SECTION 14.
The Company has informed Purchaser that, as of May 6, 1998, there were (i)
8,027,126 Shares issued and outstanding, (ii) 336,000 Shares issuable pursuant
to the exercise of options and (iii) 480,000 Shares issuable pursuant to the
exercise of warrants. The Merger Agreement provides, among other things, that
the Company will not, without the prior written consent of Parent, issue any
additional Shares (except upon the exercise of outstanding options and
warrants). Based on the foregoing, assuming the issuance of 336,000 Shares
upon the exercise of outstanding options and warrants not subject to
cancellation agreements, Purchaser believes that the Minimum Condition will be
satisfied if 5,575,418 Shares are validly tendered and not withdrawn prior to
the
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expiration of the Offer. Holders of approximately 1,428,066 Shares
(approximately 17.8% of the outstanding Shares) have agreed to tender their
Shares pursuant to the Offer. See "Voting Agreement" under Section 11.
The purpose of the Offer is to enable Parent, through Purchaser, to acquire
control of, and the entire equity interest in, the Company. The Offer is being
made pursuant to an Agreement and Plan of Merger, dated as of May 7, 1998 (the
"Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant
to the Merger Agreement and the Texas Business Corporation Act ("TBCA"), as
soon as practicable after the completion of the Offer and satisfaction or
waiver, if permissible, of all conditions, Purchaser will be merged with and
into the Company (the "Merger"), and the Company will be the surviving
corporation in the Merger (the "Surviving Corporation"). At the effective time
of the Merger (the "Effective Time of the Merger"), each Share then
outstanding (other than Shares held by (i) Parent or any subsidiary of Parent,
including the Purchaser, and (ii) the Company or any subsidiary of the
Company) will be converted into the right to receive $17.00 in cash or any
higher price per Share paid in the Offer (the "Merger Consideration"), without
interest. The Merger Agreement is more fully described in Section 11.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of shareholders of the Company of
the Merger Agreement, if required by applicable law and the Company's Restated
Articles of Incorporation, as amended (the "Articles of Incorporation"). See
Section 14. Under the TBCA and pursuant to the Articles of Incorporation, the
affirmative vote of the holders of two-thirds of the outstanding Shares is the
only vote of any class or series of the Company's capital stock that is
required to approve the Merger Agreement and the Merger.
Under Article 5.16 of the TBCA, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation, the corporation
holding such stock may merge such subsidiary into itself, or itself into such
subsidiary, without any action or vote on the part of the board of directors
or the shareholders of such other corporation (a "short-form merger"). In the
event that Purchaser acquires in the aggregate at least 90% of the outstanding
Shares pursuant to the Offer or otherwise, then, at the election of Parent, a
short-form merger could be effected without any further approval of the
Company Board or the Company's shareholders. Even if Purchaser does not own
90% of the outstanding Shares following consummation of the Offer, Parent or
Purchaser could seek to purchase additional Shares in the open market or
otherwise in order to reach the 90% threshold and employ a short-form merger.
Parent presently intends to effect a short-form merger, if permitted to do so
under the TBCA, pursuant to which Purchaser will be merged with and into the
Company. See Section 12.
Pursuant to the Merger Agreement, following the purchase of Shares in the
Offer, Parent has the right to designate directors on the Company Board and
Parent intends to fully exercise that right. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, Purchaser will
accept for payment and pay for all Shares validly tendered, and not withdrawn,
prior to the Expiration Date. The term "Expiration Date" shall mean 12:00
Midnight, New York City time, on Thursday, June 11, 1998 (the "Initial
Expiration Date"), unless and until Purchaser, in accordance with the terms of
the Merger Agreement, shall have extended the period of time for which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by Purchaser, shall expire.
The Offer is conditioned upon the satisfaction of the Minimum Condition, the
expiration or termination of all waiting periods imposed by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
other conditions set forth in Section 14. In the Merger Agreement, Parent and
Purchaser have agreed that, if all conditions to the Offer are not satisfied
on the then scheduled Expiration Date and at the
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request of the Company, Purchaser (subject to its right to terminate the
Merger Agreement) shall extend the Offer from time to time until such
conditions are satisfied or waived; provided that Purchaser shall not be
required to extend the Offer beyond July 13, 1998.
If all conditions to the Offer are not satisfied prior to the Expiration
Date, Purchaser reserves the right, subject to the terms of the Merger
Agreement and subject to complying with applicable rules and regulations of
the Securities and Exchange Commission (the "Commission"), to (i) decline to
purchase any Shares tendered in the Offer and terminate the Offer and return
all tendered Shares to the tendering shareholders, (ii) waive any or all
conditions to the Offer and, to the extent permitted by applicable law,
purchase all Shares validly tendered, (iii) extend the Offer and, subject to
the right of shareholders to withdraw Shares until the Expiration Date, retain
all Shares which have been tendered during the period or periods for which the
Offer is extended or (iv) subject to the following sentence, amend the Offer.
The Merger Agreement provides that Purchaser will not, without the prior
written consent of the Company, (i) reduce the Offer Price, (ii) change the
form of consideration payable in the Offer, (iii) reduce the maximum number of
Shares to be purchased in the Offer, (iv) reduce or waive the Minimum
Condition, (v) impose additional conditions to the Offer; (vi) modify the
conditions to the Offer in a manner adverse to the holders of Shares, or (vii)
amend any other term of the Offer in a manner adverse to the holders of
Shares. See Section 14 regarding conditions to the Offer.
The Merger Agreement requires Purchaser to accept for payment and promptly
pay for all Shares validly tendered and not withdrawn pursuant to the Offer if
all conditions to the Offer are satisfied on the Expiration Date.
Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by public
announcement thereof. The announcement in the case of an extension will be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14d-4(c) and Rule 14e-1(d) under the
Exchange Act. Without limiting the obligation of Purchaser under such Rule or
the manner in which Purchaser may choose to make any public announcement,
Purchaser currently intends to make announcements by issuing a press release
to the Dow Jones News Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of, or payment
for, Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering shareholders are entitled
to withdrawal rights as described in Section 4. However, the ability of
Purchaser to delay the payment for Shares that Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by, or on behalf of, holders of securities promptly after the termination or
withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following a material change in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage
of securities sought, will depend upon the facts and circumstances then
existing, including the relative materiality of the changed terms or
information. In a public release, the Commission has stated that in its view
an offer must remain open for a minimum period of time following a material
change in the terms of the Offer and that waiver of a material condition, such
as the Minimum Condition, is a material change in the terms of the Offer. The
release states that an offer should remain open for a minimum of five business
days from the date a material change is first published, or sent or given to
security holders and that, if material changes are made with respect to
information not materially less significant than the offer price and the
number of shares being sought, a minimum of ten business days may be required
to allow adequate dissemination and investor response. The requirement to
extend the Offer will not apply to the extent that the number of business days
remaining between the occurrence of the
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change and the then-scheduled Expiration Date equals or exceeds the minimum
extension period that would be required because of such amendment. If, prior
to the Expiration Date, the Purchaser increases the consideration offered to
holders of Shares pursuant to the Offer, such increased consideration will be
paid to all holders whose Shares are purchased in the Offer whether or not
such Shares were tendered pursuant to such increase. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
The Company has provided Purchaser with the Company's shareholder lists and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed by Purchaser to record holders of Shares and will
be furnished by Purchaser to brokers, dealers, banks and similar persons whose
names, or the names of whose nominees, appear on the shareholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions to the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for, promptly
after the Expiration Date, all Shares validly tendered prior to the Expiration
Date and not properly withdrawn in accordance with Section 4. Subject to the
Merger Agreement, all determinations concerning the satisfaction of such terms
and conditions will be within Purchaser's sole discretion, which
determinations will be final and binding. See Sections 1 and 14. Subject to
the Merger Agreement, Purchaser expressly reserves the right, in its sole
discretion, to delay acceptance for payment of, or payment for, Shares in
order to comply in whole or in part with any applicable law, including,
without limitation, the HSR Act. Any such delays will be effected in
compliance with Rule 14e-1(c) under the Exchange Act (relating to a bidder's
obligation to pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares (or a timely Book-Entry Confirmation (as defined below) with
respect thereto), (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined
below), and (iii) any other documents required by the Letter of Transmittal.
The per share consideration paid to any holder of Shares pursuant to the Offer
will be the highest per share consideration paid to any other holder of such
Shares pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered prior to the
Expiration Date to Purchaser and not properly withdrawn, if and when Purchaser
gives oral (followed by written confirmation) or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payment from Purchaser and transmitting payment to tendering shareholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID
BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
If Purchaser is delayed in its acceptance for payment of, or payment for,
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer (including such rights as are set forth in Sections 1 and 14) (but
subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
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If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates representing Shares not tendered or not accepted for
purchase will be returned to the tendering shareholder, or such other person
as the tendering shareholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such
account maintained at a Book-Entry Transfer Facility as the tendering
shareholder shall specify in the Letter of Transmittal, as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
If no such instructions are given with respect to Shares delivered by book-
entry transfer, any such Shares not tendered or not purchased will be returned
by crediting the account at the Book-Entry Transfer Facility designated in the
Letter of Transmittal as the account from which such Shares were delivered.
Purchaser reserves the right to transfer or assign, in whole or in part, to
Desc, Parent or to any direct or indirect majority owned subsidiary of Desc or
Parent, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve Purchaser of its obligations
under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in
each case prior to the Expiration Date, or (ii) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company and the Philadelphia Depository
Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") for purposes of the Offer within two (2)
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's
systems may make book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account in
accordance with the Book-Entry Transfer Facility's procedure for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents must, in any case, be transmitted
to, and received by, the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against the participant.
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THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution" and, collectively, "Eligible Institutions").
In all other cases, all signatures on Letters of Transmittal must be
guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter
of Transmittal. If the certificates for Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or certificates for Shares not tendered or not accepted for payment
are to be returned, to a person other than the registered holder of the
certificates surrendered, then the tendered certificates for such Shares must
be endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser (delivered herewith),
is received by the Depositary, as provided below, prior to the
Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents, are received by
the Depositary within three trading days after the date of execution
of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the Nasdaq National Market (the "Nasdaq National Market"),
operated by the National Association of Securities Dealers, Inc.
(the "NASD"), is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
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Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR THE SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
Backup Withholding. In order to avoid "backup withholding" of federal income
tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 in the Letter of Transmittal and certify, under penalties
of perjury, that such TIN is correct and that such shareholder is not subject
to backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the shareholder upon filing an
income tax return.
The shareholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" delivered herewith for
additional guidance on which number to report.
If the tendering shareholder has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future, the shareholder or other
payee must also complete a Certificate of Awaiting Taxpayer Identification
Number in order to avoid backup withholding. Notwithstanding that the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary. However, such amounts will be
refunded to such shareholder if a TIN is provided to the Depositary within 60
days.
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message) the tendering shareholder will
irrevocably appoint designees of Purchaser as such shareholder's attorneys-in-
fact and proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted
for payment by Purchaser, and with respect to any and all non-cash dividends,
distributions, rights, other Shares or other securities issued or issuable in
respect of such Shares on or after May 7, 1998 (collectively,
"Distributions"). All such proxies will be considered coupled with an interest
in the tendered Shares. Such appointment will be effective if and when, and
only to the extent that, Purchaser accepts for payment Shares tendered by such
shareholder as provided herein. All such powers of attorney and proxies will
be irrevocable and will be deemed granted in consideration of the acceptance
for payment of Shares tendered in accordance with the terms of the Offer. Upon
such appointment, all prior powers of attorney, proxies and consents given by
such shareholder with respect to such Shares (and any and all Distributions)
will, without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such shareholder (and, if
given, will not be deemed effective). The designees of Parent will thereby be
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empowered to exercise all voting and other rights with respect to such Shares
(and any and all Distributions), including, without limitation, in respect of
any annual or special meeting of the Company's shareholders (and any
adjournment or postponement thereof), actions by written consent in lieu of
any such meeting or otherwise, as each such attorney-in-fact and proxy or his
substitute shall in his sole discretion deem proper. Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon Purchaser's acceptance for payment of such Shares, Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares (and any and all Distributions), including voting at any meeting
of shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by Purchaser, in its sole discretion, which determination
will be final and binding. Purchaser reserves the absolute right to reject any
or all tenders of any Shares determined by it not to be in proper form or the
acceptance for payment of which, or payment for which, may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right,
in its sole discretion, subject to the provisions of the Merger Agreement, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular shareholder, whether or not similar
defects or irregularities are waived in the case of other shareholders. No
tender of Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived. None of Purchaser,
Parent, Desc, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Subject to the terms of the Merger Agreement, Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant
to the procedures set forth below at any time prior to the Expiration Date
and, unless theretofore accepted for payment and paid for by Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 13, 1998.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer as set forth in Section 3, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered again by following
one of the procedures described in Section 3 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent,
Desc, the Dealer Manager, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
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5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger relevant to beneficial holders of
Shares whose Shares are tendered and accepted for payment pursuant to the
Offer or whose Shares are converted to cash in the Merger. The discussion is
for general information only and does not purport to consider all aspects of
federal income taxation that might be relevant to beneficial holders of
Shares. The discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing, proposed and temporary
regulations promulgated thereunder, rulings, administrative pronouncements and
judicial decisions, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive basis. The
discussion applies only to beneficial holders of Shares in whose hands Shares
are capital assets within the meaning of Section 1221 of the Code and may not
apply to beneficial holders (i) who acquired their Shares pursuant to the
exercise of employee stock options or other compensation arrangements with the
Company, and (ii) who are subject to special tax treatment under the Code
(such as dealers in securities, insurance companies, other financial
institutions, regulated investment companies and tax-exempt entities). In
addition, this discussion does not discuss the federal income tax consequences
to a beneficial holder of Shares who, for United States federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership or a foreign estate or trust, nor does it consider the effect of
any foreign, state or local tax laws.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for United States federal income tax purposes and may also
be a taxable transaction under applicable state, local and foreign income and
other tax laws. In general, a beneficial holder who sells Shares pursuant to
the Offer or receives cash in exchange for Shares pursuant to the Merger will
recognize gain or loss for federal income tax purposes equal to the
difference, if any, between the amount of cash received and the beneficial
holder's adjusted tax basis in the Shares sold pursuant to the Offer or
surrendered for cash pursuant to the Merger. Gain or loss will be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in
a single transaction) tendered pursuant to the Offer or surrendered for cash
pursuant to the Merger. Under recently enacted legislation, a non-corporate
shareholder would be subject to tax at ordinary income rates if the Shares
were held for one year or less, at a maximum rate of 28% if held for more than
one year but not more than eighteen months, and at a maximum rate of 20% if
held for more than eighteen months.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL HOLDER OF
SHARES IS URGED TO CONSULT SUCH BENEFICIAL HOLDER'S OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH BENEFICIAL HOLDER OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX
LAWS.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
Since September 2, 1997, the Shares have been traded through the Nasdaq
National Market ("Nasdaq") under the symbol "ASFD." The following table sets
forth, for each of the fiscal quarters indicated, the high and low reported
sales price per Share on the Nasdaq as reported by the Dow Jones News
Retrieval Service.
<TABLE>
<CAPTION>
SHARES
---------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ending December 31, 1998
First Quarter............................................. $16 $10
Second Quarter (through May 12, 1998)..................... 17 1/4 10 7/8
Fiscal Year Ended December 31, 1997
Third Quarter (from September 2, 1997).................... 12 3/8 9
Fourth Quarter............................................ 13 5/8 9
</TABLE>
On May 7, 1998, the last full trading day prior to the public announcement
of the execution of the Merger Agreement by the Company, Parent and Purchaser,
the last reported sales price of the Shares on the Nasdaq
9
<PAGE>
National Market was $16.00 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.
The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table. In addition, under the terms of the
Merger Agreement, the Company is not permitted to declare or pay dividends
with respect to the Shares without the prior written consent of Purchaser.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
Market for the Shares. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which, depending upon the number
of Shares so purchased, could adversely affect the liquidity and market value
of the remaining Shares held by the public. Following consummation of the
Offer, unless the Minimum Condition is waived or amended with the consent of
the Company, at least two-thirds of the Shares outstanding will be owned by
Purchaser. Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Shares or whether it
would cause future market prices to be greater or less than the Offer Price.
Nasdaq Quotation. The Shares are traded through Nasdaq. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer
meet the requirements of Nasdaq for continued inclusion on Nasdaq. Nasdaq
requires that an issuer either (i) have at least 750,000 publicly held shares
(exclusive of holdings of officers, directors or any other person who is the
beneficial owner of more than 10% of the total Shares outstanding), held by at
least 400 shareholders, with a market value of at least $5,000,000, net
tangible assets (total assets (excluding goodwill) minus total liabilities) of
at least $4 million and have a minimum bid price of $1 per share or (ii) have
at least 1,000,000 publicly held shares, held by at least 400 shareholders,
with a market value of at least $15,000,000, have a minimum bid price of $5
per share and have either (A) a market capitalization of at least $50,000,000
or (B) total assets and revenues each of at least $50,000,000. If the Nasdaq
National Market and the Nasdaq Smallcap Market were to cease to publish
quotations for the Shares, it is possible that the Shares would continue to
trade in the over-the-counter market and that price or other quotations would
be reported by other sources. The extent of the public market for such Shares
and the availability of such quotations would depend, however, upon such
factors as the number of shareholders and/or the aggregate market value of
such securities remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration under the Exchange Act as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b),
the requirement of furnishing a proxy or information statement pursuant to
Section 14(a) or 14(c) in connection with shareholders' meetings and the
related requirement of furnishing an annual report to shareholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated.
Margin Regulations. The Shares presently are "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding stock
exchange listing and market quotations, it is possible that,
10
<PAGE>
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. In
addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
Purchaser presently does not intend to seek delisting of the Shares from the
Nasdaq National Market and the termination of the registration of the Shares
under the Exchange Act prior to the Merger even if the requirements for such
delisting and termination are met. If the Nasdaq National Market listing and
the Exchange Act registration of the Shares are not terminated prior to the
Merger, then the Shares will be delisted from the Nasdaq National Market and
the registration of the Shares under the Exchange Act will be terminated
following the consummation of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or
based upon publicly available documents and records on file with the
Commission and other public sources. Neither Parent, Purchaser, Desc nor the
Dealer Manager assumes responsibility for the accuracy or completeness of the
information concerning the Company contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information but which are
unknown to Parent, Purchaser, Desc or the Dealer Manager.
The Company is a leading provider of Mexican food products to Mexican-
American consumers, as well as non-Hispanic consumers who enjoy Mexican food.
The Company believes that it is the largest publicly-owned company engaged
solely in the manufacture and distribution of Mexican food products targeting
primarily the Mexican-American consumer. The Company has five separate
brands--Calidad(TM), La Victoria(TM), La Monita(TM), The Tortilla King(TM) and
Alamo Street(TM) (a brand of Sauces Unlimited, Inc.). These brands have strong
market positions in the southwestern and western regions of the United States,
particularly in Texas (Calidad, La Monita, The Tortilla King and Alamo Street)
and California (La Victoria).
The Company has only one business segment--the manufacture and sale of
Mexican food products. The Company has two operating divisions--Direct Store
Delivery ("DSD") Operations and Direct Warehouse Operations. DSD Operations
includes Calidad, La Monita and Tortilla King. DSD Operations sells branded
and private label tortillas and tortilla chips, as well as both branded and
non-branded cheeses, meats and shelf-stable products (including spices, salsas
and peppers) primarily to grocery stores in Texas and certain adjacent states.
The Company's Direct Warehouse Operations division includes La Victoria and
Sauces Unlimited. Direct Warehouse Operations manufactures salsas and other
Mexican sauces. Generally, Direct Warehouse Operations' products are delivered
to a retail customer's warehouse or distribution facility rather than directly
to a customer's retail outlets. While La Victoria primarily sells its products
to grocery stores in California and certain other western states, it also
sells its products in the food service market on a branded and private label
basis and to warehouse clubs on a branded basis. Food service sales consist
primarily of sales to restaurants and wholesale restaurant suppliers. Sauces
Unlimited's primary customer base is the food service industry. The Company is
a Texas corporation with its principal executive offices at 1313 Avenue R,
Grand Prairie, Texas 75050. The telephone number of the Company at such
location is (972) 933-4100.
Set forth below is certain selected consolidated financial information with
respect to the Company, excerpted or derived from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 and its Annual Report
on Form 10-K/A for the fiscal year ended December 31, 1997, both filed with
the Commission pursuant to the Exchange Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information (including any related notes)
contained therein. Such reports and other documents may be inspected and
copies may be obtained from the Commission in the manner set forth below.
11
<PAGE>
AUTHENTIC SPECIALTY FOODS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR FIVE MONTHS
ENDED ENDED YEARS ENDED DECEMBER 31,
JULY 31, DECEMBER 31, ----------------------------------
1993 1993(1) 1994 1995 1996 1997
-------- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $20,328 $8,113 $19,637 $21,028 $21,198 $37,203
Cost of sales........... 14,974 5,466 13,213 14,266 14,081 22,328
------- ------ ------- ------- ------- -------
Gross profit.......... 5,354 2,647 6,424 6,762 7,177 14,875
Operating expenses...... 8,511 3,304 7,210 6,940 6,768 15,260
------- ------ ------- ------- ------- -------
Income (loss) from
operations........... (3,157) (657) (786) (178) 349 (385)
------- ------ ------- ------- ------- -------
Other income (expense)
Interest expense........ (218) (98) (161) (219) (328) (507)
Interest income......... -- -- -- 62 2 --
Gain (loss) on disposal
of property and
equipment.............. (514) -- (38) (192) (22) --
Other, net.............. -- -- -- -- -- 27
------- ------ ------- ------- ------- -------
(732) (98) (199) (349) (348) (480)
------- ------ ------- ------- ------- -------
Income (loss) before
income taxes......... (3,889) (755) (985) (527) 1 (865)
Income tax expense
(benefit).............. (520) -- -- -- -- (302)
------- ------ ------- ------- ------- -------
Net income (loss)..... $(3,369) $ (755) $ (985) $ (527) $ 1 $ (563)
======= ====== ======= ======= ======= =======
Basic and diluted
earnings (loss) per
share(2)............... $ (2.15) $(0.48) $ (0.59) $ (0.31) $ 0.00 $ (0.15)
Weighted average number
of common shares
outstanding............ 1,564 1,564 1,680 1,700 1,700 3,693
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JULY 31, -----------------------------------------
1993 1993 1994 1995 1996 1997
-------- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $ -- $ 238 $ 237 $ 9 $ 200 $ 363
Working capital (deficit).... (2,289) (139) (44) (1,499) (1,557) 11,949
Total assets................. 6,630 7,436 5,946 7,132 7,089 58,780
Notes payable to bank........ 1,551 1,418 639 751 1,319 1,706
Long-term debt............... 1,528 1,513 949 1,249 920 7,420
Shareholders' equity......... 260 1,859 2,175 2,048 2,049 40,450
</TABLE>
- --------
(1) Represents a five month period. At December 31, 1993, the Company changed
its fiscal year end from July 31 to December 31.
(2) The Company adopted FASB Statement No. 128 for the year ended December
31, 1997, and as required restated all per share information for the
prior years to conform to the Statement. Because the Company incurred a
loss in 1997 and there were no common stock equivalents outstanding in
any year other than 1997, basic and diluted loss per share amounts are
the same in each period presented.
First Quarter Earnings. On April 28, 1998, the Company announced its results
of operations for the three months ended March 31, 1998. The Company reported
revenues of $20.9 million for the three months ended March 31, 1998 as
compared to $5.4 million for the three months ended March 31, 1997. In
addition, the Company reported net income of $1.1 million, or $0.13 per Share
(basic and diluted), for the three months ended March 31, 1998 as compared to
net income of $122,000, or $0.07 per Share (basic and diluted), for the three
months ended March 31, 1997.
12
<PAGE>
Certain Projections. During the course of the discussions between Parent and
the Company that led to the execution of the Merger Agreement, the Company
provided Parent with certain information about the Company and its financial
performance that is not publicly available. The information provided to Parent
and its advisors included financial forecasts for the Company as an
independent company (i.e., without regard to the impact to the Company of a
transaction with Parent or Purchaser), which included the following: forecasts
of revenues, gross profit, earnings before income, taxes, depreciation and
amortization ("EBITDA"), operating income and net income of approximately
$101.2 million, $44.6 million, $14.0 million, $10.6 million and $5.9 million,
respectively, for fiscal 1998. The foregoing information was prepared by the
Company solely for internal use and not for publication or with a view to
complying with the published guidelines of the Commission regarding
projections or with the guidelines established by the American Institute of
Certified Public Accountants and is included in this Offer to Purchase only
because it was furnished to Parent. The foregoing information is "forward-
looking" and inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company, including
industry performance, general business and economic conditions, changing
competition, adverse changes in applicable laws, regulations or rules
governing environmental, food processing, tax or accounting matters and other
matters. One cannot predict whether the assumptions made in preparing the
foregoing information will be accurate, and actual results may be materially
higher or lower than those described above. The inclusion of this information
should not be regarded as an indication that Parent, the Purchaser, the
Company or anyone who received this information considered it a reliable
predictor of future events, and this information should not be relied on as
such. None of Parent, the Purchaser or the Company assumes any responsibility
for the validity, reasonableness, accuracy or completeness of the forecasts,
and the Company has made no representation to Parent or the Purchaser
regarding the financial information described above.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information
as of particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interests of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's shareholders and filed with the Commission.
Reports, proxy statements and other information filed with the Commission can
be inspected and copied at the public reference facilities of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such information can also be
obtained by mail, upon payment of the Commission's prescribed rates by writing
to the Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements and other
information relating to the Company which have been filed electronically with
the Commission via the EDGAR System. The Shares are traded on Nasdaq and
certain reports, proxy statements and other information concerning the Company
can also be inspected at the offices of Nasdaq at 1735 K Street, N.W.,
Washington, D.C. 20006.
9. CERTAIN INFORMATION CONCERNING DESC, PARENT AND PURCHASER.
Desc, Parent and Purchaser. Desc, a corporation organized under the laws of
Mexico, is a diversified holding company engaged in five principal lines of
business: automotive parts, chemicals, consumer products, food and real
estate. All of these businesses are conducted through Desc's four principal
wholly owned subsidiaries: Unik, S.A. de C.V., Girsa, S.A. de C.V., Parent and
Dine, S.A. de C.V. Each of Desc's four principal subsidiaries is a holding
company with no significant operations and collectively they control or own
majority interests in more than 100 companies. Parent, a corporation organized
under the laws of Mexico, is responsible for businesses in the food sector.
Purchaser is a newly incorporated Texas corporation which was organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. All of the outstanding
capital stock of Purchaser is directly owned by Authentic Acquisition
Corporation, a Delaware
13
<PAGE>
corporation ("AAC Delaware") which is directly owned by Parent and indirectly
owned by Desc. AAC Delaware was recently incorporated in connection with the
transactions contemplated by the Offer and Merger. Until immediately prior to
the time Purchaser purchases Shares pursuant to the Offer, it is not
anticipated that Purchaser will have any significant assets or liabilities or
engage in activities other than those incident to its formation and
capitalization and the transactions contemplated by the Offer and the Merger.
The principal office of Desc and Parent is located at Paseo de los
Tamarindos 400-B, 28th Floor, Bosques de las Lomas, Mexico, D.F. 05120. The
telephone number of Desc and Parent at such location is (525) 261-8000. The
principal office of Purchaser is located at 7150 Village Drive, Buena Park,
California 90621. The telephone number of Purchaser is (714) 521-7999.
For certain information concerning the executive officers and directors of
Desc, Parent, AAC Delaware, and Purchaser, see Schedule I.
Except as set forth in this Offer to Purchase, none of Desc, Purchaser, AAC
Delaware, or Parent, nor, to the best knowledge of Desc, Purchaser, AAC
Delaware, or Parent, any of the persons listed on Schedule I, nor any
associate or majority owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any Shares. In addition, none of Desc,
Purchaser, AAC Delaware, or Parent nor, to the best knowledge of Desc,
Purchaser, AAC Delaware, or Parent, any of the persons or entities referred to
above, nor any of the respective executive officers, directors or subsidiaries
of any of the foregoing, has effected any transaction in the Shares during the
past 60 days.
Except as set forth in this Offer to Purchase, none of Desc, Purchaser, AAC
Delaware, or Parent has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies.
Except as set forth in this Offer to Purchase, none of Desc, Parent, AAC
Delaware, Purchaser, any of their respective affiliates, nor, to the best
knowledge of Desc, Parent, AAC Delaware or Purchaser, any of the persons
listed on Schedule I, has had any business relationships or transactions with
the Company or any of its executive officers, directors or affiliates that are
required to be reported under the rules of the Commission. Except as set forth
in this Offer to Purchase, there have been no contacts, negotiations or
transactions between Desc, Parent, AAC Delaware, Purchaser, any of their
respective affiliates or, to the best knowledge of Desc, Parent, AAC Delaware,
Purchaser, any of the persons listed on Schedule I, and the Company or its
affiliates concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
Available Information. Desc is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Reports can be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, NY 10048 and at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661. Copies of such information may be obtained by
mail, upon payment of the Commission's prescribed rates, by writing to the
Commission's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such materials can also be inspected at the offices of the New
York Stock Exchange ("NYSE"), 20 Broad Street, New York, NY 10005. The
Commission also maintains a website at http://www.sec.gov that contains or
will contain certain information relating to Desc which has been filed
electronically with the Commission via the EDGAR System.
A copy of this Offer to Purchase and certain of the agreements referred to
herein are attached as exhibits to the Tender Offer Statement on Schedule 14D-
1, dated May 14, 1998 (the "Schedule 14D-1"), which has been filed with the
Commission by (i) Purchaser, (ii) Parent, (iii) Desc and (iv) AAC Delaware.
The Schedule 14D-1 and the exhibits thereto, along with such documents as may
be filed by Purchaser, Parent, Desc and AAC Delaware with the Commission, may
be examined and copied from the offices of the Commission in the manner set
forth above.
14
<PAGE>
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon financing. The total amount of funds
required by Purchaser to consummate the Offer and the Merger, including
payment of the fees and expenses of the Offer and the Merger, is estimated to
be approximately $147 million. Under the Merger Agreement, Desc has agreed to
unconditionally guaranty the payment obligations of Purchaser pursuant to the
Offer and the Merger, and Purchaser will obtain all such funds from Desc in
the form of capital contributions and/or loans. Desc's existing cash and other
working capital are sufficient to provide funds required in connection with
the Offer without any borrowings.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS
Background of the Offer. On November 5 and 21, 1997, J. Gary Shansby and
Charles H. Esserman of Shansby Partners, L.L.C. ("Shansby Partners"), the
Company's acquisition advisor, approached Embasa Foods, Inc. ("Embasa"), a
subsidiary of Desc, to discuss a possible acquisition of Embasa by the
Company. No agreement resulted from those discussions.
On January 8, 1998, Mr. Shansby and Mr. Esserman met with representatives of
Desc at its headquarters in Mexico City to discuss a purchase of Embasa.
During that meeting, the Desc representatives indicated that they might be
interested in acquiring a position in the Company. Mr. Shansby and Mr.
Esserman indicated that they did not know whether the Company Board would be
interested in authorizing the sale of the Company. At a regular meeting of the
Company Board on January 22, 1998 Mr. Shansby and Mr. Esserman informed the
Board of Directors of their meetings with Desc. The Board encouraged Mr.
Shansby and Mr. Esserman to continue discussions with Desc and to inform the
Board about the status of those discussions.
On February 26, 1998, Desc and the Company entered into a confidentiality
agreement. At the February 27 meeting of the Company Board, Mr. Esserman
described for the Board the discussions with Desc and also described a
presentation planned for a meeting with Desc later in the day at the offices
of the Company's La Victoria subsidiary. The Board confirmed that the Company
was not for sale, but asked to be informed about any proposals from Desc.
After the Board meeting, representatives of Desc met with Mr. Shansby, Mr.
Esserman, and Keith R. Lively, who then served as Chairman and Chief Executive
Officer of the Company, and toured the La Victoria facility. Following the
meeting, Desc informed Mr. Shansby and Mr. Esserman that Desc might be
interested in making an acquisition proposal, probably for less than all of
the outstanding Shares, but no proposal was made and no agreements were
reached.
On February 27, the Company contacted DLJ about serving as financial advisor
in connection with a possible transaction with Desc. On March 4, the Company
announced that both Mr. Lively and Mr. Bing Graffunder, President of the
Company, had unexpectedly resigned. The Company's Board elected one of its
outside directors, Mr. Robert K. Swanson, to serve as Chairman of the Board
and Chief Executive Officer. During March, DLJ and JP Morgan discussed Desc's
interest in the Company but no proposals were made and no agreements were
reached. At the March 24, 1998 meeting of the Company Board, Mr. Shansby and
Mr. Esserman gave a report to the Board about discussions with Desc and agreed
to keep the Board informed of any proposals.
On March 26, 1998, representatives of Desc and its financial and legal
advisors met with representatives of the Company, including Mr. Swanson and
the Company's financial and legal advisors, in Dallas, Texas, to discuss
possible approaches to a transaction and to commence a business due diligence
review of the Company. At the Dallas meeting, Desc expressed interest in
acquiring control of the Company in a partial tender offer, and leaving the
remaining Shares outstanding so that Desc would have a public U.S. subsidiary.
The Company representatives expressed a strong preference that all Shares be
purchased.
On April 3, 1998, representatives of Desc, certain of its subsidiaries and
their financial and legal advisors met in Costa Mesa, California, with the
Company and its financial and legal advisors to review the Company's
operations and to discuss the scope of the information that the Company would
make available for Desc's due diligence review. Additionally, Desc and the
Company entered into a supplemental confidentiality agreement,
15
<PAGE>
dated as of March 31, 1998, relating to information regarding certain
acquisitions the Company was considering. Following this meeting, the Company
provided Desc and its representatives access to information about the Company,
and representatives of Desc and its financial and legal advisors began
discussions with the Company and its financial and legal advisors concerning
terms of a possible transaction.
On April 17, 1998, representatives of J.P. Morgan and Desc met in San
Francisco, California with representatives of the Company and DLJ to discuss
the operating budget for the year ended December 31, 1998, as prepared by the
management of the Company. At this meeting, Desc indicated that it would
consider a transaction involving a purchase of all outstanding Shares.
At the April 28, 1998 meeting of Parent's Board of Directors, the Parent's
Board authorized continued negotiations related to the proposed acquisition
and, if satisfactory terms could be reached, executing a definitive agreement
for such acquisition. On April 28, the Company Board also met, received a
report on the negotiations, and authorized Company representatives to continue
to discuss a proposed acquisition. At this meeting of the Company Board, legal
counsel for the Company described for the Board the material terms that were
likely to be included in a definitive merger agreement.
Following April 28, 1998, representatives of J.P. Morgan and representatives
of DLJ continued negotiations with respect to price and the terms of the
Merger Agreement, and a proposed Merger Agreement was drafted and discussed.
Desc, Parent, and the Company held board meetings on May 6, 1998. The Boards
of Desc and Parent approved the Merger Agreement. Purchaser's directors
approved the Merger Agreement at a meeting on May 7. At the May 6 meeting of
the Company Board, the Company's directors received a presentation from DLJ
with respect to the financial aspects of the transaction, as well as a
presentation from Vinson & Elkins L.L.P., its legal counsel, with respect to
the material terms of the Merger Agreement and other legal matters. However,
no decision was made at this meeting, and it was agreed that a telephonic
Company Board meeting would be held the next day after the close of the U.S.
financial markets. Accordingly, on May 7, a telephonic meeting of the Company
Board was held. After an update of the financial and legal presentations, the
Company Board unanimously approved the Merger Agreement, which was signed late
in the day on May 7.
On May 8, 1998, each of the Company and Desc publicly announced the
execution of the Merger Agreement. A copy of the press release issued by Desc
has been filed with the Commission as an exhibit to the Schedule 14D-1 of
Desc, Parent, AAC Delaware and Purchaser.
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is to enable Parent to acquire
control of, and the entire equity interest in, the Company. The Offer is being
made pursuant to the Merger Agreement and is intended to increase the
likelihood that the Merger will be effected. The purpose of the Merger is to
acquire all of the outstanding Shares not purchased pursuant to the Offer.
Shareholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company and any right to participate in its
earnings and any future growth. If the Merger is consummated, non-tendering
shareholders will no longer have an equity interest in the Company and instead
will have only the right to receive cash consideration pursuant to the Merger
Agreement. See Section 12. Similarly, after selling their Shares in the Offer
or the subsequent Merger, shareholders of the Company will not bear the risk
of any decrease in the value of the Company.
The primary benefits of the Offer and the Merger to the shareholders of the
Company are that such shareholders are being afforded an opportunity to sell
all of their Shares for cash at a price which represents a premium of
approximately 28.6% over the average closing market price of the Shares for
the thirty trading days, ending May 7, 1998, the last full trading day prior
to the initial public announcement that the Company, Purchaser and Parent
executed the Merger Agreement.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement not
discussed elsewhere in this Offer to Purchase. The summary does not purport to
be complete and is qualified in its entirety by reference to the complete text
of the Merger Agreement, a copy of which is filed with the Commission as
Exhibit 99.10 to
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the Schedule 14D-1 and is incorporated herein by reference. Capitalized terms
not otherwise defined below shall have the meanings set forth in the Merger
Agreement. The Merger Agreement may be examined and copies may be obtained at
the places and in the manner set forth under the heading, "Available
Information" in Section 9 of this Offer to Purchase.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, corporate organization, capital stock, options
or other rights to acquire Shares, authority to enter into the Merger
Agreement, required consents, no conflicts between the Merger Agreement and
the Articles of Incorporation and Bylaws of the Company or applicable laws or
agreements to which the Company or its assets may be subject, financial
statements, public filings, conduct of business, employee benefit plans,
ERISA, intellectual property, labor and employment matters, compliance with
laws, tax matters, litigation, environmental matters, material contracts,
brokers' and finders' fees, title to properties, absence of liens, votes
required to approve the Merger Agreement, undisclosed liabilities, product
liability, disclosures in proxy statement and tender offer documents and the
absence of material adverse changes.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, corporate organization, authority to enter into the Merger Agreement,
required consents, no conflicts between the Merger Agreement and the
Certificate of Incorporation, Bylaws and other constituent documents of Parent
or Purchaser or laws applicable to Parent and Purchaser or agreements to which
Parent or Purchaser are subject, brokers' fees and disclosures in proxy
statement and tender offer documents.
Conditions to the Merger. The respective obligations of Parent and
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction or waiver of each of the following
conditions: (i) the Merger Agreement and the Merger shall have been approved
by the requisite vote of the Company's shareholders, if required by law;
(ii) the waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have been terminated or shall have expired; (iii) 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 pursuant to the Offer, or the consummation
of the Merger, provided, however, that the parties shall use all reasonable
efforts to have any such injunction, order, restraint or prohibition vacated;
and (iv) 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. The obligation of Parent and
Purchaser to effect the Merger also is subject to Parent or Purchaser having
been obligated to purchase Shares in the Offer.
The Company Board. The Merger Agreement provides that effective upon the
acceptance for payment and payment by Purchaser of Shares pursuant to the
Offer such that Parent or Purchaser shall own at least two-thirds of the Fully
Diluted Shares, Purchaser shall be entitled to designate the number of
Directors, rounded up to the next whole number, on the Company Board that
equals the product of (i) the total number of directors on the Company Board
(giving effect to the election of any additional directors pursuant to the
Merger Agreement) and (ii) the percentage that the number of Shares owned by
Purchaser (including Shares accepted for payment and paid for) bears to the
total number of Fully Diluted Shares, and the Company shall take all action
necessary to cause Purchaser's designees to be elected or appointed to the
Company Board, including, without limitation, increasing the number of
directors (to the extent permitted under Article 2.34C of the TBCA), and
seeking and accepting resignations of incumbent directors. At such times, the
Company will use its best efforts to cause individuals designated by Purchaser
to constitute the same percentage as such individuals represent on the Company
Board of (x) each committee of the Company Board (other than any committee
established to take action under the Merger Agreement), (y) each board of
directors of each subsidiary of the Company and (z) each committee of each
such board.
In the event that Purchaser's designees are elected or appointed to the
Company Board, until the Effective Time of the Merger, the Company Board shall
have at least two directors who were directors of the Company on the date of
the Merger Agreement and who are not employees of the Company or any of its
subsidiaries (the
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"Independent Directors"). 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 the Merger Agreement
or, if no Independent Directors then remain, the other directors of the
Company on the date of the Merger Agreement shall designate two persons to
fill such vacancies who shall not be officers or affiliates of the Company or
any of its subsidiaries, or officers or affiliates of Parent or any of its
subsidiaries, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement.
Notwithstanding anything in the Merger Agreement to the contrary, the
affirmative vote of the majority of the Independent Directors shall be
required to (i) amend or otherwise modify the Articles of Incorporation of the
Company, (ii) approve any amendment, modification or waiver by the Company of
any provisions of the Merger Agreement or (iii) approve any other action by
the Company that adversely affects the interests of the shareholders of the
Company (other than Parent, Purchaser or any affiliate thereof) with respect
to the transactions contemplated by the Merger Agreement, including without
limitation, any actions which would constitute a breach by the Company of its
representations, warranties or covenants contained in the Merger Agreement.
The foregoing provisions of the Merger Agreement shall not limit any rights
which Parent, Purchaser or their affiliates may have as holders or beneficial
owners of Shares with respect to the election of directors or otherwise.
The Company's obligations to appoint designees of Purchaser to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Subject to applicable law, the Company shall promptly
take all action requested by Purchaser 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 the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Purchaser shall have provided to
the Company on a timely basis all information required to be included in such
information statement with respect to Purchaser's designees). Purchaser will
supply to the 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.
Shareholders' Meeting; Proxy Statement. Pursuant to the Merger Agreement the
Company will, if required by applicable law in order to consummate the Merger,
as promptly as practicable following the acceptance for payment of and payment
for Shares pursuant to the Offer prepare and file with the Commission a Proxy
Statement in accordance with the Exchange Act relating to the Merger and the
Merger Agreement and use all reasonable efforts to obtain and furnish the
information required to be included by the Exchange Act and the Commission in
such Proxy Statement and, after consultation with Parent and Purchaser, to
respond promptly to any comments made by the Commission with respect to such
Proxy Statement and cause the Proxy Statement in definitive form to be mailed
to the Company's shareholders.
Pursuant to the Merger Agreement, the Company will, if required by
applicable law in order to consummate the Merger, as promptly as practicable
following the acceptance for payment of and payment for Shares pursuant to the
Offer and in consultation with Purchaser and Parent, duly call, give notice
of, convene and hold a meeting of its shareholders (the "Shareholders
Meeting") for the purpose of approving the Merger Agreement and the
transactions contemplated thereby. The Company will, through the Company
Board, recommend to its shareholders approval of the foregoing matters and
seek to obtain all votes and approvals thereof by the shareholders, subject to
provisions set forth below under "No Solicitation;" and provided, that such
recommendation and other action may be withdrawn, modified or amended if the
Company determines in good faith, based on advice of its outside counsel, that
such action is necessary in order for the Company Board to comply with its
fiduciary duties under applicable law. Subject to the foregoing, such
recommendation, together with a copy of the DLJ Opinion shall be included in
the Proxy Statement. At the Shareholders Meeting, Purchaser has agreed to
cause all Shares then owned by it, Parent or any affiliate thereof to be voted
in favor of the adoption of the Merger Agreement and in favor of any other
resolution necessary to approve the transactions contemplated by the Merger
Agreement.
Notwithstanding the foregoing, if Purchaser shall acquire at least 90% of
the Shares outstanding pursuant to the Offer or otherwise, Purchaser may cause
the Merger to occur without a Shareholders Meeting in accordance
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with Article 5.16 of the TBCA; provided, however, that in such event, the
rights of shareholders of the Company under the Merger 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, each of
which shall no longer be applicable).
Employee Benefits. The Merger Agreement provides that, for a period of
twelve months following the Effective Time of the Merger, the Surviving
Corporation shall maintain employee benefits plans and arrangements (directly
or in conjunction with Parent or Purchaser) which, in the aggregate, will
provide a level of benefits to continuing employees of the Company and its
subsidiaries substantially comparable in the aggregate to those provided to
similarly situated employees of Parent in the United States as in effect
immediately prior to the Effective Time of the Merger (other than
discretionary benefits) provided that Parent may make modifications 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 Parent
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 the Surviving Corporation's benefit plans, Parent shall use the
employee's hire date with the Company or such other date as has been
previously determined by the Company for credit for prior employment with any
predecessor or ERISA Affiliate of the Company. The Surviving Corporation's
benefit plans providing medical, dental or life insurance benefits after the
Effective Time of the Merger to any individual who is an active or former
employee of the Company or its subsidiaries (or a dependent of such employee)
shall waive any waiting periods, pre-existing conditions, and certain
exclusions to the extent so waived under present policy and shall take into
account expenses incurred by such individuals on or before the Effective Time
of the Merger for purposes of satisfying deductible, coinsurance and maximum
out-of-pocket provisions to the extent taken into account under present
policy.
The Merger Agreement does not prohibit the Company or Purchaser 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), nor shall it be construed or applied to restrict the ability of
Purchaser or Parent to establish such types and levels of compensation and
benefits as they determine to be appropriate. Parent has agreed to cause the
Surviving Corporation to honor the employment agreements existing on the date
of the Merger Agreement and disclosed to Parent.
Options and Warrants. The Merger Agreement provides that, as soon as
practicable following the date of the Merger Agreement, the Company Board
shall: (i) adjust the terms of all Company Stock Options 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
the Company after the Merger (subject to any applicable withholding taxes)
equal to the product of (1) the total number of Shares subject to such Company
Stock Option, multiplied by (2) the excess of the Merger Consideration over
the exercise price per Share subject to such Company Stock Option, payable in
cash immediately upon the Effective Time of the Merger; and (ii) except as
provided in the Merger Agreement or as otherwise agreed to by the parties, the
Company's Stock Option Plans and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time of the Merger, and the Company shall ensure that, following the
Effective Time of the Merger, no holder of a Company Stock Option nor any
participant in any Stock Option Plan shall have any right thereunder to
acquire equity securities of the Surviving Corporation following the Merger,
except for the rights set forth in clause (i) above.
The Merger Agreement also provides that, as soon as practicable following
the date of the Merger Agreement, the Company Board shall take all action to
cause each outstanding Warrant (each a "Warrant" and collectively "Warrants")
governed by the Warrant Agreements to be, at the Effective Time of the Merger,
automatically (without any further action of the Company or the holders
thereof) cancelled in exchange for the right to receive an amount in cash
equal to the product of (i) the total number of Shares subject to such
Warrant, multiplied by
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(ii) the excess of the Merger Consideration over the exercise price per Share
subject to such Warrant. If certain consents to have such Warrants accelerated
and cashed out pursuant to the terms above are not obtained, the Company has
agreed to redeem such Warrants in accordance with the terms of the Warrants.
Interim Operations; Covenants. Pursuant to the Merger Agreement, during the
period from May 7, 1998 to the Effective Time of the Merger, the Company has
agreed that, except as expressly contemplated by the Merger Agreement, the
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 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 such period, the Company
shall not, and shall not permit any of its subsidiaries to, without the prior
written consent of Parent, 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 the Company to the
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
the 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 redemption in certain
circumstances) of Company Stock Options and Warrants outstanding on the
date of the Merger 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 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 Shares upon the
exercise of Company Stock Options and Warrants outstanding on the date
of the Merger Agreement and in accordance with their present terms;
e. amend its certificates or articles of incorporation, bylaws or other
comparable charter or organizational documents;
f. subject to the provisions of the Merger Agreement, 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 permitted by the Merger Agreement, mortgage
or otherwise encumber or subject to any Lien (in each case except as
provided by the existing terms of the Company's credit agreements) or
otherwise dispose of or 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 the 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 the Company or any direct or
indirect wholly owned subsidiary of the Company;
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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 of the Merger
Agreement or (ii) claims settled or compromised to the extent permitted
by the Merger Agreement, 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 the Merger 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, in the aggregate $200,000;
p. except in the ordinary course of business or otherwise permitted by the
Merger Agreement, modify, amend or terminate any contract or agreement
set forth in filings with the Commission filed and publicly available
prior to the date of the Merger Agreement to which the Company or any
of its subsidiaries is a party or waive, release or assign any material
rights or claims;
q. except as permitted by the Merger Agreement, (i) enter into any
employment agreement with any officer, director or key employee of the
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 the Company contained
in Merger Agreement 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.
Except as set forth in the Merger Agreement, the Company has also agreed not
to:
a. 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;
b. 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 the Merger Agreement;
or
c. 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 the Company
or any subsidiary of the Company, without the prior written consent of
Purchaser and without complying with the notice requirements and other
provisions of WARN.
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Access to Information; Confidentiality. Pursuant to the Merger Agreement,
during the period prior to the earlier of the Effective Time of the Merger and
the termination of the Merger Agreement, each of the Company and its
subsidiaries shall afford to Parent, Purchaser and their representatives
reasonable access during normal business hours to its properties, books,
contracts, commitments, personnel and records (including, without limitation,
to the extent available, the work papers of the Company's and its subsidiaries
independent public accountants) and, during such period, each of the Company
and its subsidiaries shall furnish promptly to Parent (i) a copy of each
report, schedule, registration statement and other document filed by it 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 Parent and Purchaser may from time to
time reasonably request; provided, however, that the foregoing shall not
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 of the Merger Agreement. Except as required by law, each of the
Company, Parent and Purchaser, will hold and will cause its representatives to
hold any nonpublic information in confidence to the extent required by the
Confidentiality Agreement (as defined below).
No Solicitation. Until the termination of the Merger Agreement, neither the
Company nor 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
the 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 (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity 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.
Notwithstanding the foregoing, if prior to the acceptance for payment of,
and payment for, Shares pursuant to the Offer and after consultation with
their financial advisors and after receipt of advice from independent outside
legal counsel, the Company Board or any Special Committee thereof determines
in good faith that such action is necessary to comply with its fiduciary
duties, nothing in the Merger Agreement shall prohibit the Company Board from:
(i) furnishing information to or entering into discussions or negotiations
with, any person or entity that makes an unsolicited bona fide Transaction
Proposal only to the extent that prior to taking such action the Company
provides prompt notice to Parent to the effect that it is furnishing such
information to or entering into discussions or negotiations with such person
or entity and receives from such person or entity an executed confidentiality
agreement containing terms and provisions, when taken in the aggregate,
comparable to those in the Confidentiality Agreement in the reasonable
judgment of the Company Board, (ii) failing to make or withdrawing or
modifying its recommendation referred to in the Merger Agreement if there
exists a Transaction Proposal, or (iii) making to the Company's shareholders
any recommendation and related filing with the Commission 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).
"Transaction Proposal" shall mean any of the following (other than the
transactions between the Company and Purchaser contemplated by the Offer and
the Merger Agreement) involving the Company or any of its subsidiaries: (i)
any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) 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 the Company and its subsidiaries,
taken as a whole, in a single transaction or series of related transactions;
(iii) any tender offer or exchange offer for, or the acquisition of (or right
to acquire) a "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 the Company or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) 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
the Company or any of its subsidiaries.
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Prior to the Company Board withdrawing or modifying its approval or
recommendation of the Offer, the Merger Agreement or the Merger, approving or
recommending a Transaction Proposal, or entering into an agreement with
respect to a Transaction Proposal, the Company Board shall provide Purchaser
with a written notice (a "Notice of Takeover Proposal") advising Purchaser
that the Company Board 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 the Company nor any
subsidiary shall enter into an agreement with respect to a Transaction
Proposal until 48 hours after the first Notice of Takeover Proposal with
respect to a given third party was given to Purchaser. In addition, if the
Company or any of its subsidiaries proposes to enter into an agreement with
respect to any Transaction Proposal, the Company shall, if required in
accordance with the terms of the Merger Agreement, concurrently with entering
into such agreement pay, or cause to be paid, to Purchaser the expenses and
fees, including those referred to under "Termination Fee" below.
Indemnification. The Merger Agreement provides that, for six years after the
Effective Time of the Merger, the Surviving Corporation shall indemnify all
present and former directors or officers of the Company and its subsidiaries,
and Shansby Partners L.L.C. (but only to the extent of the indemnity contained
in the Advisory Agreement) ("Indemnified Parties") against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any final resolution of a 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 incorporation or bylaws
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 incorporation or bylaws of the Company or its subsidiaries,
as applicable, consistent with applicable law shall be made by independent
counsel mutually acceptable to the 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
the Company if a court of competent jurisdiction shall ultimately determine
that indemnification of such Indemnified Parties is prohibited by applicable
law.
The Surviving Corporation will maintain for a period of not less than six
years from the Effective Time of the Merger the Company's current directors'
and officers' insurance and indemnification policy (or a policy providing
substantially similar coverage) for all persons who are directors and officers
of the Company on the date of the Merger Agreement; provided that the
Surviving Corporation shall not be required to spend as an annual premium for
such insurance an amount in excess of 200% of the annual premium paid for such
insurance in effect prior to the date of the Merger Agreement; and provided
further that the Surviving Corporation shall nevertheless be obligated to
provide such coverage as may be obtained for such amount. These provisions of
the Merger Agreement are intended for the benefit of, and shall be enforceable
by, each Indemnified Party and his or her heirs and representatives.
Termination. The Merger Agreement may be terminated and the transactions
contemplated therein abandoned at any time prior to the Effective Time of the
Merger, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the 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 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
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failure of the party seeking to terminate the Merger Agreement to
perform its obligations under the Merger Agreement required to be
performed at or prior to the Effective Time of the Merger); or
(c) by the Company, if Purchaser shall not have (i) commenced the Offer
within five business days after the initial public announcement of
Purchaser's intention to commence the Offer, or (ii) accepted for
payment any Shares pursuant to the Offer (other than due to the
failure of the Company to perform its obligations under the Merger
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 the Company, substantially concurrently with the execution, prior
to Purchaser's purchase of Shares 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 the Merger
Agreement, including the notice provisions in the Merger Agreement,
and that it pays the Termination Fee pursuant to the provisions of the
Merger Agreement described under "Termination Fee" below; or
(e) by Parent, prior to Purchaser's purchase of any Shares pursuant to the
Offer, in the event of a material breach or failure to perform in any
material respect by the Company of any covenant or other agreement
contained in the Merger Agreement or in the event of a breach of any
representation or warranty of the 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 the Company; or
(f) by the Company, prior to Purchaser's purchase of any Shares pursuant
to the Offer, in the event of a material breach or failure to perform
in any material respect by Parent or Purchaser of any covenant or
other agreement contained in the Merger Agreement or in the event of a
breach of any representation or warranty of the 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 Parent or Purchaser; or
(g) by Parent, if the Company Board, or any subcommittee thereof
established to take action under the Merger Agreement, shall (i)
withdraw or modify in any adverse manner its approval or
recommendation of the Merger 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 Parent or the Company, in each case after two business days' notice
to the other party if the Offer expires without renewal.
Termination Fee. If any person (other than Purchaser 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 the Merger
Agreement is terminated pursuant to any of the following provisions:
(i) by the Company pursuant to clause (d) under "Termination" above; or
(ii) by Parent, pursuant to clause (g) under "Termination" above;
then the Company shall, simultaneously with such termination of the Merger
Agreement, pay Purchaser a fee of $3,700,000 in cash, which amount shall be
payable in same day funds (the "Termination Fee").
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the confidentiality
letter agreement, dated as of February 26, 1998, as supplemented by the
supplemental confidentiality letter agreement dated March 31, 1998, each
between the Company and Desc (as amended, the "Confidentiality Agreement").
This summary does not purport to be complete and is qualified in its entirety
by reference to the complete text of the confidentiality letters, copies of
which are filed with the Commission as Exhibits 99.11 and 99.12 to the
Schedule 14D-1 and
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are incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Confidentiality Agreement. The
Confidentiality Agreement may be examined and copies may be obtained at the
places and in the manner set forth under the heading, "Available Information"
in Section 9 of this Offer to Purchase.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Desc has agreed, subject to certain exceptions, to
keep confidential all nonpublic, confidential or proprietary information
concerning the Company which is furnished to Desc by or on behalf of the
Company, including certain information about the Company's acquisition
opportunities with respect to certain acquisition candidates (the
"Confidential Information"), and to use the Confidential Information solely
for the purpose of evaluating a possible transaction involving the Company and
Desc and will not be used in any way detrimental to the Company.
Desc has further agreed that, for a period of two years from the date of the
Confidentiality Agreement, unless Desc receives the prior written consent of
the Company, Desc will not, directly or indirectly, solicit any management
employee of the Company for employment with whom Desc has had contact or who
becomes known to Desc in connection with the Offer.
Desc has further agreed that, for a period of two years following the date
of the Confidentiality Agreement, unless specifically requested in advance by
the Company Board, neither it nor any of its "affiliates" or "associates" (as
those terms are defined under the Exchange Act) will, other than in connection
with the Offer and the Merger, (a) acquire, offer to acquire, or agree to
acquire, or cause or recommend that any other person acquire, directly or
indirectly, by purchase, gift, through the acquisition or control of another
person or otherwise, any voting securities of the Company, or arrange or
participate in the arranging of financing thereof, (b) make or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" to
vote or become a "participant" in an "election contest" (as such terms are
used in the proxy rules of the Commission) or seek to advise or influence any
person or entity with respect to the voting of any voting securities of the
Company, (c) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(3) of the Exchange Act, with respect to any such
voting securities of the Company, (d) deposit any voting securities in a
voting trust or subject to any such voting securities to any arrangement or
agreement with respect to the voting of such voting securities, (e) propose
any business combination (including without limitation pursuant to any merger
or share exchange) with the Company or make or propose a tender or exchange
offer or any other offer for any of the Company's voting securities, or
arrange, or participate in the arrangement of, financing thereof, (f) disclose
an intent, purpose, plan or proposal with respect to the Company or its voting
securities inconsistent with the provisions of the Confidentiality Agreement
or otherwise take any other action that could reasonably be expected to
require the Company to disclose any such intent, purpose, plan or proposal,
(g) otherwise act, alone or in concert with or on behalf of others, to seek
directly or indirectly to control the management, board of directors, policies
or affairs of the Company, (h) encourage or assist any other person in
connection with any of the foregoing or (i) request permission to do any of
the foregoing.
Desc has further agreed that it will not directly or indirectly pursue,
solicit or encourage, or take any other action with respect to, any
acquisition, merger or other combination with any acquisition candidate that
has been identified to it by the Company or its Representatives without the
prior written consent of the Company or unless the Company has notified Desc
in writing that the Company has broken off all discussions with such
acquisition candidate. Desc, subject to certain exceptions, may not directly
or indirectly contact any employee, officer or Representative of any
acquisition candidate identified to it by the Company or its Representatives
without the prior written consent of the Company.
VOTING AGREEMENT
The following summary of the Voting Agreement (the "Voting Agreement") by
and among Shansby Partners, L.L.C., TSG2 L.P., TSG2 Management, L.L.C., J.
Gary Shansby and Charles H. Esserman (each a "Shansby Affiliate" and
collectively, the "Shansby Affiliates") and the Company dated as of May 7,
1998 is
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qualified by reference to the Voting Agreement which is filed as Exhibit 99.13
to the Schedule 14D-1 and is incorporated herein by reference. Capitalized
terms used but not defined herein shall have the meaning given to them in the
Voting Agreement. The Voting Agreement may be examined and copies may be
obtained at the places and in the manner set forth under the heading,
"Available Information" in Section 9 of this Offer to Purchase.
Pursuant to the Voting Agreement, each of the Shansby Affiliates has agreed
(w) to tender in connection with the Offer all Shares beneficially owned by
such Shansby Affiliate and not to withdraw such Shares unless the Merger
Agreement has been terminated in accordance with its terms, (x) not to
exercise any Warrants held by such Shansby Affiliates unless the Merger
Agreement has been terminated, (y) that at the Effective Time of the Merger
the Warrants held by the Shansby Affiliates will automatically be cancelled in
exchange for the right to receive a cash amount equal to the product of (1)
the total number of Shares subject to such Warrants, multiplied by (2) the
excess of the Merger Consideration over the exercise price per Share subject
to such Warrants and (z) to cancel the Advisory Agreement (as defined in the
Merger Agreement) effective upon, and subject to, the consummation of the
Offer and the payment of a cancellation fee by the Company to Shansby Partners
of $1,400,000.
The Voting Agreement automatically terminates if the Merger Agreement is
terminated in accordance with its terms.
Based on the public filings with the Commission by the Company and the
Shansby Affiliates, the Shansby Affiliates collectively own 1,428,066 Shares
(approximately 17.8% of the outstanding Shares).
12. PLANS FOR THE COMPANY; OTHER MATTERS
PLANS FOR THE COMPANY
Parent is conducting a detailed review of the Company and its business and
operations with a view towards determining how to optimally realize any
potential synergies which exist between the operations of the Company and
those of Parent and its subsidiaries. Such review is not expected to be
completed until after the consummation of the Merger, and, following such
review, Parent will consider, what, if any, changes would be desirable in
light of the circumstances then existing.
Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Parent intends to promptly exercise its rights under
the Merger Agreement to obtain majority representation on, and control of, the
Company Board. Parent will exercise such rights by causing the Company to
elect to the Company Board one or more of Ignacio Hernandez, Jerry Wright,
Jose Alberto Aranda, Eduardo Medina-Mora Icaza, Ramon F. Estrada Rivero and
Ernesto Scharrer Tamm, directors of Purchaser. Further information with
respect to such directors is contained in Schedule I hereto. The Merger
Agreement provides that, promptly after the purchase by Purchaser of the
Minimum Shares pursuant to the Offer, Parent has the right to designate such
number of directors, rounded up to the next whole number, on the Company Board
as is equal to the product of the total number of directors on the Company
Board (giving effect to the directors designated by Parent) multiplied by the
ratio of (a) the number of Shares beneficially owned by Purchaser or any
affiliate of Purchaser (including such Shares which are accepted for payment
and paid for pursuant to the Offer) to (b) the total number of Fully Diluted
Shares. See Section 11. The Merger Agreement provides that the directors of
Purchaser at the Effective Time of the Merger will, from and after the
Effective Time of the Merger, be the initial directors of the Surviving
Corporation. Purchaser presently intends that upon consummation of the Merger,
it shall cause to be appointed its officers, and certain officers of the
Company as the initial officers of the Surviving Corporation.
Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open
market purchases, privately negotiated transactions, a tender offer or
exchange offer or otherwise, upon such terms and at such prices as it shall
determine, which may be more or less than the price to be paid pursuant to the
Offer. Purchaser and its affiliates also reserve the right to dispose of any
or all Shares acquired by them, subject to the terms of the Merger Agreement.
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Except as disclosed in this Offer to Purchase, and except as may be effected
in connection with the integration of operations referred to above, neither
Parent nor Purchaser has any present plans or proposals that would result in
an extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or its subsidiaries, or any material changes in the
Company's corporate structure, business or composition of its management or
personnel.
OTHER MATTERS
Shareholder Approval. Under the TBCA, the approval of the Company Board and
the affirmative vote of the holders of two-thirds of the outstanding Shares
are required to adopt and approve the Merger Agreement and the transactions
contemplated thereby. The Company has represented in the Merger Agreement that
the execution and delivery of the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger by the Company's
shareholders in accordance with the TBCA. Therefore, unless the Merger is
consummated pursuant to the short-form merger provisions under the TBCA as
described below (in which case no further corporate action by the shareholders
of the Company will be required to complete the Merger), the only remaining
required corporate action of the Company will be the approval of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of two-thirds of the Shares. In the event that Parent, Purchaser
and Parent's other subsidiaries or affiliates acquire in the aggregate at
least two-thirds of the Shares entitled to vote on the approval of the Merger
and the Merger Agreement, they would have the ability to effect the Merger
without the affirmative votes of any other shareholders.
Short-Form Merger. Article 5.16 of the TBCA provides that, if a corporation
owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such
corporation or such corporation into itself without any action or vote on the
part of the board of directors or the shareholders of such other corporation
(a "short-form merger"). In the event that Parent, Purchaser and any other
subsidiaries or affiliates of Parent acquire in the aggregate at least 90% of
the outstanding Shares, pursuant to the Offer or otherwise, then, at the
election of Parent, a short-form merger could be effected without any approval
of the Company Board or the shareholders of the Company, subject to compliance
with the provisions of Article 5.16 of the TBCA. Even if Parent and Purchaser
do not own 90% of the outstanding Shares following consummation of the Offer,
Parent and Purchaser could seek to purchase additional shares in the open
market or otherwise in order to reach the 90% threshold and employ a short-
form merger. The per share consideration paid for any Shares so acquired may
be greater or less than that paid in the Offer. Parent presently intends to
effect a short-form merger if permitted to do so under the TBCA.
Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer or the Merger.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may
under certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger
because it is anticipated that the Merger would be effected within one year
following consummation of the Offer and in the Merger, shareholders will
receive the same price per share paid in the Offer. If Rule 13e-3 were
applicable to the Merger, it would require, among other things, that certain
financial information concerning the Company, and certain information relating
to the fairness of the proposed transaction and the consideration offered to
minority shareholders in such a transaction, be filed with the Commission and
disclosed to minority shareholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS
As described above, the Merger Agreement provides that from May 7, 1998
until the Effective Time of the Merger, without the prior written consent of
Parent, the Company will not (i) declare, set aside or pay any
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dividends on, or make any other distributions in respect of, any of its
capital stock; (ii) 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; (iii) purchase, redeem
or otherwise acquire any shares of its capital stock or any other securities
or any rights, warrants or options to acquire any such shares or other
securities, except for the cash-out of Company Stock Options and Warrants (as
provided in the Merger Agreement) outstanding on the date of the Merger
Agreement; or (iv) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options 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 Shares upon
the exercise of Company Stock Options and Warrants outstanding on the date of
the Merger Agreement and in accordance with their present terms). See Section
11.
14. CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, and subject to the terms
of the Merger Agreement (including the obligation of Purchaser to extend the
Offer at the request of the Company) and any applicable rules and regulations
of the Commission, including Rule 14e-1(c) relating to Purchaser's obligation
to pay for or return tendered shares after termination of the Offer, Parent
and Purchaser shall not be required to accept for payment or pay for any
Shares tendered pursuant to the Offer and may delay acceptance for payment or
may terminate the Offer, if the Minimum Condition is not satisfied by the
Expiration Date, or if any applicable waiting period under the HSR Act has not
expired or terminated by the Expiration Date, or if, at any time after the
date of the Merger Agreement and before the Expiration Date, any of the
following events shall occur and be continuing:
a. there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger pursuant to an authoritative interpretation
by or on behalf of a Governmental Entity (as defined in the Merger
Agreement) that (i) prohibits the acquisition by Parent or Purchaser of
any Shares under the Offer, or restrains or prohibits the making or
consummation of the Offer or the Merger, (ii) prohibits or materially
limits the ownership or operation by the Company, Parent or any of
their respective subsidiaries of a material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries
or compels the Company, Parent or any of their respective subsidiaries
to dispose of or hold separate any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries,
in each case as a result of the Offer or the Merger or (iii) imposes
material limitations on the ability of Parent or Purchaser to acquire
or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer including, without
limitation, the right to vote such Shares on all matters properly
presented to the shareholders of the Company or (iv) prohibits Parent
or any of its subsidiaries from effectively controlling in any material
respect any material portion of the business or operations of the
Company; or
b. any of the representations and warranties of the Company contained in
the Merger 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 the Merger
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
such representations and warranties together in their entirety, do not
individually or in the aggregate, result in a Material Adverse Effect
(as defined in the Merger Agreement) on the Company; or
c. the Company shall have failed to perform in all material respects the
obligations required to be performed by it under the Merger Agreement
at or prior to the Expiration Date, including but not limited to its
obligations under the Merger Agreement regarding the nonsolicitation of
other Transaction Proposals, except for such failures to perform as
have not had or would not, individually
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or in the aggregate, have a Material Adverse Effect with respect to the
Company or materially adversely affect the ability of the Company to
consummate the Merger or the Purchaser to accept for payment or pay for
Shares pursuant to the Offer; or
d. the Company Board shall have (i) withdrawn, modified or amended in any
respect adverse to Parent or Purchaser its approval or recommendation
of the Merger Agreement, the Offer or the Merger, (ii) recommended or
approved any Transaction Proposal from a person other than Parent,
Purchaser or any of their respective affiliates, or (iii) resolved to
do any of the foregoing; or
e. the Merger Agreement shall have been terminated in accordance with its
terms; or
f. the 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 the Company or any of its
subsidiaries, which in the reasonable judgment of Parent or Purchaser
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.
The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of the Parent and Purchaser and, subject to the Merger Agreement, may
be waived by Parent or Purchaser, in whole or in part at any time and from
time to time, in the sole discretion of Parent or Purchaser; provided that,
without the express written consent of the Company, neither Parent nor
Purchaser may waive the Minimum Condition.
15. CERTAIN LEGAL MATTERS
General. Except as described in this Section 15, based on information
provided by the Company, none of the Company, Desc, Purchaser or Parent is
aware of any license or regulatory permit that appears to be material to the
business of the Company that might be adversely affected by Purchaser's
acquisition of Shares as contemplated herein or of any approval or other
action by a domestic or foreign governmental, administrative or regulatory
agency or authority that would be required for the acquisition and ownership
of the Shares by Purchaser as contemplated herein. Should any such approval or
other action be required, Purchaser and Parent presently contemplate that such
approval or other action will be sought, except as described below under
"State Antitakeover Statutes." While, except as otherwise described in this
Offer to Purchase, Purchaser does not presently intend to delay the acceptance
for payment of, or payment for, Shares tendered pursuant to the Offer pending
the outcome of any such matter, there can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that failure to obtain any such approval or
other action might not result in consequences adverse to the Company's
business or that certain parts of the Company's business might not have to be
disposed of, or other substantial conditions complied with, in the event that
such approvals were not obtained or such other actions were not taken in order
to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, Purchaser could
decline to accept for payment, or pay for, any Shares tendered. See Section 14
for certain conditions to the Offer, including conditions with respect to
governmental actions.
State Antitakeover Statutes. A number of states have adopted laws and
regulations that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, employees, principal executive offices or principal places of
business in such states. In Edgar v. MITE Corp., the Supreme Court of the
United States (the "Supreme Court") invalidated on constitutional grounds the
Illinois Business Takeover statute, which, as a matter of state securities
law, made certain corporate acquisitions more difficult. However, in 1987, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State
of Indiana may, as a matter of corporate law and, in particular, with respect
to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining shareholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of shareholders in the state and
were incorporated there.
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The State of Texas recently enacted Part Thirteen (Articles 13.01 et seq.)
of the TBCA (the "Business Combination Law") which has application to "issuing
public corporations" formed under the TBCA, such as the Company. The Business
Combination Law imposes a three-year moratorium on certain business
combination transactions between an issuing public corporation and an
"affiliated shareholder" (generally, a beneficial owner of 20% or more of the
then outstanding voting shares of the issuing public corporation) or any
affiliate or associate of the affiliated shareholder unless (i) the proposed
business combination, or the purchase or acquisition of voting shares on the
date such person became an affiliated shareholder (the "share acquisition
date"), was approved by the board of directors of the issuing public
corporation prior to the affiliated shareholder's share acquisition date or
(ii) the proposed business combination is approved by the affirmative vote of
at least two-thirds of the outstanding voting shares (excluding the shares
owned by the affiliated shareholder and its affiliates and associates) at a
meeting of shareholders (and not by written consent) duly called for that
purpose not less than six months after the affiliated shareholder's share
acquisition date. Application of the Business Combination Law is subject to a
number of exceptions.
Because the transactions contemplated by the Merger Agreement have been
unanimously approved by the Company Board, the restrictions under the Business
Combination Law will not affect the Offer or the Merger. The Business
Combination Law will apply to the Company for so long as it has (i) 100 or
more shareholders of record, (ii) any class of voting securities registered
under the Exchange Act or (iii) any class of voting securities qualified for
trading in a national market system, but not thereafter.
Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state other than Texas will by their terms apply to the
Offer, and, except as set forth above with respect to the Business Combination
Law, neither Parent nor Purchaser has currently complied with any state
antitakeover statute or regulation. Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer and nothing in this Offer to Purchase or any action taken in connection
with the Offer is intended as a waiver of such right. If it is asserted that
any state antitakeover statute is applicable to the Offer and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer, Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and Purchaser might be
unable to accept for payment or pay for Shares tendered pursuant to the Offer
or may be delayed in consummating the Offer. In such case, Purchaser may not
be obligated to accept for payment, or pay for, any Shares tendered pursuant
to the Offer. See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.
Parent and the Company expect to file promptly their Notification and Report
Forms with respect to the Offer under the HSR Act. The waiting period under
the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City
time, on the fifteenth day after the date Parent's form is filed, unless early
termination of the waiting period is granted. However, the DOJ or the FTC may
extend the waiting period by requesting additional information or documentary
material from Parent or the Company. If such a request is made, such waiting
period will expire at 11:59 p.m., New York City time, on the tenth day after
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized
by the HSR Act. Thereafter, such waiting period may be extended only by court
order or with the consent of Parent. In practice, complying with a request for
additional information or material can take a significant amount of time. In
addition, if the DOJ or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. The Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period
requirements imposed by the HSR Act with respect to the Offer have been
satisfied. See Section 14.
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The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws of transactions such as Purchaser's acquisition of Shares pursuant to the
Offer and the Merger. At any time before or after Purchaser's acquisition of
Shares, the DOJ or the FTC could take such action under the Antitrust Laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the acquisition of Shares pursuant to the Offer or otherwise seeking
divestiture of Shares acquired by Purchaser or divestiture of substantial
assets of Parent or its subsidiaries. Private parties, as well as state
governments, may also bring legal action under the Antitrust Laws under
certain circumstances. Based upon an examination of information provided by
the Company relating to the businesses in which Parent and the Company are
engaged, Parent and Purchaser believe that the acquisition of Shares by
Purchaser will not violate the Antitrust Laws. Nevertheless, there can be no
assurance that a challenge to the Offer or other acquisition of Shares by
Purchaser on antitrust grounds will not be made or, if such a challenge is
made, of the result.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or
restraint of trade.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by
margin stock. Such secured credit may not be extended or maintained in an
amount that exceeds the maximum loan value of all the direct and indirect
collateral securing the credit, including margin stock and other collateral.
As described in Section 10 of this Offer to Purchase, the financing of the
Offer will not be directly or indirectly secured by the Shares or other
securities which constitute margin stock. Accordingly, all financing for the
Offer will be in full compliance with the Margin Regulations.
16. FEES AND EXPENSES
J.P. Morgan is acting as Dealer Manager in connection with the Offer and is
providing certain financial advisory services to Purchaser and Parent in
connection with the Offer. Parent has agreed to pay J.P. Morgan a fee of
approximately $1.4 million for such services. Parent has also agreed to
reimburse J.P. Morgan for its reasonable out-of-pocket expenses, including
reasonable fees and expenses of its counsel and any other advisor retained by
J.P. Morgan in connection with its engagement, and to indemnify J.P. Morgan
and certain related persons against certain liabilities and expenses,
including certain liabilities and expenses under the federal securities laws.
In the ordinary course of its business, J.P. Morgan engages in securities
trading, market-making and brokerage activities and may, at any time, hold
long or short positions and may trade or otherwise effect transactions in
securities of Desc, the Company or their respective subsidiaries. As of May
12, 1998, J.P. Morgan had neither a long nor a short position in Shares held
for its own accounts.
The Purchaser and Parent have retained Morrow & Co., Inc. to act as the
Information Agent and Citibank, N.A. to act as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by
personal interview, mail, telephone, telex, telegraph and other methods of
electronic communication and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer materials to
beneficial holders. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their services. Purchaser has also
agreed to reimburse each such firm for certain reasonable out-of-pocket
expenses and to indemnify each such firm against certain liabilities in
connection with their services, including certain liabilities under federal
securities laws.
Except as set forth above, neither Parent nor Purchaser will pay any fees or
commissions to any broker or dealer or other person for making solicitations
or recommendations in connection with the Offer. Brokers, dealers, banks and
trust companies will be reimbursed by Purchaser for customary mailing and
handling expenses incurred by them in forwarding the Offer materials to their
customers.
31
<PAGE>
17. MISCELLANEOUS
The Offer is being made to all holders of Shares other than the Company.
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of the Shares
pursuant thereto, Purchaser will make a good faith effort to comply with such
state statute. In any jurisdiction where the securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of Purchaser by the Dealer Manager or one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF DESC, PARENT OR PURCHASER NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE
DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER,
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF DESC, PARENT, PURCHASER OR THE COMPANY SINCE THE DATE
OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE.
Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained at the
same places and in the same manner set forth in Section 9 of this Offer to
Purchase (except that they will not be available at the regional offices of
the Commission).
AUTHENTIC ACQUISITION CORPORATION
May 14, 1998
32
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE
OFFICERS OF DESC, PARENT, AAC DELAWARE AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF DESC. The following table sets forth
the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of
each director and executive officer of Desc. Unless otherwise indicated, each
such person is a citizen of Mexico and the business address of each such
person is c/o Desc, S.A. de C.V., Paseo de los Tamarindos 400-B, 28th Floor,
Bosques de las Lomas, Mexico, D.F. 05120. Unless otherwise indicated, each
such person has held his or her present occupation as set forth below, or has
been an executive officer at Desc, or the organization indicated, for the past
five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
A Share Directors
<C> <S>
Fernando Senderos Mestre........... Chairman of the Board and Chief Executive Officer
of Desc; Chairman of the Board of Parent. First
elected in 1973.
Manuel Senderos Irigoyen........... Private Investor and Founder of Desc. First elected
in 1973.
Eneko de Belausteguigoitia Arocena. Chairman of the Board of Elai, S.C. First elected
in 1973.
Carlos Gonzalez Zabalegui.......... Chief Executive Officer of Controladora Comercial
Mexicana, S.A. de C.V.; Director of Grupo
Financiero Inverlat, S.A. de C.V.; Director of
Grupo Financiero Banacci, S.A. de C.V.; Director of
Seguros Comercial America, S.A. de C.V. First
elected in 1996.
Carlos Gomez y Gomez............... Chairman of the Board of Grupo Financiero Santander
Mexicano, S.A. de C.V. First elected in 1973.
Luis Prado Vieyra.................. Chairman of the Board of Cia. Administradora Prado
Vieyra, S.A. de C.V. First elected in 1973.
Adolfo Patron Lujan................ Private Investor. First elected in 1982.
Ernesto Vega Velasco............... Secretary of the Board, Vice President, Chief
Operating and Chief Financial Officer of Desc.
First elected in 1973.
Alejandro Burillo Azcarraga........ Vice Chairman of the Board of Grupo Televisa, S.A.
de C.V. First elected in 1992.
Manuel Senderos Fernandez.......... Private Investor. First elected in 1993.
Federico Fernandez Senderos........ Private Investor. First elected in 1993.
Emilio Mendoza Saeb................ Vice President of Desc; Chief Executive Officer of
Unik, S.A. de C.V. First elected in 1994.
Andres Banos Samblancat............ Vice President of Desc; Chief Executive Officer of
Dine, S.A. de C.V. First elected in 1994.
Ruben Aguilar Monteverde........... Private Investor. First elected in 1978.
A Share Director Alternates
Jorge Ballesteros Franco........... Chief Executive Officer of Grupo Mexicano de
Desarrollo, S.A. de C.V. First elected in 1973.
</TABLE>
I-1
<PAGE>
<TABLE>
<C> <S>
Antonio Ruiz Galindo Terrazas.... Chairman of the Board of Grupo DSC, S.A. de
C.V. First elected in 1973.
Luis Dario Chazaro Senderos...... Private Investor. First elected in 1976.
Jose Luis Ballesteros Franco..... Chief Executive Officer of Grup Synkro, S.A.
de C.V. First elected in 1978.
Jose Pinto Mazal................. Chief Executive Officer of Beta San Miguel,
S.A. de C.V. Director of Polycrom, S.A. de
C.V. First elected in 1996.
B Share Directors
Alberto Bailleres Gonzalez....... Chairman of the Board of Industrias Penoles;
Chairman of the Board of Grupo Palacio de
Hierro, S.A. de C.V.; Chairman of the Board
of Grupo Nacional Provincial, S.A. de C.V.
First elected in 1973.
Romulo O'Farrill, Jr............. Chairman of the Board of Novedades Editores,
S.A. de C.V. First elected in 1973.
Francisco Trouyet Hauss.......... Chairman of the Board of Interindustrias,
S.A. de C.V. First elected in 1973.
Victor de la Lama Cortina........ Chairman of the Board of Administradora
Londres, S.A. de C.V. First elected in 1973.
Oscar Alarcon Velazquez.......... Private Investor. First elected in 1976.
Prudencio Lopez Martinez......... Chairman of the Board of Cia. Molinera
Mexicana, S.A. de C.V. First elected in
1973.
Guillermo Fernandez de la Parra.. Private Investor. First elected in 1973.
Guillermo Ballesteros Ibarra..... Director of Grupo Mexicano de Desarrollo,
S.A. de C.V. First elected in 1973.
Roger Patron Lujan............... Private Investor. First elected in 1984.
Javier Ruiz Galindo Terrazas..... Private Investor. First elected in 1994.
Enrique Ochoa Vega............... Vice President of Desc; Chief Executive
Officer of Girsa, S.A. de C.V. First elected
in 1994.
Gonzalo Gout Ortiz de Montellano. Chairman of the Board of Constructora y
Edificadora Mexicana, S.A. de C.V. First
elected in 1982.
B Share Director Alternates
Jose Gomez Gordoa................ Chairman of the Board of Bufete Gomez
Gordoa--Gomez Roch. First elected in 1982.
Jose Pintado Rivero.............. Chairman of the Board of Pintado y Asoc.
First elected in 1982.
C Share Directors
Carlos Sales Gutierrez........... Chief Executive Officer of Nacional
Financiera, S.N.C. First elected in 1997.
C Share Director Alternate
Jose Pliego Alvarez.............. Deputy Chief Executive Officer of Nacional
Financiera, S.N.C. First elected in 1998.
</TABLE>
I-2
<PAGE>
Executive Officers (not listed above)
<TABLE>
<C> <S>
Arturo D'Acosta Ruiz......... Corporate Director of Treasury and Accounting.
With the company for 16 years.
Eduardo Medina-Mora Icaza.... Corporate Director of Strategic Planning. With
the company for 8 years.
Juan Antonio Huitron Benitez. Corporate Director of Tax and Internal Auditing.
With the company for 18 years.
Alberto Morett Lopez......... Corporate Director of Administration and Human
Resources. With the company for 5 years.
Pedro Piedras Ros............ Corporate Director of Control (Girsa and Dine).
With the company for 18 years.
Agustin Rios Matence......... Corporate Director of Control (Unik). With the
company for 21 years.
Ernesto Scharrer Tamm........ Corporate Director of Control (Agrobios). With
the company for 16 years.
Ramon F. Estrada Rivero...... General Counsel of Desc; Secretary and General
Counsel of Parent, AAC Delaware and Purchaser.
With the company for 8 years.
</TABLE>
Fernando Senderos Mestre is the son of Manuel Senderos Irigoyen, the uncle of
Manuel Senderos Fernandez and Federico Fernandez Senderos, the cousin of Luis
Dario Chazaro Senderos and the brother-in-law of Carlos Gomez y Gomez. Manuel
Senderos Irigoyen is the grandfather of Manuel Senderos Fernandez and Federico
Fernandez Senderos, the uncle of Luis Dario Chazaro Senderos and the father-
in-law of Carlos Gomez y Gomez. Guillermo Ballesteros Ibarra is the uncle of
Jorge Ballesteros Franco and Jose Luis Ballesteros Franco, who are brothers.
Adolfo Patron Lujan is the brother of Roger Patron Lujan.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of
each director and executive officer of Parent. Each such person is a citizen
of Mexico and the business address of each such person is c/o Agrobios, S.A.
de C.V., Paseo de los Tamarindos 400-B, 28th Floor, Bosques de las Lomas,
Mexico, D.C. 05120. Unless otherwise indicated, each such person has held his
or her present occupation as set forth below, or has been an executive officer
at Parent or the organization indicated, for the past five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Directors
<C> <S>
Fernando Senderos Mestre.......... Chairman of the Board and Chief Executive Officer of
Desc; Chairman of the Board of Parent.
Manuel Senderos Irigoyen.......... Private Investor.
Eneko de Belausteguigoitia Arocena Chairman of the Board of Elai, S.C.
Carlos Gomez y Gomez.............. Chairman of the Board of Grupo Financiero Santander
Mexicano, S.A. de C.V.
Ernesto Vega Velasco.............. Secretary of the Board, Vice President, Chief
Operating and Chief Financial Officer of Desc.
Eduardo Medina-Mora Icaza......... Corporate Director of Strategic Planning of Desc.
Ernesto Scharrer Tamm............. Corporate Director of Control (Agrobios).
</TABLE>
I-3
<PAGE>
Executive Officers (not listed above)
<TABLE>
<C> <S>
Ramon F. Estrada Rivero...... Secretary and General Counsel of Parent, AAC
Delaware and Purchaser; General Counsel of Desc.
With the company for 8 years.
Juan Antonio Huitron Benitez. Corporate Director of Tax and Internal Auditing
of Desc; Chief Financial Officer of Parent. With
the company for 18 years.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF AAC DELAWARE AND PURCHASER. The
following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for
the past five years, of each director and executive officer of AAC Delaware
and Purchaser. Unless otherwise indicated, each such person is a citizen of
Mexico and the business address of each such person is c/o Authentic
Acquisition Corporation, 7150 Village Drive, Buena Park, California 90621.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with both Purchaser and AAC Delaware. Unless
otherwise indicated, each such person has held his or her present occupation
as set forth below, or has been an executive officer at AAC Delaware and
Purchaser or the organization indicated, for the past five years (or inception
with respect to AAC Delaware and Purchaser).
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Directors
<C> <S>
Ignacio Hernandez......... Chairman of the Board.
Jerry Wright(1)........... Chief Executive Officer; Chief Executive Officer of Embasa
Foods, Inc.
Jose Alberto Aranda....... Chief Financial Officer of Corfuerte, S.A. de C.V.
Eduardo Medina-Mora Icaza. Vice Chairman; Corporate Director of Strategic Planning of
Desc.
Ramon F. Estrada Rivero... Secretary and General Counsel of Parent, AAC Delaware and
Purchaser; General Counsel of Desc.
Ernesto Scharrer Tamm..... Corporate Director of Control (Agrobios).
Executive Officer (not listed above)
Robert DeVan(1)........... Chief Financial Officer and Assistant Secretary; Chief
Financial Officer of Embasa Foods, Inc.
</TABLE>
- --------
(1) United States citizen.
I-4
<PAGE>
Annex A
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
2900 Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
May 7, 1998
Board of Directors
Authentic Specialty Foods, Inc.
1313 Avenue R
Grand Prairie, TX 75050
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $1.00
per share (the "Shares"), of Authentic Specialty Foods, Inc. (the "Company")
of the consideration to be received by such shareholders pursuant to the
Agreement and Plan of Merger, dated as of May 7, 1998 (the "Agreement"), by
and between Agrobios S.A. de C.V. ("Buyer"), the Company and Authentic
Acquisition Corporation ("MergerCo"), a wholly owned subsidiary of Buyer.
Pursuant to the Agreement, Buyer or MergerCo will commence a tender offer (the
"Tender Offer") for any and all outstanding Shares at a price of $17.00 in
cash per share (the "Offer Price"). The Tender Offer is to be followed by a
merger (the "Merger") of MergerCo with and into the Company in which the
Shares not tendered into the Tender Offer would be converted, subject to
certain exceptions, into the right to receive the Offer Price. The Tender
Offer, together with the Merger is referred to herein as the "Transaction".
In arriving at our opinion, we have reviewed the draft dated May 6, 1998 of
the Agreement. We also have reviewed financial and other information that was
publicly available or furnished to us by the Company including information
provided during discussions with management. Included in the information
provided during discussions with management was certain financial projections
of the Company for the fiscal year ending December 31, 1998 (the "1998
Budget") prepared by the management of the Company. In addition, we have
compared certain financial and securities data of the Company with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of the Shares, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
A-1
<PAGE>
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
1998 Budget supplied to us, we have assumed that it has been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company as to the estimated operating and
financial performance of the Company. We have not assumed any responsibility
for making an independent evaluation of any assets or liabilities or for
making any independent verification of any of the information reviewed by us.
We have relied as to certain legal matters on advice of counsel to the
Company.
We were requested by the Board of Directors to solicit indications of
interest in the Company from a limited number of parties considered to be the
most likely potential acquirors of the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Transaction and the other business strategies being considered
by the Company's Board of Directors, nor does it address the Board's decision
to proceed with the Transaction. Our opinion does not constitute a
recommendation to any shareholder as to whether such shareholder should tender
in the Tender Offer or how such shareholder should vote on the proposed
Transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the holders of Shares
pursuant to the Transaction is fair to such shareholders from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ Michael L. Crow
By: _________________________________
Michael L. Crow
Senior Vice President
A-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<C> <S> <C>
By Overnight Courier
By Mail: Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Corporate Trust Window
P.O. Box 7072 Distribution, Inc. 111 Wall Street, 5th Floor
Paramus, New Jersey 07653 404 Sette Drive New York, New York 10043
Paramus, New Jersey
07652
For information:
(800) 422-2077
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification on Substitute Form
W-9 may be directed to the Information Agent or the Dealer Manager at the
address and telephone numbers set forth below. Shareholders may also contact
their broker, dealer, commercial bank or trust company for assistance
concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms please call:
Toll Free: (800) 662-5200
The Dealer Manager for the Offer is:
J.P. MORGAN SECURITIES INC.
60 Wall Street, 26th Floor
New York, NY 10260-0060
(800) 832-7845
<PAGE>
EXHIBIT 99.2
[LOGO OF DESC] LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED MAY 14, 1998
OF
AUTHENTIC ACQUISITION CORPORATION,
A WHOLLY OWNED, INDIRECT SUBSIDIARY
OF
AGROBIOS, S.A. DE C.V.,
A WHOLLY OWNED SUBSIDIARY
OF
DESC, S.A. DE C.V.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JUNE 11, 1998, UNLESS THE OFFER IS EXTENDED. SHARES
WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR
TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
By Overnight Courier
By Mail: Delivery: By Hand:
<C> <S> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Corporate Trust Window
P.O. Box 7072 Distribution, Inc. 111 Wall Street, 5th Floor
Paramus, New Jersey 07653 404 Sette Drive New York, New York 10043
Paramus, New Jersey
07652
For information:
(800) 422-2077
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by shareholders of Authentic
Specialty Foods, Inc., if certificates for Shares (as such term is defined
below) are to be forwarded herewith or, unless an Agent's Message (as defined
in Instruction 2 below) is utilized, if delivery of Shares is to be made by
book-entry transfer to an account maintained by the Depositary at a Book-Entry
Transfer Facility (as defined in and pursuant to the procedures set forth in
Section 3 of the Offer to Purchase). Shareholders who deliver Shares by book-
entry transfer are referred to herein as "Book-Entry Shareholders" and other
shareholders who deliver shares are referred to herein as "Certificate
Shareholders."
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation
(as defined in Section 3 of the Offer to Purchase) with respect to, their
Shares and all other documents required hereby to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES
CERTIFICATE REPRESENTED BY NUMBER OF
NUMBER(S)(1) SHARE SHARES
TOTAL SHARES CERTIFICATES TENDERED(2)
-----------------------------------------
<S> <C> <C> <C>
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Shareholders
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Share Certificates delivered to the Depositary are being
tendered hereby. See Instruction 4.
<PAGE>
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: ____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_] The Depository Trust Company [_] Philadelphia Depository Trust Company
Account Number: ________________ Transaction Code Number: _________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): ___________________________________________
Window Ticket Number (if any): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution which Guaranteed Delivery: ____________________________
If delivered by Book-Entry Transfer, check box of Applicable Book-Entry
Transfer Facility:
[_] The Depository Trust Company [_] Philadelphia Depository Trust Company
Account Number: ________________ Transaction Code Number: _________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET
FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Authentic Acquisition Corporation, a Texas
corporation ("Purchaser"), and a wholly owned, indirect subsidiary of
Agrobios, S.A. de C.V. ("Parent"), a corporation organized under the laws of
the United Mexican States ("Mexico"), and a wholly owned subsidiary of Desc,
S.A. de C.V., a corporation organized under the laws of Mexico, the above-
described shares of common stock, par value $1.00 per share (the "Shares"), of
Authentic Specialty Foods, Inc., a Texas corporation (the "Company"), pursuant
to Purchaser's offer to purchase all of the outstanding Shares at a price of
$17.00 per Share, net to the seller in cash, without interest thereon (the
"Offer Price") upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 14, 1998, and in this Letter of Transmittal
(which, together with any amendments or supplements thereto or hereto,
collectively constitute the "Offer"). The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole at any time, or
in part from time to time, to one or more of its wholly owned subsidiaries,
the right to purchase all or any portion of the Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer. Receipt of the Offer is hereby
acknowledged.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 7, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other
Shares or other securities issued or issuable in respect thereof on or after
May 7, 1998 (collectively, "Distributions")) and irrevocably constitutes and
appoints the Depositary the true and lawful Agent and attorney-in-fact of the
undersigned with respect to such Shares (and all Distributions), with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver certificates for
such Shares (and any and all Distributions), or transfer ownership of such
Shares (and any and all Distributions) on the account books maintained by any
of the Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares (and any and all Distributions) for
transfer on the books of the Company, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
and all Distributions), all in accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints the designees of Purchaser, and each of them, the attorneys-in-fact
and proxies of the undersigned, each with full power of substitution, to vote
at any annual or special meeting of the Company's shareholders or any
adjournment or postponement thereof or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, to execute any written consent concerning any matter
as each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, all of the Shares (and any and all Distributions)
tendered hereby and accepted for payment by Purchaser. This appointment will
be effective if and when, and only to the extent that, Purchaser accepts such
Shares for payment pursuant to the Offer. This power of
<PAGE>
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment shall, without further action, revoke any
prior powers of attorney and proxies granted by the undersigned at any time
with respect to such Shares (and any and all Distributions), and no subsequent
powers of attorney, proxies, consents or revocations may be given by the
undersigned with respect thereto (and, if given, will not be deemed
effective). The undersigned acknowledges and agrees that Purchaser reserves
the right to require that, in order for Shares or other securities to be
deemed validly tendered, immediately upon Purchaser's acceptance for payment
of such Shares, Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares (and, to the extent applicable, any
and all Distributions), including voting at any meeting of the Company's
shareholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that the undersigned owns the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the
tendered Shares complies with Rule 14e-4 under the Exchange Act, and that when
the same are accepted for payment by Purchaser, Purchaser will acquire good,
marketable and unencumbered title thereto and to all Distributions, free and
clear of all liens, restrictions, charges and encumbrances and the same will
not be subject to any adverse claims. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions. In addition, the
undersigned shall remit and transfer promptly to the Depositary for the
account of Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending
such remittance and transfer or appropriate assurance thereof, Purchaser shall
be entitled to all rights and privileges as owner of each such Distribution
and may withhold the entire purchase price of the Shares tendered hereby or
deduct from such purchase price the amount or value of such Distribution as
determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer (and if the Offer is extended or amended, the terms or conditions of any
such extension or amendment). Without limiting the foregoing, if the price to
be paid in the Offer is amended in accordance with the Merger Agreement, the
price to be paid to the undersigned will be the amended price notwithstanding
the fact that a different price is stated in this Letter of Transmittal. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return
any certificates for Shares not tendered or accepted for payment in the
name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of all
Shares purchased and/or return any certificates for Shares not tendered or not
accepted for payment (and any accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above under "Description of
Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of all Shares purchased and/or return
any certificates evidencing Shares not tendered or not accepted for payment
(and any accompanying documents, as appropriate) in the name(s) of, and
deliver such check and/or return any such certificates (and any accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated herein in the box entitled "Special Payment Instructions," please
credit any Shares tendered herewith by book-entry transfer that are not
accepted for payment by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that Purchaser has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder thereof if Purchaser does not
accept for payment any of the Shares so tendered.
[_] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
<PAGE>
____________________________________ ____________________________________
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if the To be completed ONLY if
check for the purchase price of certificates for Shares not
Shares accepted for payment is to tendered or not accepted for
be issued in the name of someone payment and/or the check for the
other than the undersigned, if purchase price of Shares accepted
certificates for Shares not for payment is to be mailed to
tendered or not accepted for someone other than the
payment are to be issued in the undersigned, or to the
name of someone other than the undersigned at an address other
undersigned or if Shares tendered than that shown under
hereby and delivered by book- "Description of Shares Tendered."
entry transfer that are not
accepted for payment are to be
returned by credit to an account
maintained at a Book-Entry
Transfer Facility other than the
account indicated above.
Issue: [_] Check, and/or Mail: [_] Check and/or
[_] Share Certificate(s) to: [_] Share Certificates to:
Name _____________________________ Name _____________________________
(Please Type or Print) (Please Type or Print)
Address ___________________________ Address __________________________
__________________________________ __________________________________
(Include Zip Code) (Include Zip Code)
__________________________________ __________________________________
(Tax Identification or Social (Tax Identification or Social
Security Number) Security Number)
(See Substitute Form W-9 on (See Substitute Form W-9 on
Reverse Side) Reverse Side)
Credit Shares delivered by
book-entry transfer and not
purchased to the Book-Entry
Transfer Facility account set
forth below:
Check appropriate box:
[_] Depository Trust Company
[_] Philadelphia Depository
Trust Company
Account Number: __________________
____________________________________ ____________________________________
<PAGE>
________________________________________________________________________________
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
SIGNATURE(S) OF HOLDER(S)
Dated:___________________, 199__
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Shareholder(s))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates (or, if applicable, Rights Certificates) or on a security position
listing by (a) person(s) authorized to become (a) registered holder(s)
by certificates and documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 5.)
NAME(S) ________________________________________________________________________
________________________________________________________________________________
CAPACITY (FULL TITLE) __________________________________________________________
(See Instruction 5)
ADDRESS ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
AREA CODE AND TELEPHONE NOS. ( ) ___________________________________________
( ) ___________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NO. ______________________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.
________________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the "Book-Entry Transfer Facilities" systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of a financial institution (including most commercial
banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by shareholders of
the Company either if Share certificates are to be forwarded herewith or,
unless an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section
3 of the Offer to Purchase. For a shareholder validly to tender Shares
pursuant to the Offer, either (a) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any required
signature guarantees or an Agent's Message (in connection with book-entry
transfer) and any other required documents, must be received by the Depositary
at one of its addresses set forth herein prior to the Expiration Date and
either (i) certificates for tendered Shares must be received by the Depositary
at one of such addresses prior to the Expiration Date or (ii) Shares must be
delivered pursuant to the procedures for book-entry transfer set forth herein
and in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must
be received by the Depositary prior to the Expiration Date or (b) the
tendering shareholder must comply with the guaranteed delivery procedures set
forth herein and in Section 3 of the Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-
entry transfer procedures on a timely basis may tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth herein and in Section
3 of the Offer to Purchase.
Pursuant to such guaranteed delivery procedures, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to all tendered Shares), together
with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any other required documents
must be received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the Nasdaq National Market is open for business.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering shareholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER.) If fewer than all the Shares evidenced by any Share certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares that are to be tendered in the box entitled "Number of Shares
Tendered." In any such case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificates will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date or the
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
<PAGE>
If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of the authority of such person so
to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or not accepted for payment are to be issued in the name of a
person other than the registered holder(s). Signatures on any such Share
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the transfer and
sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such other
person) payable on account of the transfer to such other person will be
deducted from the purchase price of such Shares purchased unless evidence
satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT
BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES
EVIDENCING THE SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS; WIRE TRANSFERS. If a check for
the purchase price of any Shares accepted for payment is to be issued in the
name of, and/or Share certificates for Shares not accepted for payment or not
tendered are to be issued in the name of and/or returned to, a person other
than the signer of this Letter of Transmittal or if a check is to be sent,
and/or such certificates are to be returned, to a person other than the signer
of this Letter of Transmittal, or to an address other than that shown above,
the appropriate boxes on this Letter of Transmittal should be completed. Any
shareholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at a Book-Entry
Transfer Facility as such shareholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-
Entry Transfer Facility designated above as the account from which such Shares
were delivered.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and phone numbers set forth below, or from brokers, dealers,
commercial banks or trust companies.
9. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser reserves
the absolute right in its sole discretion to waive, at any time or from time
to time, any of the specified conditions of the Offer, in whole or in part, in
the case of any Shares tendered.
10. BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a shareholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the Depositary with such shareholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify,
under penalties of perjury, that such TIN is correct and that such shareholder
is not subject to backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the shareholder upon filing an
income tax return.
The shareholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
If the tendering shareholder has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future, the shareholder or other
payee must also complete the Certificate of Awaiting Taxpayer Identification
Number below in order to avoid backup withholding. Notwithstanding that the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary. However, such amounts will be
refunded to such shareholder if a TIN is provided to the Depositary within 60
days.
<PAGE>
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The shareholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER,
AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE
EXPIRATION DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES
FOR GUARANTEED DELIVERY.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with
such shareholder's correct taxpayer identification number on Substitute Form
W-9 below. If such shareholder is an individual, the taxpayer identification
number is his social security number. If a tendering shareholder is subject to
backup withholding, such shareholder must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not
provided with the correct taxpayer identification number, the shareholder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Certain shareholders (including, among others, all corporations, and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. Exempt shareholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below, and sign, date and return the Substitute Form W-9
to the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct taxpayer
identification number by completing the form contained herein certifying that
the taxpayer identification number provided on Substitute Form W-9 is correct
(or that such shareholder is awaiting a taxpayer identification number).
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
such shareholder should write "Applied For" in the space provided for in the
TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% on all payments of the purchase price
until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME:
________________________________________________________________________________
PART 1--PLEASE PROVIDE YOUR Social Security
TIN IN THE RIGHT AND Number
CERTIFY BY SIGNING AND (If awaiting TIN write
DATING BELOW. "Applied For")
SUBSTITUTE _______________________
FORM W-9 OR
DEPARTMENT OF THE
TREASURY _______________________
INTERNAL REVENUE SERVICE Employer Identification
PAYER'S REQUEST Number TIN
FOR TAXPAYER (If awaiting TIN write
IDENTIFICATION "Applied For")
NUMBER (TIN) _______________________________________________________
AND CERTIFICATION PART II--CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding either
because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
_______________________________________________________
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding
because of under-reporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding
you received another notification from the IRS that
you are no longer subject to backup withholding, do
not cross out item (2). (Also see instructions in the
enclosed GUIDELINES.)
SIGNATURE _______________ DATE ________________, 199__
NAME (Please Print) __________________________________
________________________________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31%. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU INDICATED "APPLIED
FOR" IN PLACE OF A TIN IN SUBSTITUTE FORM W-9.
________________________________________________________________________________
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION
NUMBER HAS NOT BEEN ISSUED TO ME AND EITHER (1) I HAVE MAILED OR DELIVERED
AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE
APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY
ADMINISTRATION OFFICE OR (2) I INTEND TO MAIL OR DELIVER AN APPLICATION IN
THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER
IDENTIFICATION NUMBER BY THE TIME OF PAYMENT, 31% OF ALL REPORTABLE
PAYMENTS MADE TO ME WILL BE WITHHELD, BUT THAT SUCH AMOUNTS MAY BE REFUNDED
TO ME IF I THEN PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN SIXTY (60)
DAYS.
SIGNATURE _____________________________ DATE: ______________________________
NAME (Please Print) ___________________
________________________________________________________________________________
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth below:
The Depositary Agent for the Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
By Overnight Courier
By Mail: Delivery: By Hand:
<C> <S> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Corporate Trust Window
P.O. Box 7072 Distribution, Inc. 111 Wall Street, 5th Floor
Paramus, New Jersey 07653 404 Sette Drive New York, New York 10043
Paramus, New Jersey
07652
For information:
(800) 422-2077
</TABLE>
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Sole Dealer Manager for the Offer is:
J.P. MORGAN SECURITIES INC.
60 Wall Street, 26th Floor
New York, New York 10260-0060
(800) 832-7845
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
TO
AUTHENTIC ACQUISITION CORPORATION,
A WHOLLY OWNED, INDIRECT SUBSIDIARY
OF
AGROBIOS, S.A. DE C.V.,
A WHOLLY OWNED SUBSIDIARY
OF
DESC, S.A. DE C.V.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $1.00 per share (the "Shares"),
of Authentic Specialty Foods, Inc., a Texas corporation, are not immediately
available, if the procedure for book-entry transfer cannot be completed prior
to the Expiration Date (as defined in the Offer to Purchase), or if time will
not permit all required documents to reach the Depositary prior to the
Expiration Date. Such form may be delivered by hand, transmitted by facsimile
transmission or mailed to the Depositary. See Section 3 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier Delivery: By Hand:
Citibank, N.A.
c/o Citicorp Data Citibank, N.A. Citibank, N.A.
Distribution, Inc. c/o Citicorp Data Distribution, Inc. Corporate Trust Window
P.O. Box 7072 404 Sette Drive 111 Wall Street, 5th Floor
Paramus, New Jersey Paramus, New Jersey 07652 New York, New York 10043
07653
By Facsimile:
(For Eligible Institutions Only)
(201) 262-3240
For information:
(800) 422-2077
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE
TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A
VALID DELIVERY TO THE DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
The Guarantee below must be completed.
Ladies and Gentlemen:
The undersigned hereby tenders to Authentic Acquisition Corporation, a Texas
corporation, and a wholly owned subsidiary of Agrobios, S.A. de C.V., a
corporation organized under the laws of the United Mexican States ("Mexico"),
and a wholly owned subsidiary of Desc, S.A. de C.V., a corporation organized
under the laws of Mexico, upon the terms and subject to the conditions set
forth in the Purchaser's Office to Purchase, dated May 14, 1998 and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Offer"), receipt of which is hereby
acknowledged, the number of shares specified below of common stock, par value
$1.00 per share (the "Shares"), of Authentic Specialty Foods, Inc., a Texas
corporation, pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Number of Shares): Name(s) of Holders:
_______________________________________ _____________________________________
Certificate Nos. (if available): ______ _____________________________________
Please Type or Print
Check ONE box if Shares will be delivered
by book-entry transfer: Address(es): ________________________
_____________________________________
[_] The Depository Trust Company (Zip Code)
[_] Philadelphia Depository Trust Company
Area Code and Telephone No.: ________
Account No.: __________________________ Signature(s): _______________________
Dated: ________________________________ _____________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form
for transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message, and any other documents
required by the Letter of Transmittal, within three trading days after the
date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _________________________ Authorized Signature: _______________
Address: ______________________________ Title: ______________________________
_______________________________________ Name: _______________________________
(Zip Code) Please Type or Print
Area Code and Telephone No. ___________ Dated: ______________________________
NOTE: DO NOT SEND CERTIFICATES EVIDENCING SHARES WITH THIS NOTICE.
CERTIFICATES EVIDENCING SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99.4
J.P. MORGAN SECURITIES INC.
60 WALL STREET, 26TH FLOOR
NEW YORK, NEW YORK 10260-0060
(800) 832-7845
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
AT
$17.00 NET PER SHARE IN CASH
BY
AUTHENTIC ACQUISITION CORPORATION,
A WHOLLY OWNED, INDIRECT SUBSIDIARY
OF
AGROBIOS, S.A. DE C.V.,
A WHOLLY OWNED SUBSIDIARY
OF
DESC, S.A. DE C.V.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JUNE 11, 1998, UNLESS THE OFFER IS EXTENDED.
SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
May 14, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by Authentic Acquisition Corporation, a Texas
corporation ("Purchaser") and a wholly owned, indirect subsidiary of Agrobios,
S.A. de C.V. ("Parent"), a corporation organized under the laws of the United
Mexican States ("Mexico"), and a wholly owned subsidiary of Desc, S.A. de
C.V., a corporation organized under the laws of Mexico, to act as Dealer
Manager in connection with Purchaser's offer to purchase all outstanding
shares of common stock, par value $1.00 per share (the "Shares"), of Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), at $17.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated May 14, 1998 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE) THAT NUMBER OF SHARES WHICH WHEN ADDED TO THE NUMBER OF
SHARES (IF ANY) BENEFICIALLY OWNED BY PARENT AND PURCHASER REPRESENTS AT LEAST
TWO-THIRDS OF THE SHARES OUTSTANDING ON THE DATE SHARES ARE ACCEPTED FOR
PAYMENT (ASSUMING EXERCISE OF ALL OUTSTANDING OPTIONS AND WARRANTS NOT SUBJECT
TO CANCELLATION AGREEMENTS). THE OFFER IS ALSO SUBJECT TO THE OTHER TERMS AND
CONDITIONS CONTAINED IN THE OFFER TO PURCHASE.
<PAGE>
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase dated May 14, 1998;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date;
4. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. A letter to shareholders of the Company from Robert K. Swanson,
Chairman of the Board and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 which has
been filed with the Securities and Exchange Commission.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral (followed by written
confirmation) or written notice to the Depositary of Purchaser's acceptance of
such Shares for payment pursuant to the Offer. Payment for Shares purchased
pursuant to the Offer will in all cases be made only after timely receipt by
the Depositary of (i) certificates for such Shares, or timely confirmation of
a book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company,
pursuant to the procedures described in Section 3 of the Offer to Purchase,
(ii) a properly completed and duly executed Letter of Transmittal (or a
properly completed and manually signed facsimile thereof) or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
transfer and (iii) all other documents required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. Purchaser will, however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
customary mailing and handling costs incurred by them in forwarding the
enclosed materials to their customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of
the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JUNE 11, 1998, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
<PAGE>
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery
procedures specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
J.P. MORGAN SECURITIES INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU THE
AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE
DEPOSITARY, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT 99.5
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
AT
$17.00 NET PER SHARE IN CASH
BY
AUTHENTIC ACQUISITION CORPORATION,
A WHOLLY OWNED, INDIRECT SUBSIDIARY
OF
AGROBIOS, S.A. DE C.V.,
A WHOLLY OWNED SUBSIDIARY
OF
DESC, S.A. DE C.V.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JUNE 11, 1998, UNLESS THE OFFER IS EXTENDED.
SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
May 14, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated May 14, 1998
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") in connection with
the offer by Authentic Acquisition Corporation, a Texas corporation
("Purchaser") and a wholly owned, indirect subsidiary of Agrobios, S.A. de
C.V. ("Parent"), a corporation organized under the laws of the United Mexican
States ("Mexico") and a wholly owned subsidiary of Desc, S.A. de C.V., a
corporation organized under the laws of Mexico ("Desc"), to purchase for cash
all outstanding shares of common stock, par value $1.00 per share (the
"Shares"), of Authentic Specialty Foods, Inc., a Texas corporation (the
"Company"). We are the holder of record of Shares held for your account. A
tender of such Shares can be made only by us as the holder of record and
pursuant to your instructions. The enclosed Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender Shares
held by us for your account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is invited to the following:
1. The offer price is $17.00 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of May 7, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that Purchaser
will be merged (the "Merger") with and into the Company after the
completion of the Offer and the satisfaction of certain conditions. As a
result of the Merger, each Share issued and outstanding immediately prior
to the Effective Time (as defined in the Merger Agreement) (other than
Shares held by (i) Parent or any subsidiary of Parent, including Purchaser
and (ii) the Company or any subsidiary of the Company) will be converted
into the right to receive the price paid in the Offer in cash, without
interest.
<PAGE>
4. The Board of Directors of the Company has unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and has determined that the terms of the Offer and
the Merger, taken together, are fair to, and in the best interest of, the
Company's shareholders and unanimously recommends that the shareholders
accept the Offer and tender their Shares pursuant to the Offer.
5. The Offer and withdrawal rights expire at 12:00 Midnight, New York
City time, on Thursday, June 11, 1998, unless the Offer is extended.
6. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number
of Shares which, when added to Shares beneficially owned by Parent and
Purchaser (if any), represents at least two-thirds of the Shares
outstanding (assuming exercise of all outstanding options and warrants not
subject to cancellation agreements) on the date Shares are accepted for
payment. The offer is also subject to the other conditions set forth in the
Offer to Purchase.
7. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Except as disclosed in the Offer to Purchase, Purchaser is not aware of any
state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares
will be tendered unless otherwise specified on the reverse side of this
letter. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.
-2-
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AUTHENTIC SPECIALTY FOODS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated May 14, 1998 and the related Letter of Transmittal in
connection with the Offer by Authentic Acquisition Corp., a Texas corporation
and a wholly owned, indirect subsidiary of Agrobios, S.A. de C.V., a
corporation organized under the laws of Mexico, and a wholly owned subsidiary
of Desc, S.A. de C.V., a corporation organized under the laws of Mexico, to
purchase all outstanding shares of common stock, par value $1.00 per share
(the "Shares"), of Authentic Specialty Foods, Inc., a Texas corporation (the
"Company").
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
___________________________________ __________________________________
NUMBER OF SHARES TO BE SIGN HERE
TENDERED:* _______________________ __________________________________
__________________________________
Signature(s)
__________________________________
__________________________________
Please Type or Print Name(s)
Please Type or Print Address _____
__________________________________
__________________________________
Area Code and Telephone No. ______
__________________________________
Taxpayer Identification or Social
Security Number
Dated: __________, 199_
___________________________________ __________________________________
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
-3-
<PAGE>
EXHIBIT 99.6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social security numbers have nine digits separated by two hyphens: i.e. 000-
00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
- ------------------------------------------------
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
5. Sole proprietorship The owner(3)
account
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
<S> <C>
6. Sole proprietorship The owner
account
7. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
8. Corporate account The corporation
9. Partnership account The partnership
held in the name of
the business
10. Association, club, The organization
religious, charitable,
or other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. The name of the business or the "doing
business as" name may also be entered. Either the social security number
or the employer identification number may be used.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all dividend and
interest payments and on broker transactions include the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodian account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments described in section 6049(b)(6) to nonresident aliens.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 859).
. Payments described in section 6049(b)(7) to resident aliens.
. Payments on tax-free covenant bonds under section 1466.
. Payments made to a nominee.
Exempt payees described above should file the Substitute Form W-9 to avoid
possible erroneous backup withholding. Complete the Substitute Form W-9 as
follows:
ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ACROSS THE FACE OF
THE FORM, SIGN, DATE, AND RETURN THE FORM TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup with-
holding. For details, see the sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N and the regulations thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax reforms. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a
false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS.--If the payer discloses or uses
taxpayer identification numbers in violation of Federal law, the payer may be
subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.7
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated May 14, 1998 and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser (as defined
below) is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by J.P. Morgan
Securities Inc. or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
Notice of Offer to Purchase
Each Outstanding Share of Common Stock
of
Authentic Specialty Foods, Inc.
for
$17.00 Net in Cash
by
Authentic Acquisition Corporation,
a wholly owned, indirect subsidiary
of
Agrobios, S.A. de C.V.,
a wholly owned subsidiary
of
[LOGO OF DESC] DESC, S.A. de C.V.
Authentic Acquisition Corporation, a Texas corporation ("Purchaser"), and a
wholly owned, indirect subsidiary of Agrobios, S.A. de C.V. ("Parent"), a
corporation organized under the laws of the United Mexican States ("Mexico"),
and a wholly owned subsidiary of Desc, S.A. de C.V., a corporation organized
under the laws of Mexico ("Desc"), hereby offers to purchase all outstanding
shares of common stock, par value $1.00 per share (the "Shares"), of Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), at a price of $17.00
per Share (the "Offer Price"), net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated May 14, 1998 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). See the Offer to Purchase for capitalized
terms used but not defined herein.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 11, 1998,
UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES
WHICH, WHEN ADDED TO THE NUMBER OF SHARES (IF ANY) BENEFICIALLY OWNED BY PARENT
AND PURCHASER, REPRESENTS AT LEAST TWO-THIRDS OF THE SHARES OUTSTANDING
(ASSUMING EXERCISE OF ALL OUTSTANDING OPTIONS AND WARRANTS NOT SUBJECT TO
CANCELLATION AGREEMENTS) ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT.
The purpose of the Offer is to enable Parent, through Purchaser, to acquire
control of, and the entire equity interest in, the Company. The Offer is being
made pursuant to an Agreement and Plan of Merger, dated as of May 7, 1998 (the
"Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant
to the Merger Agreement and the Texas Business Corporation Act, as soon
as practicable after the completion of the Offer and satisfaction or waiver, if
permissible, of all conditions, Purchaser will be merged with and into the
Company (the "Merger"), and the Company will be the surviving corporation in the
Merger. At the effective time of the Merger, each Share then outstanding
(other than Shares held by (i) Desc or any subsidiary of Desc, including Parent
and Purchaser, and (ii) the Company or any subsidiary of the Company) will be
converted into the right to receive $17.00 in cash or any higher price per
Share paid in the Offer, without interest. The Merger Agreement is more fully
described in the Offer to Purchase.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to Citibank, N.A.
(the "Depositary") of Purchaser's acceptance for payment of such Shares pursuant
to the Offer. Upon the terms and subject to the conditions of the Offer,
payment for Shares accepted for purchase pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering shareholders for the deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving the payment from Purchaser and transmitting it to tendering
shareholders whose Shares have been accepted for payment. Under no
circumstances will interest be paid by Purchaser by reason of any delay in
making the purchase. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in Section 3 of the Offer to
Purchase) pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (ii) a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined in Section 3 of
the Offer to Purchase) and (iii) any other documents required by the Letter of
Transmittal.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves the
right, in its sole discretion, at any time and from time to time, to extend the
period of time during which the Offer is open, including the occurrence of any
condition specified in Section 14 of the Offer to Purchase, by giving oral or
written notice of such extension to the Depositary. In addition, the Merger
Agreement provides that if the conditions to the Offer remain unsatisfied prior
to the Expiration Date, then if requested by the Company, Purchaser will,
subject to Purchaser's right to terminate the Merger Agreement, extend the Offer
from time to time until such conditions are satisfied or waived; provided that
Purchaser will not be required to extend the Offer beyond July 13, 1998. Any
such extension will be followed as promptly as practicable by public
announcement thereof, such announcement thereof to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of tendering shareholders to withdraw their Shares.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, June 11, 1998, unless and until Purchaser shall have, pursuant to the
Merger Agreement, extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, will expire.
Tenders of Shares made pursuant to the Offer are irrevocable except that such
Shares may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by Purchaser pursuant to the Offer, may also be
withdrawn at any time after July 13, 1998. For a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover page of the Offer to Purchase. Any such notice of withdrawal must specify
the name of the person who tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If certificates for
Shares have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in Section 3 of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including the time of receipt) of any notice of withdrawal will be determined
by Purchaser, in its sole discretion, whose determination will be final and
binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended, is
contained in the Offer to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal will be mailed to
record holders of Shares whose names appear on the Company's shareholder list
and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list or who are listed as participants in a clearing agency's security position
listing.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Questions and requests for assistance or for additional copies of the Offer to
Purchase and the related Letter of Transmittal and other tender offer materials
may be directed to the Information Agent or the Dealer Manager as set forth
below, and copies will be furnished promptly at Purchaser's expense. No fees or
commissions will be paid to brokers, dealers or other persons (other than the
Information Agent and the Dealer Manager) for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms please call: (800) 662-5200
The Sole Dealer Manager for the Offer is:
J.P. Morgan Securities Inc.
60 Wall Street, 26th Floor
New York, New York 10260-0060
(800) 832-7845
May 14, 1998
<PAGE>
EXHIBIT 99.8
TEXT OF PRESS RELEASE
DESC AGREES TO LAUNCH TENDER OFFER
FOR AUTHENTIC SPECIALTY FOODS, INC.
MEXICO CITY (May 8, 1998) DESC, S.A. de C.V. (NYSE:DES; BMV:DESC) today
announced that it has agreed to launch a cash tender offer for Authentic
Specialty Foods, Inc. (NASDAQ:ASFD) pursuant to a merger agreement entered
into on May 7, 1998.
The tender offer will be made by Authentic Acquisition Corporation, a wholly-
owned indirect subsidiary of DESC, within five business days. The tender will
be made at a price of $17.00 per share in cash for up to all shares of
Authentic Specialty Foods (ASF), for a total price of $142 million, and is
expected to be completed in June 1998. J.P. Morgan & Co. Incorporated is
DESC's financial advisor. Donaldson, Lufkin & Jenrette Securities Corporation
served as financial advisor to Authentic Specialty Foods.
The offer is subject to the termination of the waiting period under U.S.
antitrust laws and certain conditions, including the tender of at least two-
thirds of the outstanding Authentic Specialty Foods shares. As soon as
practicable after the completion of the offer, Authentic Acquisition
Corporation will consummate a second-step merger in which the remaining
shareholders of ASF will also receive $17.00 per share in cash.
ASF is a leading provider of high-quality branded, authentic Mexican food
products. The company sells salsas and Mexican sauces, tortillas and tortilla
chips, cheeses, meats, and other shelf-stable products under labels that
include La Victoria and Calidad. It has strong distribution, primarily in
Texas and California, to the grocery, food service, mass merchandise and club
store channels of trade. ASF is based in Grand Prairie, Texas. Adjusted pro
forma consolidated 1997 net sales were almost $90 million. For the three
months ended March 31, 1998, ASF had net sales of $21 million and EBITDA of
approximately $3 million.
The acquisition of ASF provides DESC with a product portfolio complementary to
that of its recently acquired Corfuerte subsidiary and makes it the leading
supplier of authentic branded Mexican food products in the U.S. It clearly
positions DESC and Corfuerte to capitalize upon the growing demand for
authentic ethnic foods in the U.S. The acquisition is part of DESC's strategy
to serve both the Mexican and U.S. consumer markets with premium branded food
products, and to grow its presence in both markets.
Corfuerte's products are distributed in Texas and California through its U.S.
subsidiary, Embasa Foods. Embasa's primary products are jalapenos, nopalitos,
chipotle peppers and salsas. The ASF acquisition provides opportunities for
synergies between ASF and Embasa Foods in the areas of sales, marketing and
operations, which management believes will amount to $4 million. Embasa Foods
is based in Buena Park, California. Pro forma revenues for Corfuerte,
including ASF, are expected to be $200 million in 1998.
Fernando Senderos, Chairman and Chief Executive Officer of DESC said, "This
acquisition is part of DESC's strategy to expand its branded food businesses,
such as authentic Mexican foods, and it provides a platform for future growth
in the U.S. and Mexico. We plan to become the leading manufacturer and
distributor of branded Mexican foods, and ASF will help us achieve that goal.
We expect the transaction to be well received by both ASF and DESC
shareholders, to receive all regulatory approvals and to close quickly."
Commenting on the transaction, Robert K. Swanson, Chairman and Chief Executive
Officer of Authentic Specialty Foods, said, "The Board of Directors of ASF
believes this transaction is in the best interests of ASF's shareholders and
employees, and unanimously recommends that all shareholders tender their
shares to DESC. DESC has a clear commitment to growing ASF's business and
developing its brands, as well as the management, resources and experience to
do so."
<PAGE>
DESC, S.A. de C.V., is one of the largest industrial groups in Mexico, and
through its subsidiaries is engaged in the autoparts, chemicals, food,
consumer products and real estate businesses. It is based in Mexico City and
its 1997 revenues were over $1.9 billion.
Statements contained in this press release, including statements relating to
DESC's expectations regarding anticipated performance in the future, are
"forward looking statements," as such term is defined in the Private
Securities Litigation Reform Act of 1995. Actual results could differ
materially from DESC's statements in this release regarding its expectations,
goals, or projected results, due to various factors, including those set forth
in DESC's Company's Cautionary Statements contained in its Form 20-F, filed
with the Securities and Exchange Commission on June 27, 1997.
This press release is neither an offer to purchase nor a solicitation of an
offer to sell securities. The tender offer will be made pursuant to definitive
documents to be filed with the Securities and Exchange Commission.
FOR FURTHER INFORMATION:
DESC
<TABLE>
<S> <C>
Arturo D'Acosta Ruiz John T. McInerney, Howard S. Anger,
Eduardo Gonzalez Noah Fields
DESC, S.A. de C.V. Dewe Rogerson Inc.
Tel 011-525-261-8000 Tel 212-688-6840
Fax 011-525-561-8096 Fax 212-838-3393
Web Site: www.desc.com.mx E-Mail: [email protected]
E-Mail: [email protected]
ASF
Robert K. Swanson Morgen-Walke Associates, Inc.
Chairman and Chief Executive Officer Carolyn Bass, Jim Byers, Doug Sherk
Authentic Specialty Foods, Inc. Tel 415-296-7383
Tel 415-544-9966 Sandra Badurina, Deborah Szajngarten
Tel 212-850-5600
</TABLE>
# # #
<PAGE>
EXHIBIT 99.9
TEXT OF PRESS RELEASE
FOR IMMEDIATE RELEASE
---------------------
DESC LAUNCHES TENDER OFFER
FOR AUTHENTIC SPECIALTY FOODS, INC.
MEXICO CITY, May 14, 1998 -- DESC, S.A. de C.V. (NYSE:DES; BMV:DESC) today
announced that it had commenced a cash tender offer for Authentic Specialty
Foods, Inc. (NASDAQ:ASFD) pursuant to a merger agreement previously entered
into.
The tender offer is being made at a price of $17.00 net per share by Authentic
Acquisition Corporation, a wholly owned indirect subsidiary of DESC. The offer
and withdrawal rights are scheduled to expire at 12:00 midnight, New York City
time on Thursday, June 11, 1998, unless the offer is extended by DESC.
Shareholders wishing to accept the offer should tender their shares through
Citibank, N.A. DESC has retained J.P. Morgan & Co. Incorporated as its
financial advisor. Donaldson, Lufkin & Jenrette Securities Corporation is
financial advisor to ASFD.
The offer is subject to the termination of the waiting period under U.S.
antitrust laws and certain conditions, including the tender of at least two-
thirds of the outstanding ASFD shares.
This press release is neither an offer to purchase nor a solicitation of an
offer to sell securities. The tender offer is made only through the Offer to
Purchase and related Letter of Transmittal. For information regarding the
pricing, tender and delivery procedure and conditions of the tender offer,
reference is made to the Offer to Purchase and related Letter of Transmittal and
other related documents. Documents can be obtained by contacting Morrow & Co.,
Inc., the information agent for the tender offer, at (800) 566-9061.
<PAGE>
For further information please call:
DESC
Arturo D'Acosta Ruiz John T. McInerney, Howard S. Anger,
Eduardo Gonzalez Noah Fields
DESC, S.A. de C.V. Dewe Rogerson Inc.
Tel 011-525-261-8000 Tel 212-688-6840
Fax 011-525-261-8096 Fax 212-838-3393
Web Site: www.desc.com.mx E-mail: [email protected]
E-mail: [email protected]
Thomas Ball
John Ferguson
Morrow & Co., Inc.
Tel 800-566-9061
ASFD
Robert K. Swanson Morgen-Walke Associates, Inc.
Chairman and Chief Executive Officer Carolyn Bass, Jim Byers, Doug Sherk
Authentic Specialty Foods, Inc. Tel 415-296-7383
Tel 415-544-9966 Sandra Badurina, Deborah Szajngarten
Tel 212-850-5600
# # #
<PAGE>
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
__________________________________________________________________
__________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
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
-i-
<PAGE>
Page
----
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
-ii-
<PAGE>
Page
----
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
-iii-
<PAGE>
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:
-2-
<PAGE>
ARTICLE I
THE OFFER
1.1 The Offer.
---------
1.1.1 General. Provided that this Agreement shall not have been
-------
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. Buyer and MergerCo 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
-3-
<PAGE>
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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<PAGE>
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
-------------------------
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. Buyer 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
------------------------
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.
-----------------
1.2.1 Approval and Recommendation of the Board. Company hereby
----------------------------------------
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
-5-
<PAGE>
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. Donaldson, Lufkin & Jenrette 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
-------------------------
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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<PAGE>
1.2.3 Shareholder Lists. In connection with the Offer and the Merger,
-----------------
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.
---------
(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
-7-
<PAGE>
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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<PAGE>
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth
----------
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
-------
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 Paul,
Hastings, Janofsky & Walker LLP, 695 Town Center Drive, 17th Floor, Costa Mesa,
California 92626, 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
----------------------------
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
---------------------
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.
---------------------------------
(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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<PAGE>
(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
---------
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
--------
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
-----------------------
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
------------------------
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
------------------------------
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
----------------------------------
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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<PAGE>
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
----------------------------------------------
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
---------------------------------------------------
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.
--------------------------
(a) Stock Options. As soon as practicable following the date of this
-------------
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
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<PAGE>
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 "Amstutz Consents") of Lawrence Amstutz, Ruth C. Amstutz and
Barry L. Brock, who are each parties to that certain Warrant Agreement
dated October 30, 1997 with Company (the "Amstutz Warrant Agreement") to
have such warrants covered thereby canceled in accordance with the terms of
the immediately preceding sentence; provided, that if the Amstutz Consents
are not so obtained the Company shall promptly redeem such warrants in
accordance with the current terms of the Amstutz Warrant Agreement
following acceptance for payment of, and payment for, the shares in the
Offer. The Shansby Warrant Agreements and the Amstutz 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
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<PAGE>
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 Amstutz 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 Merger
Consideration is to be remitted to a name other than that in which the
Certificates surrendered for exchange is
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<PAGE>
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 Buyer, 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 Buyer (who
-14-
<PAGE>
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 Buyer, 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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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 Hart-Scott-Rodino 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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
(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;
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<PAGE>
(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;
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<PAGE>
(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
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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
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<PAGE>
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
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<PAGE>
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.
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4.14 Opinion of Financial Advisor. Company has received the opinion of
----------------------------
Donaldson, Lufkin & Jenrette 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
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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.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
Buyer 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
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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 Buyer 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 J. P. Morgan 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.
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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
Amstutz 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
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<PAGE>
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
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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.
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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 Shansby 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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<PAGE>
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
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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 Buyer 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, Buyer
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.
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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
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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
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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
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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
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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.
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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 Buyer's and MergerCo's Obligation. The obligation of
----------------------------------------------
Buyer and MergerCo to effect the Merger is subject to Buyer or MergerCo having
been obligated
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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 Buyer, 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
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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,
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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
-------
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: Ramon F. Estrada Rivero, Esq.
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17/th/ Floor
Costa Mesa, California 92626
Attn: Peter J. Tennyson, Esq.
(b) if to Company, to
Authentic Specialty Foods, Inc.
1313 Avenue R.
Grand Prairie, Texas 75050
Attn: Samuel E. Hillin, President
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002
Attn: J. Mark Metts, Esq.
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<PAGE>
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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<PAGE>
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/ Ramon F. Estrada Rivero
-------------------------------------
Ramon F. Estrada Rivero
General Counsel and Secretary
AUTHENTIC ACQUISITION CORPORATION
By: /s/ Jerry P. Wright
-------------------------------------
Jerry P. Wright
Chief Executive Officer
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ Robert K. Swanson
-------------------------------------
Robert K. Swanson
Chairman of the Board and
Chief Executive Officer
Desc, 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 Ramon F. Estrada Rivero
-------------------------------------
Ramon F. Estrada Rivero
General Counsel
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ANNEX I
-------
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;
-53-
<PAGE>
(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.
-54-
<PAGE>
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.
-55-
<PAGE>
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)
-56-
<PAGE>
"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
-57-
<PAGE>
"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
-58-
<PAGE>
"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
-59-
<PAGE>
"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)
-60-
<PAGE>
EXHIBIT 99.11
AUTHENTIC SPECIALTY FOODS, INC.
February 26, 1998
Desc, S.A. de C.V.
Paseo De Los Tamarindos
400-B
Bosques De Alas Lomas
05120 Mexico D.F.
Ladies and Gentlemen:
1. Authentic Specialty Foods, Inc. ("ASFD") and Desc, S.A. de C.V.
("Desc"), are currently evaluating a possible strategic merger or other
strategic business combination with each other (a "Transaction"). In connection
with such proposed Transaction, ASFD proposes to furnish Desc certain written
and oral information (the "Information"), which is either confidential,
proprietary or otherwise not generally available to the public. In connection
therewith, Desc agrees, subject to the further provisions hereof, to treat the
Information supplied by or on behalf of ASFD in strictest confidence.
2. The term "Information" shall include any and all reports, analyses,
compilations, studies and information developed or prepared by or on behalf of
ASFD or by or on behalf of Desc that include, incorporate, refer to, reflect or
are based (in whole or in part) upon the Information, but shall not include
information, if any, that Desc can demonstrate (a) becomes generally available
to the public in a manner other than as a result of a disclosure by Desc or by
Desc's Representatives (as defined below) to whom Desc has disclosed such
information in accordance with the provisions of this letter; (b) was available
to Desc on a non-confidential basis prior to its disclosure to Desc by ASFD; or
(c) becomes available to Desc on a non-confidential basis from a source other
than ASFD if Desc has no reason to believe such source is bound by or subject to
a confidentiality agreement or other confidentiality obligations or duties with
ASFD.
3. Desc agrees that the Information supplied by or on behalf of ASFD will
not be used by Desc or its officers, directors, agents, representatives
(including, without limitation, attorneys, accountants, experts, consultants,
financial advisors and persons contemplating providing financing in connection
with any Transaction) or employees (collectively, "Representatives") in any way
directly or indirectly except to evaluate or implement a Transaction and that
the Information supplied by ASFD shall be kept strictly confidential for the
term hereof by Desc and by them; provided, however, that (a) any of the
Information supplied by ASFD may be disclosed to such of Desc's Representatives
who, in Desc's reasonable judgment, need to know the Information for the purpose
of evaluating or implementing a Transaction, who shall be informed by Desc of
the confidential and proprietary nature of the Information, and (b) any
disclosure of the Information may be made upon the prior written consent of
ASFD. Desc further agrees to be fully responsible for any breach of this letter
by any of its Representatives.
<PAGE>
Desc, S.A. de C.V.
February 26, 1998
Page 2
4. Unless otherwise required by applicable law or the rules of any
applicable securities exchange or order of a court or other tribunal of
competent jurisdiction, without the prior written consent of the other, neither
party hereto will disclose, and each will direct its respective Representatives
not to disclose, to any person the fact that any Information has been provided
to or received from such other party, that any discussions or negotiations are
taking place concerning a Transaction or any of the terms, conditions or other
facts with respect to a Transaction, including the status thereof. The term
"person" as used in this letter shall be broadly interpreted to include without
limitation any corporation, company, entity, trust, group, partnership or
individual.
5. Desc also agrees that, for two years after the date hereof, unless
specifically requested in advance by ASFD's Board of Directors, neither such
party nor any of its "affiliates" or "associates" (as those terms are defined
under the Securities Exchange Act of 1934) will (a) acquire, offer to acquire,
or agree to acquire, or cause or recommend that any other person acquire,
directly or indirectly, by purchase, gift, through the acquisition or control
of another person or otherwise, any voting securities of ASFD, or arrange or
participate in the arranging of financing thereof, (b) make or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" to vote
or become a "participant" in an "election contest" (as such terms are used in
the proxy rules of the Securities and Exchange Commission) or seek to advise or
influence any person or entity with respect to the voting of any voting
securities of ASFD, (c) form, join or in any way participate in a "group" within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, with respect to any such voting securities of the ASFD, (d) deposit any
voting securities in a voting trust or subject any such voting securities to any
arrangement or agreement with respect to the voting of such voting securities,
(e) propose any business combination (including without limitation pursuant to
any merger or share exchange) with ASFD or make or propose a tender or exchange
offer or any other offer for any of the ASFD's voting securities, or arrange, or
participate in the arrangement of, financing thereof, (f) disclose an intent,
purpose, plan or proposal with respect to ASFD or its voting securities
inconsistent with the provisions of this letter or otherwise take any other
action that could be reasonably be expected to require ASFD to disclose any such
intent, purpose, plan or proposal, (g) otherwise act, alone or in concert with
or on behalf of others, to seek directly or indirectly to control the
management, board of directors, policies or affairs of the ASFD, (h) encourage
or assist any other person in connection with any of the foregoing or (i)
request permission to do any of the foregoing.
6. Upon the request of ASFD, all of the Information will immediately be
returned to ASFD, and no copies shall be retained by Desc or its
Representatives; provided, however, that notwithstanding the foregoing, any
portion of the Information that consists of reports, analyses, compilations,
studies or information developed or prepared by or for Desc or its
Representatives that include, incorporate, refer to, reflect or are based upon
(in whole or in part) the Information will be
<PAGE>
Desc, S.A. de C.V.
February 26, 1998
Page 3
destroyed immediately, and Desc shall promptly certify to ASFD that such
destruction has taken place in accordance with the terms of this letter
agreement.
7. Desc understands that ASFD makes no representation or warranty as to
the accuracy or completeness of any information furnished by ASFD to Desc or its
Representatives. Desc agrees that ASFD shall not have any liability to it or any
of its Representatives resulting from the use of the Information by Desc or by
them. Solely for the purposes of this paragraph, the term "information" is
deemed to include all information furnished by ASFD to Desc or its
Representatives, regardless of whether such information is or continues to be
subject to the confidentiality provisions hereof.
8. If Desc or anyone to whom Desc transmits the Information pursuant to
this letter becomes compelled by applicable law or securities exchange
regulation or order of a court or other tribunal of competent jurisdiction to
disclose any of the Information, Desc will provide ASFD with prompt notice of
such requirement so that ASFD may seek a protective order or other appropriate
remedy or waive compliance with the provisions of this letter. In the event that
such protective order or other remedy is not obtained, or that ASFD waives
compliance with the provisions of this letter, Desc will furnish only that
portion of the Information that it is advised by written opinion of legal
counsel is required by applicable law or rules of any applicable securities
exchange or any such order, and such disclosure will not result in any liability
hereunder unless such disclosure was caused by or resulted from a previous
disclosure by Desc or by its Representatives that was not permitted by this
letter. Additionally, Desc will exercise its all reasonable efforts to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded any such Information that is disclosed.
9. Each party hereby acknowledges that it is aware (and its respective
Representatives who are apprised of this matter have been, or upon becoming so
apprised will be advised) of the restrictions imposed by the United States
federal securities laws and other applicable domestic and foreign laws on a
person possessing material non-public information about a public company.
10. This letter sets forth the entire understanding and agreement of the
parties hereto and supersedes all previous communications, negotiations and
agreements, whether oral or written, with respect to the subject matter hereof.
Each party understands and agrees that no contract or agreement providing for a
Transaction shall be deemed to exist by or among any persons unless and until a
definitive agreement containing mutually satisfactory provisions has been
executed and delivered, and each party hereto hereby waives, in advance, any
claims (including, without limitation, breach of contract) in connection with
the negotiation or consummation of a Transaction unless and until the parties
hereto have entered into such a definitive agreement. The parties hereto also
agree that unless and until such a definitive agreement has been executed and
delivered, neither party has any legal obligation of any kind whatsoever with
respect to any such Transaction by virtue of this letter
<PAGE>
Desc, S.A. de C.V.
February 26, 1998
Page 4
or any other written or oral expression with respect to such Transaction,
except, in the case of this letter, for the matters specifically agreed to
herein. For purposes of this paragraph, the term "definitive agreement" does not
include an executed letter of intent or any other preliminary written agreement,
nor does it include any written or oral acceptance of an offer or bid by any
party hereto.
10. Desc agrees that it will not directly or indirectly contact any
employee, officer or Representative of ASFD with respect to the Transaction, and
that Desc's contacts with respect to the Transaction will be limited solely to
J. Gary Shansby and Charles H. Esserman unless otherwise expressly authorized in
writing prior to any such contact by either Mr. Shansby or Mr. Esserman.
11. Desc will not, during the two year period after the date hereof,
directly or indirectly, solicit for employment or hire any employee of ASFD with
whom Desc has had contact or who became known to Desc in connection with the
consideration of the Transaction. Each reference in this Agreement to "ASFD"
shall include any of its subsidiaries.
12. Each party acknowledges that the other party would not have an
adequate remedy at law for money damages if any of the covenants in this letter
were not performed in accordance with its terms and therefore agrees that the
other party shall be entitled to specific enforcement of such covenants in
addition to any other remedy to which it may be entitled, at law or in equity.
13. This letter shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to any principles of
conflicts-of-law. The parties agree that any appropriate state or federal
district court located in Dallas County, Texas shall have jurisdiction over any
case or controversy arising hereunder or in connection herewith and shall be the
proper forum in which to adjudicate such case or controversy. Each party agrees
that it will promptly 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.
<PAGE>
Desc, S.A. de C.V.
February 26, 1998
Page 5
If the foregoing correctly sets forth our agreement, please execute two
originals of this letter in the space provided below, retain one fully executed
original for your files and return the other to the undersigned. This letter
may be executed in multiple counterparts, each of which shall be an original and
all of which taken together shall constitute one instrument.
Sincerely,
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ Charles H. Esserman
---------------------------
Charles H. Esserman
Vice President
ACCEPTED AND AGREED TO
as of the 27 day of February, 1998
-- --------
DESC, S.A. DE C.V.
By: /s/ Eduardo Medina-Mora
--------------------------
Name: Eduardo Medina-Mora
Title: Attorney-in-fact
<PAGE>
EXHIBIT 99.12
AUTHENTIC SPECIALTY FOODS, INC.
March 31, 1998
Desc, S.A. de C.V.
Paseo De Los Tamarindos
400-B
Bosques De Alas Lomas
05120 Mexico D.F.
Ladies and Gentlemen:
1. Reference is made to that certain confidentiality agreement (the
"Confidentiality Agreement") dated February 26, 1998 by and between Authentic
Specialty Foods, Inc. ("ASFD") and Desc, S.A. de C.V. ("Desc"). Terms defined in
the Confidentiality Agreement (regardless of whether capitalized) but not
defined herein shall have the respective meaning set forth in the
Confidentiality Agreement.
2. Subject to the terms of the Confidentiality Agreement, ASFD has
disclosed to Desc that ASFD is currently pursuing certain acquisition
opportunities with respect to certain acquisition candidates, and that during
the course of discussions between ASFD and Desc regarding a possible
Transaction, ASFD may pursue other acquisition opportunities with additional
acquisition candidates (each current and potential candidate is referred to
herein as an "Acquisition Candidate"). ASFD may from time to time disclose to
Desc, subject to the terms of the Confidentiality Agreement, the identities of,
and information with respect to, one or more of the Acquisition Candidates, as
well as information with respect to the status of discussions and negotiations
with the Acquisition Candidates and the financing of any transaction with the
Acquisition Candidates (collectively, "Acquisition Candidate Information").
Without limiting the generality of the provisions of the Confidentiality
Agreement, and for purposes of clarifying the provisions of the Confidentiality
Agreement, the parties acknowledge and agree that the Acquisition Candidate
Information shall constitute "Information" for purposes of the Confidentiality
Agreement.
3. Desc agrees that the Acquisition Candidate Information will not be
used by Desc or its Representatives in any way directly or indirectly except to
evaluate or implement a Transaction and that the Information supplied by ASFD
shall be kept strictly confidential for the term hereof by Desc and by them.
Without limiting the generality of the foregoing or the generality of the
provisions of the Confidentiality Agreement, and for purposes of clarifying the
provisions of the Confidentiality Agreement, Desc further agrees it will not
directly or indirectly pursue, solicit or encourage, or take any other action
with respect to, any acquisition, merger or other combination with any
Acquisition Candidate that has been identified to Desc by ASFD or its
Representatives without the prior written consent of ASFD or unless ASFD has
notified Desc in writing that ASFD
<PAGE>
Desc, S.A. de C.V.
March 31, 1998
Page 2
has broken off all discussions with such Acquisition Candidate. Desc further
agrees to be fully responsible for any breach of this letter by any of its
Representatives.
4. Desc agrees that it will not directly or indirectly contact any
employee, officer or Representative of any Acquisition Candidate identified to
Desc by ASFD or its Representatives without the prior written consent of ASFD.
The provisions of this paragraph 4 shall not apply to contacts in the ordinary
course of business pursuant to relationships that Desc can demonstrate existed
prior to the date of this letter or by persons who Desc can demonstrate do not
have direct or indirect access to any Acquisition Candidate Information.
5. Each party acknowledges that the other party would not have an
adequate remedy at law for money damages if any of the covenants in this letter
were not performed in accordance with its terms and therefore agrees that the
other party shall be entitled to specific enforcement of such covenants in
addition to any other remedy to which it may be entitled, at law or in equity.
6. This letter shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to any principles of conflict-
of-laws. The parties agree that any appropriate state or federal district court
located in Dallas County, Texas shall have jurisdiction over any case or
controversy arising hereunder or in connection herewith and shall be the proper
forum in which to adjudicate such case or controversy. Each party agrees that it
will promptly 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.
If the foregoing correctly sets forth our agreement, please execute two
originals of this letter in the space provided below, retain one fully executed
original for your files and return the other to the undersigned. This letter may
be executed in multiple counterparts, each of which shall be an original and all
of which taken together shall constitute one instrument.
Sincerely,
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ CHARLES H. ESSERMAN
----------------------------
Charles H. Esserman
Secretary
<PAGE>
Desc, S.A. de C.V.
March 31, 1998
Page 3
ACCEPTED AND AGREED TO
as of the 3rd day of April, 1998
--- -----
DESC, S.A. DE C.V.
By: /s/ Jose Alberto Aranda
----------------------------
Name: Jose Alberto Aranda
Title:
<PAGE>
EXHIBIT 99.13
May 7, 1998
Shansby Partners, L.L.C.
TSG2 L.P.
TSG2 Management, L.L.C.
J. Gary Shansby
Charles H. Esserman
c/o The Shansby Group
250 Montgomery Street
San Francisco, CA 94104
Re: Offer to Purchase Shares of Authentic Specialty Foods, Inc.
Ladies and Gentlemen:
Authentic Acquisition Corporation, a Texas corporation ("Purchaser"), and a
wholly owned subsidiary of Agrobios, S.A. de C.V. ("Buyer"), has offered to
purchase all of the outstanding shares of common stock (the "Shares") of
Authentic Specialty Foods, Inc., a Texas corporation ("Company"), at a price of
$17 per Share (the "Offer Price"), upon the terms and subject to the conditions
set forth in the Agreement and Plan of Merger among Purchaser, Buyer and Company
of even date herewith (the "Merger Agreement") (which, together with any
amendments or supplements permitted by the Merger Agreement, collectively
constitute the "Offer").
As a condition to the consummation of the Offer and the other transactions
contemplated by the Merger Agreement, Purchaser has required (i) in connection
with the Offer that each of you agree to tender all Shares beneficially owned by
you and not to withdraw such Shares unless the Merger Agreement has been
terminated in accordance with its terms, (ii) unless the Merger Agreement has
been terminated, Shansby Partners, L.L.C. ("Shansby Partners") agrees not to
exercise any warrants now held by Shansby Partners, but instead that all such
warrants shall be subject to clause (iii) below, (iii) at the "Effective Time of
the Merger" (as defined in the Merger Agreement) all of the warrants for Shares
governed by the Warrant Agreements dated September 2, 1997, September 30, 1997,
October 29, 1997 and January 9, 1998, respectively, between Shansby Partners and
Company automatically be canceled in exchange for the right to receive an amount
(the "Cash Amount") equal to the product of (a) the number of Shares to be
received by Shansby Partners upon exercise of such warrants and (b) the
difference between the Offer Price and the respective "Exercise Price" (as
defined in the respective Warrant Agreement) and (iv) subject to the purchase of
and payment for the Shares by Purchaser pursuant to the Offer (as well as the
payment of the Cash Amount), the cancellation of the
<PAGE>
Advisory Agreement dated August 15, 1997 between Shansby Partners and Company
(the "Advisory Agreement") and all rights to receive transaction fees thereunder
in consideration for the payment at the Effective Time of the Merger of
$1,400,000.00 (the "Advisory Amount"); provided, however, that the
indemnification obligations set forth therein on the date hereof shall survive
such cancellation.
By execution of this Agreement in the space provided below (w) in
connection with the Offer, each of you agrees to tender all Shares beneficially
owned by you and not to withdraw such Shares unless the Merger Agreement has
been terminated in accordance with its terms, (x) unless the Merger Agreement
has been terminated, Shansby Partners agrees not to exercise any warrants now
held by Shansby Partners, but instead all such warrants shall be subject to
clause (y) below, (y) Shansby Partners agrees that at the Effective Time of the
Merger the warrants held by Shansby Partners shall automatically be canceled in
exchange for the right to receive the Cash Amount in accordance with the
provisions of the Merger Agreement and (z) effective upon and subject to the
purchase of and payment for the Shares (as well as the payment of the Cash
Amount) by Purchaser pursuant to the Offer, and effective upon payment of the
Advisory Amount, Shansby Partners agrees to cancel the Advisory Agreement,
provided, however, that the indemnification obligations set forth therein on the
date hereof shall survive such cancellation. Company hereby agrees at the
respective times indicated above to take all actions contemplated in this
paragraph to be taken by Company, including, without limitation, the payment of
the Cash Amount and the Advisory Amount, at the Effective Time of the Merger.
Also, by execution of this Agreement below, each of you hereby acknowledges
and agrees that Company and Purchaser would not have an adequate remedy at law
for money damages if any of the covenants or agreements in this Agreement were
not performed in accordance with the terms hereof and therefore agrees that
Purchaser and/or Company shall be entitled to specific performance of such
covenants and agreements in addition to any other remedy to which it may be
entitled, at law or equity.
The parties hereto hereby acknowledge that Buyer and Purchaser are relying
on this Agreement in making the Offer and agree that Buyer and Purchaser may
rely on this Agreement. For purposes hereof Buyer and Purchaser are deemed to
be third party beneficiaries hereof with the right to enforce the provisions of
this Agreement.
This Agreement shall automatically terminate if the Merger Agreement is
terminated in accordance with its terms.
<PAGE>
This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to any principles of conflict
of laws.
If each of you are in agreement with the foregoing, please execute two
originals of this Agreement in the space provided below, retain one fully
executed original for your files and return the other to the undersigned. This
Agreement may be executed in multiple counterparts, each of which shall be an
original and all of which when taken together shall constitute one instrument.
Very truly yours,
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ Robert K. Swanson
---------------------------------------
Robert K. Swanson
Chairman of the Board and
Chief Executive Officer
Agreed and Acknowledged
this 7th day of May, 1998.
SHANSBY PARTNERS, L.L.C.
By: /s/ Charles H. Esserman
------------------------------
Charles H. Esserman
Member
TSG2 L.P.
By: TSG2 Management, L.L.C., its
general partner
By: /s/ Charles H. Esserman
-------------------------
Charles H. Esserman
Managing Member
<PAGE>
TSG2 MANAGEMENT, L.L.C.
By: /s/ Charles H. Esserman
--------------------------------
Charles H. Esserman
Managing Member
/s/ J. Gary Shansby
- ------------------------------------
J. GARY SHANSBY,
individually
/s/ Charles H. Esserman
- ------------------------------------
CHARLES H. ESSERMAN,
individually
