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<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
BERKSHIRE HATHAWAY INC.
J ACQUISITION CORP.
and
JUSTIN INDUSTRIES, INC.
June 19, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
ARTICLE I
THE OFFER AND MERGER
<S> <C>
Section 1.1 The Offer............................................................... 2
Section 1.2 Company Actions......................................................... 3
Section 1.3 Directors............................................................... 5
Section 1.4 The Merger.............................................................. 6
Section 1.5 Effective Time.......................................................... 6
Section 1.6 Closing................................................................. 6
Section 1.7 Directors and Officers of the Surviving Corporation..................... 6
Section 1.8 Stockholders' Meeting................................................... 7
Section 1.9 Merger Without Meeting of Stockholders.................................. 7
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ARTICLE II
CONVERSION OF SECURITIES
<TABLE>
<S> <C>
Section 2.1 Conversion of Capital Stock............................................. 7
Section 2.2 Exchange of Certificates................................................ 8
Section 2.3 Dissenting Shares....................................................... 10
Section 2.4 Company Option Plans.................................................... 10
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C>
Section 3.1 Corporate Organization.................................................. 11
Section 3.2 Capitalization.......................................................... 12
Section 3.3 Authority............................................................... 13
Section 3.4 Consents and Approvals; No Violations................................... 13
Section 3.5 SEC Documents; Undisclosed Liabilities.................................. 14
Section 3.6 Broker's Fees........................................................... 15
Section 3.7 Absence of Certain Changes or Events.................................... 15
Section 3.8 Legal Proceedings....................................................... 15
Section 3.9 Compliance with Applicable Law.......................................... 15
Section 3.10 Company Information..................................................... 16
Section 3.11 Opinion of Financial Advisor............................................ 16
Section 3.12 Employee Matters........................................................ 16
Section 3.13 Environmental Matters................................................... 17
Section 3.14 Takeover Statutes....................................................... 17
Section 3.15 Rights Agreement........................................................ 17
Section 3.16 Properties.............................................................. 18
Section 3.17 Tax Returns and Tax Payments............................................ 18
Section 3.18 Intellectual Property................................................... 19
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
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Section 4.1 Corporate Organization.................................................. 19
</TABLE>
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TABLE OF CONTENTS
(continued)
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Page
<S> <C>
Section 4.2 Authority............................................................... 20
Section 4.3 Consents and Approvals: No Violation.................................... 20
Section 4.4 Broker's Fees........................................................... 21
Section 4.5 Purchaser's Operation................................................... 21
Section 4.6 Parent or Purchaser Information......................................... 21
Section 4.7 Financing............................................................... 21
Section 4.8 Stock Ownership......................................................... 21
Section 4.9 Purchaser Capitalization................................................ 21
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<S> <C>
Section 5.1 Conduct of Businesses Prior to the Effective Time....................... 22
Section 5.2 No Solicitation......................................................... 23
Section 5.3 Publicity............................................................... 25
Section 5.4 Notification of Certain Matters......................................... 26
Section 5.5 Access to Information................................................... 26
Section 5.6 Further Assurances...................................................... 27
Section 5.7 Employee Matters........................................................ 27
Section 5.8 Indemnification......................................................... 28
Section 5.9 Additional Agreements................................................... 29
</TABLE>
ARTICLE VI
CONDITIONS
<TABLE>
<S> <C>
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.............. 29
Section 6.2 Conditions to Obligations of Parent and Purchaser to Effect
the Merger.............................................................. 30
</TABLE>
ARTICLE VII
TERMINATION
<TABLE>
<S> <C>
Section 7.1 Termination............................................................. 30
Section 7.2 Effect of Termination................................................... 32
Section 7.3 Termination Fee; Expenses............................................... 32
</TABLE>
ARTICLE VIII
MISCELLANEOUS
<TABLE>
<S> <C>
Section 8.1 Amendment and Modification.............................................. 33
Section 8.2 Extension; Waiver....................................................... 33
Section 8.3 Nonsurvival of Representations.......................................... 33
and Warranties
Section 8.4 Notices................................................................. 33
Section 8.5 Counterparts............................................................ 34
Section 8.6 Entire Agreement; Third Party........................................... 34
Beneficiaries
Section 8.7 Severability............................................................ 35
Section 8.8 Governing Law........................................................... 35
Section 8.9 Assignment.............................................................. 35
Section 8.10 Headings................................................................ 35
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-ii-
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TABLE OF CONTENTS
(continued)
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Page
<S> <C>
Section 8.11 Enforcement.............................................................. 35
</TABLE>
Exhibit A: Shareholders Agreement
Schedules to this Agreement and Plan of Merger are omitted. Such
schedules identify matters related to representations and warranties by the
Company regarding required third party consents, investment banking
arrangements, legal proceedings, employee matters, environmental matters, tax
returns, and intellectual property.
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 19,
2000, by and among Berkshire Hathaway Inc., a Delaware corporation ("Parent"), J
Acquisition Corp., a Texas corporation and a wholly owned subsidiary of Parent
(the "Purchaser"), and Justin Industries, Inc., a Texas corporation (the
"Company").
WHEREAS, the Board of Directors of Parent, the Board of Directors of
Purchaser, and the Board of Directors of the Company have approved, and
determined that it is in the best interests of their respective companies and
stockholders to consummate, the transactions provided for herein; and
WHEREAS, Parent and Purchaser have proposed acquiring all of the
outstanding shares of Common Stock, par value $2.50 per share, of the Company
(the "Shares" or the "Company Common Stock") together with the associated rights
to purchase Company Common Stock (the "Rights") issued pursuant to the Rights
Agreement dated as of October 6, 1989, as amended (the "Rights Agreement")
between the Company and The Bank of New York, as Rights Agent thereunder, at a
price of $22.00 per Share in cash; and
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer (as defined herein) and the Merger (as defined herein); and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to Parent's and Purchaser's willingness to enter
into this Agreement, Parent and Purchaser have entered into a Stockholder
Agreement, dated as of the date hereof, the form of which is attached as Exhibit
A hereto (the "Stockholder Agreement"), with the stockholder named therein (the
"Stockholder"), pursuant to which the Stockholder has, among other things, (1)
agreed to tender all Shares (including Shares to be acquired upon conversion of
the Series Two Convertible Voting Preferred Stock, par value $2.50 per share, of
the Company (the "Company Preferred Stock" and collectively with the Company
Common Stock, the "Company Stock") owned by the Stockholder pursuant to the
Offer, (2) granted to Parent an option to purchase all of the Shares owned by
the Stockholder, and (3) agreed to vote all Shares beneficially owned by the
Stockholder in favor of the Merger and this Agreement and against any Takeover
Proposal (as defined herein), in each case subject to and on the conditions set
forth therein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
---------
(a) Provided this Agreement shall not have been terminated in
accordance with Section 7.1, as promptly as practicable (but in no event later
than seven (7) business days after the public announcement of the execution
hereof), the Purchaser shall, and Parent shall cause Purchaser to, commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") ) an offer (the "Offer") to purchase for cash all
of the Shares (and associated Rights) at a price of $22.00 per Share, net to the
seller in cash (such price, or such higher price per Share as may be paid in the
Offer, being referred to herein as the "Offer Price"), subject only to the
conditions set forth in Annex A hereto; provided, however, that Parent may
-------- -------
designate another wholly owned, direct or indirect subsidiary of Parent as the
bidder (within the meaning of Rule 14d-1(g) under the Exchange Act) in the
Offer, in which case reference herein to Purchaser shall be deemed to apply to
such subsidiary, as appropriate. The Company shall not tender Shares held by it
or by any of its subsidiaries pursuant to the Offer. The Purchaser shall, and
Parent shall cause the Purchaser to, on the terms and subject to the prior
satisfaction or waiver of the conditions to the Offer, accept for payment and
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law.
(b) The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement and
only the conditions set forth in Annex A hereto and providing for an initial
expiration date (the "Expiration Date") of twenty (20) business days (as defined
in Rule 14d-1 under the Exchange Act) from the date of commencement. The
Purchaser shall not, and Parent shall cause the Purchaser not to, decrease the
Offer Price or decrease the number of Shares sought, amend the conditions to the
Offer set forth in Annex A or impose conditions to the Offer in addition to
those set forth in Annex A, without the prior written consent of the Company.
The Purchaser may, without the consent of the Company, (A) extend the Offer for
the shortest time periods which it reasonably believes are necessary, but in no
event more than an additional forty (40) days, in one or more periods of not
more than ten (10) business days, if Parent and Purchaser are not in material
breach of this Agreement and if any condition to the Offer is not satisfied or
waived and such condition is reasonably capable of being satisfied and (B) if,
on the Expiration Date, the Shares validly tendered and not withdrawn pursuant
to the Offer equal at least seventy-five percent (75%) of the outstanding Shares
but less than ninety percent (90%) of the outstanding Shares (on a fully diluted
basis, as such term is defined in Annex A), extend the Offer on one occasion for
up to ten (10) business days notwithstanding that all the conditions to the
Offer have been satisfied so long as Purchaser irrevocably waives the
satisfaction of any of the conditions to the Offer (other than in the case of
paragraph (a) of Annex A hereto the occurrence of any statute, rule, regulation,
judgment, order or preliminary or permanent injunction making illegal or
prohibiting the consummation of the Offer) that subsequently may not be
satisfied during any such extension of the Offer. In addition, the Offer Price
may be increased and the Offer may be extended to the extent required by law in
connection with such increase, in each case without the consent of the Company.
2
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(c) On the date the Offer is commenced, Parent and Purchaser
shall file with the United States Securities and Exchange Commission (the "SEC")
a Tender Offer Statement on Schedule TO with respect to the Offer (together with
all amendments and supplements thereto and including the exhibits thereto, the
"Schedule TO"). The Schedule TO shall contain or shall incorporate by reference
the Offer to Purchase and a form of letter of transmittal and summary
advertisement (the Schedule TO, the Offer to Purchase and related letter of
transmittal and related summary advertisement, together with any amendments and
supplements thereto, collectively the "Offer Documents"). The Offer Documents
shall comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information supplied by the Company for inclusion in the Offer Documents. Each
of Parent and Purchaser shall further take all steps necessary to cause the
Offer Documents to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and Purchaser, on the one hand, and the Company,
on the other hand, shall promptly correct any information provided by it for use
in the Offer Documents if and to the extent that it shall have become false and
misleading in any material respect and the Purchaser further shall take all
steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given an opportunity to review and comment upon the Schedule TO
(and shall provide any comments thereon as soon as practicable) prior to the
filing thereof with the SEC. In addition, Parent shall, and shall cause the
Purchaser to, provide the Company and its counsel in writing with any comments
that Parent, Purchaser or their counsel may receive from the SEC or its staff
with respect to the Offer Documents promptly after receipt of such comments and
with copies of any written responses and telephonic notification of any verbal
responses by Parent, Purchaser or their counsel.
(d) Parent shall provide or cause to be provided to Purchaser
all of the funds necessary to purchase any Shares that Purchaser becomes
obligated to purchase pursuant to the Offer.
Section 1.2 Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held,
has (i) approved this Agreement (including all terms and conditions set forth
herein) and the transactions contemplated hereby, including the Offer and the
Merger (as defined in Section 1.4) (collectively, the "Transactions"),
determined that the Merger is advisable and that the terms of the Offer and the
Merger are fair to, and in the best interests of, the Company's stockholders and
recommended that the Company's stockholders accept the Offer, tender their
Shares thereunder to the Purchaser and approve and adopt this Agreement and the
Merger; provided, that such recommendation may be withdrawn, modified or amended
--------
as provided in Section 5.2(b). The
3
<PAGE>
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of its Board of Directors described in the immediately preceding
sentence.
(b) Concurrently with the commencement of the Offer or as
promptly thereafter as practicable, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-9") which shall contain the recommendation referred to in Section
1.2 (a) hereof unless such recommendation has been withdrawn, or as such
recommendation has been modified or amended, in each case in accordance with the
provisions of this Agreement. The Schedule 14D-9 shall comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or the
Purchaser for inclusion in the Schedule 14D-9. The Company further shall take
all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to
be disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws, and shall mail such Schedule 14D-9 to the
stockholders of the Company promptly after commencement of the Offer, together
with the initial mailing of the Offer to Purchase. Each of the Company, on the
one hand, and Parent and Purchaser, on the other hand, shall promptly correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false and misleading in any material respect
and the Company further shall take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent, the Purchaser and their counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 (and shall provide any
comments thereon as soon as practicable) prior to the filing thereof with the
SEC. In addition, the Company shall provide Parent, the Purchaser and their
counsel in writing with any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt
of such comments and with copies of any written responses and telephonic
notification of any verbal responses by the Company or its counsel.
(c) In connection with the Offer, the Company shall promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall promptly furnish Parent with such additional information, including
updated lists of stockholders, mailing labels and security position listings,
and such other information and assistance as the Purchaser or its agents may
reasonably request in communicating the Offer to the stockholders of the
Company. Except for such steps as are necessary to disseminate the Offer
Documents and subject to the requirements of applicable law, Parent shall, and
shall cause the Purchaser and each of their affiliates, associates, employees,
agents and advisors to, hold in confidence the information contained in any of
such labels and lists and the additional information referred to in the
preceding sentence, shall use such information only in connection with the Offer
and Merger, and, if this Agreement is terminated, shall promptly deliver or
cause to be delivered to the Company all copies of such information then in its
possession or control or the possession or control of its agents or
representatives.
4
<PAGE>
Section 1.3 Directors. Promptly upon the purchase by Purchaser of
---------
Shares pursuant to the Offer, and from time to time thereafter as Shares are
acquired by Purchaser, Parent or their affiliates, Purchaser shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as will give Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors of the Company equal to that number of directors which equals the
product of the total number of directors on the Board of Directors of the
Company (giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Parent, Purchaser or any of their affiliates (including for purposes of
this Section 1.3 such Shares as are accepted for payment pursuant to the Offer,
but excluding Shares held by the Company or any of its subsidiaries) bears to
the total number of shares of Company Common Stock then issued and outstanding.
At such times, if requested by Purchaser, the Company will use its best efforts
to cause each committee of the Board of Directors of the Company and the Board
of Directors of each subsidiary of the Company to include persons designated by
Purchaser constituting the same percentage of each such committee and the Board
of Directors of each subsidiary of the Company as Purchaser's designees are of
the Board of Directors of the Company. The Company shall, upon request by
Purchaser, promptly increase the size of the Board of Directors of the Company
as is necessary to enable Purchaser's designees to be elected to the Board of
Directors of the Company in accordance with the terms of this Section 1.3 and
shall cause Purchaser's designees to be so elected; provided, however, that, if
-------- -------
Purchaser's designees are appointed or elected to the Board of Directors of the
Company, until the Effective Time (as hereinafter defined) the Board of
Directors of the Company shall have at least two (2) directors who are directors
on the date hereof and who are neither officers of the Company nor designees,
stockholders, affiliates or associates (within the meaning of the federal
securities laws) of Parent (one or more of such directors, the "Independent
Directors"); provided further, that if less than two (2) Independent Directors
remain, the remaining Independent Director (if any) or if no Independent
Directors remain, the other directors, shall designate persons to fill the
vacancies who shall not be either officers of the Company or designees,
shareholders, affiliates or associates of Parent, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Subject to
applicable law, the Company shall promptly take all action necessary pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 1.3 and shall include in the
Schedule 14D-9 mailed to stockholders promptly after the commencement of the
Offer (or an amendment thereof or an information statement pursuant to Rule 14f-
1 if Purchaser has not theretofore designated directors) such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 1.3. Parent and Purchaser will supply the Company and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding anything in this Agreement to the contrary, during the period
after the election of directors designated by Purchaser pursuant to this Section
1.3 but prior to the Effective Time, the Board of Directors of the Company shall
delegate to a committee of the Board of Directors of the Company comprised
solely of the Independent Directors (the "Committee") the sole responsibility
for (i) the amendment or termination of this Agreement (in either case in
accordance with this Agreement) on behalf of the Company, but excluding a
termination pursuant to Section 7.1(c)(ii) hereof, which is not
5
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delegated, (ii) the waiver of any of the Company's rights or remedies hereunder,
(iii) the extension of the time for performance of Parent's or Purchaser's
obligations hereunder, or (iv) the assertion or enforcement of the Company's
rights under this Agreement to object to (a) a failure to consummate the Merger
for a failure of the condition set forth in Section 6.2 to be satisfied or (b) a
termination of this Agreement under Section 7.1(d)(iii).
Section 1.4 The Merger. Subject to the terms and conditions of this
----------
Agreement and the provisions of the Texas Business Corporation Act (the "Texas
Act"), at the Effective Time, the Company and the Purchaser shall consummate a
merger (the "Merger") pursuant to which (a) the Purchaser shall be merged with
and into the Company and the separate corporate existence of the Purchaser shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger (the "Surviving Corporation") under the name "Justin Industries,
Inc." and shall continue to be governed by the laws of the State of Texas, and
(c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. At the Effective Time, (x) the articles of incorporation of the Company
shall be amended as desired by Parent and as so amended shall become the
articles of incorporation of the Surviving Corporation, until thereafter amended
as provided by law and such articles of incorporation, (y) the bylaws of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation until thereafter amended as provided by law,
the articles of incorporation and such bylaws. The Merger shall have the effects
set forth in the Texas Act.
Section 1.5 Effective Time. Parent, Purchaser, and the Company shall
--------------
cause appropriate Articles of Merger (the "Articles of Merger") to be executed
and filed on the date of the Closing (as defined in Section 1.6) (or on such
other date as Parent and the Company may agree) with the Secretary of State of
the State of Texas (the "Secretary of State") as provided in the Texas Act. The
Merger shall become effective on the date on which the Articles of Merger have
been duly filed with the Secretary of State or such later time as is agreed upon
by the parties and specified in the Articles of Merger, and such time is
hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
-------
take place at 10:00 a.m., on a date to be specified by the parties, which shall
be as soon as practicable, but in no event later than the second business day,
after satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Munger, Tolles & Olson, 355 South
Grand Avenue, Los Angeles, California, unless another date or place is agreed to
in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
---------------------------------------------------
directors of the Purchaser and the officers of the Company immediately prior to
the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
articles of incorporation and bylaws.
Section 1.8 Stockholders' Meeting.
---------------------
6
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(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders for the purpose of considering and taking
action upon this Agreement (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by the Purchaser
pursuant to the Offer;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use its
reasonable efforts (x) to obtain and furnish the information required to be
included by the federal securities laws (and the rules and regulations
thereunder) in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the SEC
with respect to the preliminary proxy or information statement and cause a
definitive proxy or information statement (the "Proxy Statement") to be mailed
to its stockholders and (y) to obtain the necessary approvals of the Merger and
this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of
the Board that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement, unless such recommendation has been
withdrawn, or as such recommendation has been modified or amended, in each case
in accordance with the provisions of this Agreement.
(b) Parent shall provide the Company with the information
concerning Parent and Purchaser required to be included in the Proxy Statement.
Parent shall vote, or cause to be voted, all of the Shares then owned by it, the
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders. In the event
--------------------------------------
that Parent, the Purchaser or any other Subsidiary of Parent, shall acquire at
least ninety percent (90%) of the then-outstanding shares of Company Common
Stock, pursuant to the Offer or otherwise, each of the parties hereto shall take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after such acquisition, without a meeting of stockholders of
the Company, in accordance with Article 5.16 (in lieu of Article 5.03) of the
Texas Act.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time,
---------------------------
by virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or of the common stock, par value $.0l per share,
of the Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share
----------------------
of the Purchaser Common Stock shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par value $.0l per
share, of the Surviving Corporation.
7
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(b) Cancellation of Treasury Stock and Parent-Owned Stock.
-----------------------------------------------------
All shares of Company Common Stock that are owned by the Company as treasury
stock, all shares of Company Common Stock owned by any subsidiary of the Company
and any shares of Company Common Stock owned by Parent, the Purchaser or any
other wholly owned subsidiary of Parent (in each case together with associated
Rights) shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each issued and outstanding share
--------------------
of Company Common Stock (together with associated Rights), other than Shares to
be canceled in accordance with Section 2.1(b) hereof and any Dissenting Shares
(as defined in Section 2.3 hereof), shall be converted into the right to receive
the Offer Price in cash, without interest (the "Merger Consideration"), payable
to the holder thereof upon surrender of the certificate formerly representing
such share of Company Common Stock (and associated Rights) in the manner
provided in Section 2.2 hereof. All such shares of Company Common Stock (and
associated Rights), when so converted, 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 (and associated Rights) shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration therefor upon the surrender of such certificate in
accordance with Section 2.2 hereof, without interest.
Section 2.2 Exchange of Certificates.
------------------------
(a) Paying Agent. Parent shall designate a bank or trust
------------
company (the "Paying Agent") reasonably acceptable to the Company to make the
payments of the funds to which holders of shares of Company Common Stock shall
become entitled pursuant to Section 2.1(c) hereof. When and as needed, Parent
shall make available to the Paying Agent such funds for timely payment
hereunder. Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation. Any net profit resulting from, or interest
or income produced by, such investments will be payable to Parent.
(b) Exchange Procedures. Promptly after the Effective Time
-------------------
but in no event more than three (3) business days thereafter, Parent shall cause
the Paying Agent to mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1(c) into the right to receive the Merger
Consideration, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Parent and the Surviving Corporation may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration (subject to
subsection (e), below) for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be canceled. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in
8
<PAGE>
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in Company
------------------------------------------------------
Common Stock. At the Effective Time, the stock transfer books of the Company
------------
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by applicable law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following
---------------------------------
180 calendar days after the Effective Time, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) as
general creditors thereof with respect to the payment of any Merger
Consideration that may be payable upon surrender of any Certificates such
stockholder holds, as determined pursuant to this Agreement, without any
interest thereon. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Withholding Taxes. If so specified in the Offer
-----------------
Documents, Parent, the Purchaser, the Surviving Corporation and the Paying Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable to a holder of Shares pursuant to the Offer or Merger such amounts as
Parent, the Purchaser, the Surviving Corporation or the Paying Agent is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code") or any provision of
state, local or foreign tax law. To the extent amounts are so withheld by
Parent, the Purchaser, the Surviving Corporation or the Paying Agent, the
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which the deduction and
withholding was made.
Section 2.3 Dissenting Shares. Notwithstanding any provision of this
-----------------
Agreement to the contrary, if and to the extent required by the Texas Act,
shares of Company Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by holders of such shares of
Company Common Stock who have properly exercised appraisal rights with respect
thereto (the "Dissenting Common Stock") in accordance
9
<PAGE>
with Articles 5.11, 5.12 and 5.13 of the Texas Act, shall not be exchangeable
for the right to receive the Merger Consideration, and holders of such shares of
Dissenting Common Stock shall be entitled to receive payment of the appraised
value of such shares of Dissenting Common Stock in accordance with the
provisions of Article 12 of the Texas Act unless and until such holders fail to
perfect or effectively withdraw or otherwise lose their rights to appraisal and
payment under the Texas Act. If, after the Effective Time, any such holder fails
to perfect or effectively withdraws or loses such right, such shares of
Dissenting Common Stock shall thereupon be treated as if they had been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration, without any interest thereon. Notwithstanding
anything to the contrary contained in this Section 2.3, if the Merger is
rescinded or abandoned, then the right of any stockholder to be paid the fair
value of such stockholder's Dissenting Common Stock pursuant to Article 12 of
the Texas Act shall cease. The Company shall give Parent prompt notice of any
demands received by the Company for appraisals of shares of Dissenting Common
Stock. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisals or offer to settle
or settle any such demands.
Section 2.4 Company Option Plans. Prior to the Closing Date, the
--------------------
Board of Directors of Parent and the Board of Directors of the Company (or, if
appropriate, any committee administering the Option Plans (as defined below))
shall adopt such resolutions or take such other actions as may be required to
effect the following:
(a) Adjust the terms of all outstanding stock options to
purchase shares of Company Common Stock ("Company Stock Options") granted under
the Company's 1981 Stock Option Plan, 1984 Incentive Stock Option Plan, 1992
Stock Option Plan, 1996 Non-Employee Director Stock Option Plan or 1999
Performance Incentive Plan, each as amended (the "Option Plans"), to provide
that each Company Stock Option outstanding immediately prior to the Effective
Time shall (except to the extent that Parent and the holder of a Company Stock
Option otherwise agree in writing prior to the Effective Time): (i) vest
immediately prior to the Effective Time; (ii) if such Company Stock Option has
an exercise price of less than the Offer Price, unless the holder of such
Company Stock Option shall have elected by written notice to Parent prior to the
date 15 business days prior to the Effective Time to receive the consideration
contemplated by clause (iii), be cancelled at the Effective Time in exchange for
a payment from the Surviving Corporation (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 and (2) the excess of the Offer Price
over the exercise price per share of Company Common Stock subject to such
Company Stock Option, payable in cash immediately following the Effective Time;
or (iii) with respect to any Company Stock Option not cancelled pursuant to
clause (ii) above, at the Effective Time, be assumed by Parent, or substituted
with a new option issued by Parent, so that such Company Stock Option shall be
deemed to constitute an option to acquire, on the terms and conditions of
Parent's 1996 Stock Option Plan, as amended, (x) the number of shares of Parent
Class B common stock, par value $.1667 per share ("Parent Class B Stock") (which
shares shall be registered pursuant to an effective registration statement)
equal to the product of (1) the number of shares of Company Common Stock
issuable upon exercise of such Company Stock Option and (2) 0.0113519 (the
"Parent Class B Exchange Ratio"), provided that any fractional shares of Parent
Class B Stock resulting from such multiplication shall be rounded up or down to
the nearest whole share, at (y) a price per share equal to (1) the exercise
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<PAGE>
price for the shares of Company Common Stock otherwise purchasable pursuant to
such Company Stock Option divided by (2) the Parent Class B Exchange Ratio,
provided that such exercise price shall be rounded up or down to the nearest
cent.
(b) Except as provided in subsection (a) above, the Option
Plans and any other plan, program or arrangement providing for the issuance or
grant of any interest in respect of the capital stock of the Company or any
subsidiary shall terminate as of the Effective Time, and the Company shall
ensure that following the Effective Time no holder of a Company Stock Option nor
any participant in any such plan, program or arrangement shall have any right
thereunder to acquire capital securities of Parent or the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as
follows:
Section 3.1 Corporate Organization. Each of the Company and its
----------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
requisite corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted. Each of
the Company and its Significant Subsidiaries (as defined below) is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not reasonably be
expected to have, when aggregated with all other such failures, a Material
Adverse Effect (as defined below) on the Company ("Company Material Adverse
Effect"). As used in this Agreement, the term "Material Adverse Effect" means, a
material adverse effect on the business, operations or financial condition of
such party and its subsidiaries taken as a whole or a material adverse effect on
the party's ability to consummate the transactions contemplated hereby;
provided, however, that a "Material Adverse Effect" shall not include any of the
-------- -------
following or any combination of the following: any change or effect resulting
from or attributable to (A) general national, international or regional economic
or financial conditions, (B) other developments which are not unique to the
Company and its subsidiaries, but also affect other persons who engage in the
lines of business in which the Company or its subsidiaries are engaged, (C) the
announcement or pendency of this Agreement or the transactions contemplated
hereby (including, if resulting therefrom, employee attrition and delay,
reduction or cancellation or change in the terms of orders or purchases from or
other transactions with the Company or its subsidiaries), and (D) any change in
the market price of the Company Common Stock, Parent Class A Common Stock, par
value $5.00 per share, or Parent Class B Stock, or any portfolio securities
owned by Parent or its subsidiaries. As used in this Agreement, (i) the word
"subsidiary" when used with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly beneficially owned or controlled by such
party or by any one or more of its subsidiaries, or by such party and one or
more of its subsidiaries, and (ii)
11
<PAGE>
"Significant Subsidiary" has the meaning given such term in Rule 405 of the
Securities Act of 1933, as amended (the "Securities Act"). The copies of the
Articles of Incorporation and Bylaws of the Company (the "Company Articles" and
"Company Bylaws"), as most recently filed with the Company's SEC Documents (as
hereinafter defined), are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 1,000,000 shares of Company
Preferred Stock. At the close of business on June 19, 2000, there were
25,775,603 shares of Company Common Stock issued and outstanding, 100 shares of
Company Preferred Stock issued and outstanding (all of which are owned
beneficially and of record by the Stockholder), and 1,705,885 shares of Company
Common Stock issuable upon the exercise of outstanding Company Stock Options
pursuant to the Option Plans. Except as set forth in Section 3.2(a) of the
disclosure schedule of the Company delivered to Parent concurrently herewith
(the "Company Disclosure Schedule"), all of the issued and outstanding shares of
Company Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as set forth above or in
Section 3.2(a) of the Company Disclosure Schedule, as of the date of this
Agreement there are not and, as of the Effective Time there will not be, any
shares of capital stock issued and outstanding or any subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any securities of the Company, including any securities
representing the right to purchase or otherwise receive any Company Stock (other
than the Rights and the conversion rights of the Company Preferred Stock set
forth in the Company's Articles).
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, the Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of its Significant Subsidiaries,
free and clear of any liens, charges, encumbrances, adverse rights or claims and
security interests whatsoever ("Liens") which would reasonably be expected to
have, in the aggregate, a Company Material Adverse Effect, and all of such
shares are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights. None of the Company's Significant Subsidiaries
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any security of such Significant Subsidiary, including any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Significant Subsidiary.
Section 3.3 Authority.
---------
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to obtaining the approval of holders
of 66-2/3% of the shares of Company Common Stock prior to the consummation of
the Merger in accordance with Article 5.03 of the Texas Act, if so required. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by its Board of Directors and, except for obtaining the approval of
its stockholders as contemplated
12
<PAGE>
by Section 1.8 hereof and as required by the Texas Act, no other corporate
action on the part of the Company is necessary to authorize the execution and
delivery by the Company of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming due and valid authorization, execution
and delivery hereof by the other parties thereto, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) The Board of Directors of the Company has approved and
taken all corporate action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this Agreement by the
Company.
Section 3.4 Consents and Approvals; No Violations.
-------------------------------------
(a) Except for (i) the consents and approvals set forth in
Section 3.4(a) of the Company Disclosure Schedule, (ii) the filing with the SEC
of the Offer Documents and, if necessary, of the Proxy Statement, (iii) the
filing of the Articles of Merger with the Secretary of State of the State of
Texas pursuant to the Texas Act, (iv) if necessary, the adoption of this
Agreement by the requisite votes of the stockholders of the Company and (v)
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), no consents or approvals of, or filings, declarations or registrations
with, any federal, state or local court, administrative or regulatory agency or
commission or other governmental authority or instrumentality, domestic or
foreign (each a "Governmental Entity"), are necessary for the consummation by
the Company of the transactions contemplated hereby, other than such other
consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not reasonably be expected to have, in the
aggregate, a Company Material Adverse Effect.
(b) Except as set forth in Section 3.4(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions
hereof, will (i) conflict with or violate any provision of the articles of
incorporation or bylaws of the Company or any of the similar organizational
documents of any of its Significant Subsidiaries or (ii) assuming that the
authorizations, consents and approvals referred to in Section 3.4(a) and the
authorization hereof by the Company's stockholders are duly obtained in
accordance with the Texas Act, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in the loss of any material
benefit under, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of the Company or any of its subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or
13
<PAGE>
other instrument or obligation to which the Company or any of its subsidiaries
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except, in the case of clause (ii) above, for such
violations, conflicts, breaches, defaults, losses, terminations of rights
thereof, accelerations or Lien creations which, in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.5 SEC Documents; Undisclosed Liabilities. The Company has
--------------------------------------
filed all required reports, schedules, forms and registration statements with
the SEC since January 1, 1998 (collectively, and in each case including all
exhibits and schedules thereto and documents incorporated by reference therein,
the "SEC Documents"). As of their respective dates, 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 (including any and all financial statements included therein) as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company included in
the 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 in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments). Since December 31,
1999, neither the Company nor any of its subsidiaries, has incurred any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required, if known, to be reflected or reserved against on a
consolidated balance sheet of the Company prepared in accordance with GAAP
except (i) as and to the extent set forth on the audited balance sheet of the
Company and its subsidiaries as of December 31, 1999 (including the notes
thereto), (ii) as incurred in connection with the transactions contemplated by
this Agreement, (iii) as incurred after December 31, 1999 in the ordinary course
of business and consistent with past practice, (iv) as described in the SEC
Documents filed since December 31, 1999 (the "Recent SEC Documents"), or (v) as
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 3.6 Broker's Fees. Except as set forth in Section 3.6 of the
-------------
Company Disclosure Schedule, neither the Company nor any subsidiary of the
Company nor any of their respective officers or directors on behalf of the
Company or such subsidiaries has employed any financial advisor, broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated hereby.
Section 3.7 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the SEC Documents filed prior to the date hereof or as set forth in
Section 3.7 of the Company Disclosure Schedule, since December 31, 1999, (a) no
events have occurred which would reasonably be expected to have, in the
aggregate, a Company Material Adverse Effect and (b) the
14
<PAGE>
Company and its subsidiaries have carried on and operated their respective
businesses in all material respects in the ordinary course of business
consistent with past practice, except for such deviations of the Company's
business from the ordinary course of business which would not reasonably be
expected to have, in the aggregate, a Company Material Adverse Effect.
Section 3.8 Legal Proceedings.
-----------------
(a) Except as disclosed in the SEC Documents or in Section 3.8
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to any, and there are no pending legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against the Company or any of its subsidiaries or
challenging the validity or propriety of the transactions contemplated hereby,
which proceedings, claims, actions, or investigations, in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in the SEC Documents or in Section 3.8
of the Company Disclosure Schedule, there is no injunction, order, judgment,
decree or regulatory restriction imposed upon the Company, any of its
subsidiaries or the assets of the Company or any of its subsidiaries which, when
aggregated with all other such injunctions, orders, judgments, decrees and
restrictions, would reasonably be expected to have a Company Material Adverse
Effect.
Section 3.9 Compliance with Applicable Law. Except as disclosed in
------------------------------
Section 3.9 of the Company Disclosure Schedule, the Company and each of its
subsidiaries hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses as presently
conducted and are in compliance with the terms thereof, except where the failure
to hold such license, franchise, permit or authorization or such noncompliance
would not, when aggregated with all other such failures or noncompliance,
reasonably be expected to have a Company Material Adverse Effect, and neither
the Company nor any of its subsidiaries knows of, or has received notice of, any
material violations of any applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to the Company or
any of its subsidiaries, which, in the aggregate, would reasonably be expected
to have a Company Material Adverse Effect.
Section 3.10 Company Information. The information relating to the
-------------------
Company and its subsidiaries to be provided by the Company to be contained in
the Proxy Statement, if any, or the Offer Documents, or in any other document
filed with any other Governmental Entity in connection herewith at the
respective times filed with the SEC or such other Governmental Entity and first
published, sent or given to stockholders of the Company and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement is
mailed to holders of the shares of Company Common Stock, at the time of the
Special Meeting and at the Effective Time, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. The Schedule 14D-9 (except that no representation is made by the
Company to such portions thereof that relate only to Parent or any of their
subsidiaries or to statements made therein based on information supplied by
Parent or the Purchaser for inclusion therein) will
15
<PAGE>
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
Section 3.11 Opinion of Financial Advisor. The Company's Board of
----------------------------
Directors has received the opinion of Donaldson, Lufkin & Jenrette, financial
advisor to the Company's Board of Directors, to the effect that, as of the date
of such opinion, the consideration to be received in the Offer and the Merger by
the holders of shares of Company Common Stock is fair to the holders of such
shares from a financial point of view.
Section 3.12 Employee Matters. The Company has delivered or made
----------------
available to Parent full and complete copies or descriptions of each material
employment, severance, bonus, change-in-control, profit sharing, compensation,
termination, stock option, stock appreciation right, restricted stock, phantom
stock, performance unit, pension, retirement, deferred compensation, welfare or
other employee benefit agreement, trust fund or other arrangement and any union,
guild or collective bargaining agreement maintained or contributed to or
required to be contributed to by the Company or any of its ERISA Affiliates (as
defined below), for the benefit or welfare of any director, officer, employee or
former employee of the Company or any of its ERISA Affiliates (such plans and
arrangements being collectively the "Company Benefit Plans"). Each of the
Company Benefit Plans is in material compliance with all applicable laws
including ERISA and the Code except where such noncompliance would not
reasonably be expected to have a Company Material Adverse Effect. The Internal
Revenue Service has determined that each Company Benefit Plan that is intended
to be a qualified plan under Section 401(a) of the Code is so qualified and the
Company is aware of no event occurring after the date of such determination that
would adversely affect such determination. The liabilities accrued under each
such plan are reflected on the latest balance sheet of the Company included in
the Recent SEC Reports in accordance with generally accepted accounting
principles applied on a consistent basis. No condition exists that is
reasonably likely to subject the Company or any of its subsidiaries to any
direct or indirect liability under Title IV of ERISA or to a civil penalty under
Section 502(j) of ERISA or liability under Section 4069 of ERISA or 4975, 4976,
or 4980B of the Code or the loss of a federal tax deduction under Section 280G
of the Code or other liability with respect to the Company Benefit Plans that
would have a Company Material Adverse Effect and that is not reflected on such
balance sheet. There are no pending or to the Company's knowledge, threatened,
claims (other than routine claims for benefits or immaterial claims) by, on
behalf of or against any of the Company Benefit Plans or any trusts related
thereto except where such claims would not reasonably be expected to have a
Company Material Adverse Effect. "ERISA Affiliate" means, with respect to any
person, any trade or business, whether or not incorporated, that together with
such person would be deemed a "single employer" within the meaning of Section
4001(a)(15) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
Section 3.13 Environmental Matters. Except as set forth in Section
---------------------
3.13 of the Company's Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, required
environmental remediation activities or, to the knowledge of the Company,
governmental investigations of any nature seeking to impose, or that reasonably
could be expected to result in the imposition, on the Company or any of its
subsidiaries of any liability or obligations arising under common law standards
relating to environmental protection, human health or safety, or under any
local, state, federal, national or
16
<PAGE>
supernational environmental statute, regulation or ordinance, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (collectively, "Environmental Laws"), pending or, to the knowledge of
the Company, threatened, against the Company or any of its subsidiaries, which
liability or obligation would have or would reasonably be expected to have a
Company Material Adverse Effect. To the knowledge of the Company, during or
prior to the period of (i) its or any of its subsidiaries' ownership or
operation of any of their respective current properties, (ii) its or any of its
subsidiaries' participation in the management of any property, or (iii) its or
any of its subsidiaries' holding of a security interest or other interest in any
property, there was no release or threatened release of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property which would
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any material liability or
obligations pursuant to or under any Environmental Law that would have or would
reasonably be expected to have a Company Material Adverse Effect.
Section 3.14 Takeover Statutes. The Company has taken all actions
-----------------
necessary such that no restrictive provision of any "fair price," "moratorium,"
"control share acquisition," "interested shareholder" or other similar anti-
takeover statute or regulation (including, without limitation, Article 13 of the
Texas Act) (each a "Takeover Statute") or restrictive provision of any
applicable anti-takeover provision in the governing documents of the Company is,
or at the Effective Time will be, applicable to the Company, Parent, the
Purchaser, the shares of Company Stock, the Offer, the Merger or any other
transaction contemplated by this Agreement.
Section 3.15 Rights Agreement. The Company has taken all action
----------------
required so that the entering into of this Agreement and the Stockholder
Agreement, and the consummation of the transactions contemplated hereby and
thereby do not and will not enable or require the Rights to be separated from
the shares of Company Common Stock with which the Rights are associated, or to
be distributed, exercisable, exercised, or nonredeemable or result in the Rights
associated with any Company Common Stock beneficially owned by Parent or any of
its affiliates or associates (as defined in the Rights Agreement) to be void or
voidable. The Company has delivered to Purchaser a true and correct copy of the
Rights Agreement, as amended in accordance with its terms to render it
inapplicable to the Offer, the Merger, and the other transactions contemplated
by this Agreement and the Stockholder Agreement.
Section 3.16 Properties. Except as disclosed in the Recent SEC
----------
Documents and for any of the following which would not have a Company Material
Adverse Effect, each of the Company and its subsidiaries (i) has good and
indefeasible title to all the properties and assets reflected on the latest
audited balance sheet included in such Recent SEC Documents as being owned by
the Company or one of its subsidiaries or acquired after the date thereof which
are, individually or in the aggregate, material to the Company's business on a
consolidated basis (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of (A) all
Liens except (1) statutory liens securing payments not yet due and (2) such
imperfections or irregularities of title or other Liens (other than real
property mortgages or deeds of trust) as do not materially affect the use of the
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties,
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and (B) all real property mortgages and deeds of trust except such secured
indebtedness as is properly reflected in the latest audited balance sheet
included in such Recent SEC Documents, and (ii) is the lessee of all leasehold
estates reflected in the latest audited financial statements included in such
Recent SEC Documents or acquired after the date thereof which are material to
its business on a consolidated basis and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without material
default thereunder by the lessee or, to the Company's knowledge, the lessor.
Section 3.17 Tax Returns and Tax Payments. The Company and its
----------------------------
subsidiaries have timely filed (or, as to subsidiaries, the Company has filed on
behalf of such subsidiaries) all material Tax Returns (as defined below)
required to be filed by it, except for such failure that would not result in a
Company Material Adverse Effect. The Company and its subsidiaries have paid (or,
as to subsidiaries, the Company has paid on behalf of such subsidiaries) all
Taxes (as defined below) shown to be due on such Tax Returns or has provided
(or, as to Subsidiaries, the Company has made provision on behalf of such
Subsidiaries) reserves in its financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax Returns, except for such
Taxes which, if unpaid or unreserved, would not result in a Company Material
Adverse Effect. Neither the Company nor any of its subsidiaries has granted any
request that remains in effect for waivers of the time to assess any Taxes.
Except as disclosed in Section 3.17 of the Company's Disclosure Schedule, no
claim for unpaid Taxes has been asserted against the Company or any of its
Subsidiaries in writing by a Tax authority which, if resolved in a manner
unfavorable to the Company or any of its Subsidiaries, as the case may be, would
result, individually or in the aggregate, in a Company Material Adverse Effect.
There are no Liens for Taxes upon the assets of the Company or any Subsidiary,
except for Liens for Taxes not yet due and payable or for Taxes that are being
disputed in good faith by appropriate proceedings and with respect to which
adequate reserves have been taken, that could result in a Company Material
Adverse Effect. Except as discussed in Section 3.16 of the Company Disclosure
Schedule, no audit of any material Tax Return of the Company or any of its
subsidiaries is being conducted by a Tax authority. None of the Company or any
of its subsidiaries has made an election under Section 341(f) of the Code.
Except as disclosed in Section 3.16 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries has any liability for Taxes of any
person (other than the Company and its subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any comparable provision of state, local or foreign law).
As used herein, "Taxes" shall mean 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, 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 authority, domestic or
foreign. As used herein, "Tax Return" shall mean any return, report or statement
required to be filed with any governmental authority with respect to Taxes. As
used herein, "Code" shall mean the Code and the Treasury Regulations promulgated
thereunder.
Section 3.18 Intellectual Property. Except as set forth in Section
---------------------
3.18 of the Company's Disclosure Schedule, the Company or its subsidiaries own,
or are licensed or otherwise possess legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights and any applications
therefor, technology, know-how, trade secrets, computer software programs or
applications, domain names and tangible or intangible proprietary
18
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information or materials that are used in the respective businesses of the
Company and its subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that, individually or in the aggregate,
has not had and is not reasonably likely in the future to have a Company
Material Adverse Effect. All patents, registered trademarks and service marks
and registered copyrights held by the Company or its subsidiaries are subsisting
and in force except where failure to be subsisting and in force would not likely
cause a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to
the Company as follows:
Section 4.1 Corporate Organization. Each of Parent and Purchaser is
----------------------
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted. Each of Parent and its
Significant Subsidiaries is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not reasonably be expected to have, when aggregated
with all other such failures, a Material Adverse Effect on the Parent (a "Parent
Material Adverse Effect).
Section 4.2 Authority. Each of Parent and Purchaser has all
---------
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Parent and Purchaser of this Agreement, and the consummation
of the transactions contemplated hereby, have been duly authorized and approved
by their Boards of Directors and by Parent as the sole stockholder of Purchaser
and no other corporate action on the part of Parent or Purchaser is necessary to
authorize the execution and delivery by Parent and Purchaser of this Agreement
and the consummation by them of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Purchaser, and,
assuming due and valid authorization, execution and delivery hereof by the
Company, is a valid and binding obligation of each of Parent and Purchaser,
enforceable against each of them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
Section 4.3 Consents and Approvals: No Violation.
------------------------------------
(a) Except for (i) the filing with the SEC of the Offer
Documents, (ii) the filing of the Articles of Merger with the Secretary of State
of the State of Texas pursuant to the Texas Act, and (iii) filings, permits,
authorizations, consents and approvals as may be
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required under, and other applicable requirements of, the Exchange Act, the HSR
Act and the Securities Act, no consents or approvals of, or filings,
declarations or registrations with, any Governmental Entity are necessary for
the consummation by Parent and Purchaser of the transactions contemplated
hereby, other than such other consents, approvals, filings, declarations or
registrations that, if not obtained, made or given, would not reasonably be
expected to have, in the aggregate, a Parent Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement by
Parent or the Purchaser, nor the consummation by Parent or the Purchaser of the
transactions contemplated hereby, nor compliance by Parent or the Purchaser with
any of the terms or provisions hereof, will (i) conflict with or violate any
provision of the Restated Certificate of Incorporation or Bylaws of Parent or
any of the similar organizational documents of Purchaser or any of Parent's
Significant Subsidiaries or (ii) assuming that the authorizations, consents and
approvals referred to in Section 4.3(a) are obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Parent or any of its subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in the loss of any
material benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon any of the
respective properties or assets of Parent or Purchaser or any of Parent's
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent, Purchaser or any of Parent's
subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except, in the case of clause (ii) above,
for such violations, conflicts, breaches, defaults, losses, terminations of
rights thereof, accelerations or Lien creations which, in the aggregate, would
not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.4 Broker's Fees. Neither Parent nor any subsidiary of
-------------
Parent nor any of their respective officers or directors on behalf of Parent or
such subsidiaries has employed any financial advisor, broker or finder in a
manner that would result in any liability of the Company for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated hereby or that would result in any reduction of the consideration
payable to the shareholders of the Company.
Section 4.5 Purchaser's Operation. Purchaser was formed solely for
---------------------
the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
Section 4.6 Parent or Purchaser Information. The information
-------------------------------
relating to Parent and its subsidiaries to be provided by Parent to be contained
in the Offer Documents and the Proxy Statement, if any, or in any other document
filed with any other Governmental Entity in connection herewith, at the
respective time filed with the SEC or such other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to holders of the Shares, at the time of the Special
Meeting and at the Effective Time, will not contain any untrue statement of a
material fact or omit to state a material
20
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fact necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading. The Offer Documents and the Proxy
Statement, if any (except that no representation is made as to such portions
thereof that relate only to the Company or any of its subsidiaries or to
statements made therein based on information supplied by the Company for
inclusion therein) will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder and the Securities Act
and the rules and regulations thereunder, respectively.
Section 4.7 Financing. Parent and Purchaser collectively have and
---------
will have at the Expiration Date of the Offer and at the Effective Time, and
Parent will make available to Purchaser, sufficient funds to enable Purchaser to
pay for all outstanding shares of Company Stock purchased pursuant to the Offer
or converted into cash pursuant to the Merger, to perform Parent's and
Purchaser's obligations under this Agreement and to pay all fees and expenses
related to the transactions contemplated by this Agreement payable by them.
Section 4.8 Stock Ownership. As of the date hereof, neither Parent
---------------
nor the Purchaser beneficially owns any Shares.
Section 4.9 Purchaser Capitalization. The authorized capital stock
------------------------
of Purchaser consists of 100 shares of common stock, par value $.01 per share,
all of which shares have been validly issued, are fully paid and nonassessable
and are owned by Parent free and clear of any liens.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Businesses Prior to the Effective Time.
-------------------------------------------------
Except as set forth in Section 5.1 of the Company Disclosure Schedule, as
expressly contemplated or permitted by this Agreement, or as required by
applicable law, rule or regulation, during the period from the date of this
Agreement to the Effective Time, unless Parent otherwise agrees in writing, the
Company shall, and shall cause its subsidiaries to, in all material respects,
(i) conduct its business in the usual, regular and ordinary course consistent
with past practice and (ii) use all reasonable efforts to maintain and preserve
intact its business organization and the good will of those having business
relationships with it and retain the services of its present officers and key
employees. Without limiting the generality of the foregoing, and except as set
forth in Section 5.1 of the Company Disclosure Schedule, as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of Parent:
(a) (i) issue, sell, grant, dispose of, pledge or otherwise encumber,
or authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of its capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of its capital stock, or any rights, warrants, option,
calls, commitments or any other agreements of any character to purchase or
acquire any shares of its capital stock or any securities or rights convertible
into, exchangeable for, or
21
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evidencing the right to subscribe for, any shares of its capital stock or (B)
any other securities in respect of, in lieu of, or in substitution for, any
shares of its capital stock outstanding on the date hereof, other than pursuant
to the exercise of Company Stock Options outstanding as of the date hereof; (ii)
redeem, purchase or otherwise acquire, or propose to redeem, purchase or
otherwise acquire, any of its outstanding shares of capital stock; or (iii)
split, combine, subdivide or reclassify any shares of its capital stock or
declare, set aside for payment or pay any dividend, or make any other actual,
constructive or deemed distribution, in respect of any shares of its capital
stock or otherwise make any payments to its stockholders in their capacity as
such, other than the payment of the cash dividend of $.06 per share of Company
Common Stock declared on June 14, 2000 payable on July 5, 2000 to holders of
record on June 25, 2000;
(b) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person other than the Company or its subsidiaries;
(c) sell, transfer, mortgage, encumber or otherwise dispose of
any of its properties or assets with a minimum value in excess of $10 million to
any individual, corporation or other entity other than a direct or indirect
wholly owned subsidiary, or cancel, release or assign any indebtedness in excess
of $1 million to any such person or any claims held by any such person, in each
case that is material to the Company and its subsidiaries, taken as a whole,
except (i) in the ordinary course of business consistent with past practice, or
(ii) pursuant to contracts or agreements in force at the date of this Agreement;
(d) make any material acquisition or investment in a business
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property or
assets of any other individual, corporation or other entity other than a wholly
owned subsidiary thereof, or purchase or enter into any agreement to purchase
equipment, materials, supplies, or services in excess of $10 million in any one
transaction or $20 million in the aggregate;
(e) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or terminate
any employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement, trust,
fund or arrangement with, for or in respect of, any stockholder, officer,
director, other employee, agent, consultant or affiliate other than (i) as
required pursuant to the terms of agreements in effect on the date of this
Agreement, and (ii) increases in salaries, wages and benefits of employees who
are not directors or officers of the Company made in the ordinary course of
business and in a manner consistent with past practice;
(f) amend its articles of incorporation, bylaws or similar
governing documents;
(g) waive or fail to enforce any provision of any
confidentiality or standstill agreement to which it is a party; or
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(h) make any commitment to take any of the actions prohibited
by this Section 5.1.
Section 5.2 No Solicitation.
---------------
(a) The Company shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as hereinafter defined) and shall seek to have returned to the Company
any confidential information that has been provided in any such discussions or
negotiations. From the date hereof, the Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any affiliate, investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information which has not been
previously publicly disseminated), or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding any Takeover Proposal; provided,
--------
however, that if, prior to the Expiration Date and following the receipt of
-------
a Superior Proposal (as hereinafter defined) or a proposal which is reasonably
expected to lead to a Superior Proposal that was unsolicited and made after the
date hereof in circumstances not otherwise involving a breach of this Agreement,
the Board of Directors of the Company determines in good faith, after
considering applicable provisions of state law and after consultation with
outside counsel, that a failure to do so would constitute a breach of its
fiduciary duties to the Company's shareholders under applicable law, the Company
may, in response to such Takeover Proposal and subject to compliance with
Section 5.2(c), (x) furnish information with respect to the Company to the party
making such Takeover Proposal pursuant to a customary confidentiality agreement,
provided that (i) such confidentiality agreement must include a provision
prohibiting solicitation of key employees of the Company or its subsidiaries,
such provision lasting at least one year, and may not include any provision
calling for an exclusive right to negotiate with the Company and (ii) the
Company advises Parent of all such nonpublic information delivered to such
person concurrently with its delivery to the requesting party, and (y)
participate in negotiations with such party regarding such Takeover Proposal. It
is agreed that any violation of the restrictions set forth in the preceding
sentence by any executive officer of the Company or any of its subsidiaries or
any affiliate, director or investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries, if known by the
Company, shall be deemed to be a breach of this Section 5.2(a) by the Company.
(b) Except as expressly permitted in this Section 5.2,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the approval, determination of advisability, or
recommendation by such Board of Directors or such committee of the Transactions,
(ii) approve, determine to be advisable, or recommend, or propose publicly to
approve, determine to be advisable, or recommend, any Takeover Proposal or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Takeover Proposal. Notwithstanding the foregoing, in
the event that prior to the Expiration Date the Board of Directors of the
Company determines in good faith, in response to a Superior Proposal that was
23
<PAGE>
unsolicited and made after the date hereof in circumstances not otherwise
involving a breach of this Agreement, after considering applicable provisions of
state law and after consultation with outside counsel, that the failure to do so
would constitute a breach of its fiduciary duties to the Company's stockholders
under applicable law, the Board of Directors of the Company may (subject to this
and the following sentences and to compliance with Section 5.2(a)) (x) withdraw
or modify its approval, determination, or recommendation of the Transactions or
(y) approve, determine to be advisable, or recommend a Superior Proposal,
provided, however, that any actions described in clause (y) may be taken
-------- -------
only at a time that is after the second business day following Parent's receipt
of written notice from the Company advising Parent that the Board of Directors
of the Company has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal, identifying the person making such
Superior Proposal and providing notice of the determination of the Board of
Directors of the Company of what action referred to in clause (y) the Board of
Directors of the Company has determined to take.
(c) In addition to the obligations of the Company set forth
in paragraphs (a) and (b) of this Section 5.2, the Company shall promptly advise
Parent orally and in writing of any request for confidential information or of
any Takeover Proposal, the material terms and conditions of such request or the
Takeover Proposal and the identity of the person making such request or Takeover
Proposal and shall keep Parent reasonably informed of the status and details of
any such request or Takeover Proposal.
(d) Nothing contained in this Section 5.2 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders; provided, however, neither the Company
-------- -------
nor its Board of Directors nor any committee thereof shall, except as in
accordance with Section 5.2(b), withdraw or modify, or propose publicly to
withdraw or modify, its approval, determination or recommendation with respect
to the Transactions or approve, determine to be advisable, or recommend, or
propose publicly to approve, determine to be advisable, or recommend, a Takeover
Proposal.
(e) For purposes of this Agreement:
(i) "Takeover Proposal" means any inquiry, proposal or
offer from any person (other than Parent and its subsidiaries, affiliates, and
representatives) relating to any direct or indirect acquisition or purchase of
15% or more of the assets of the Company and its subsidiaries or 15% or more of
any class of equity securities of the Company or any of its Significant
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of equity
securities of the Company or any of its Significant Subsidiaries, or any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Significant Subsidiaries, other than the transactions contemplated by this
Agreement.
(ii) For purposes of this Agreement, a "Superior
Proposal" means a bona fide written offer from any person (other than Parent and
its subsidiaries, affiliates and representatives) for a direct or indirect
acquisition or purchase of 50% or more of the assets of the Company or any of
its Significant Subsidiaries or 50% or more of any class of equity
24
<PAGE>
securities of the Company or any of its Significant Subsidiaries, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 50% or more of any class of equity securities of the Company
or any of its Significant Subsidiaries, or any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by this Agreement, (A)
which provides for consideration on a per share basis to the stockholders of the
Company with a value (taking into account, among other things, the likelihood of
such offer resulting in a consummated transaction) exceeding the Offer Price,
(B) which, considering all relevant factors, is more favorable to the Company
and its stockholders than the Offer and the Merger, and (C) for which the third
party has demonstrated that financing is reasonably likely to be obtained, in
each case as determined by the Board of Directors in its good faith judgment
(based on the advice of independent financial advisors and outside counsel). Any
Superior Proposal is a Takeover Proposal.
Section 5.3 Publicity. The initial press release with respect to
---------
the execution of this Agreement shall be a joint press release reasonably
acceptable to Parent and the Company. Thereafter, so long as this Agreement is
in effect, neither the Company, Parent nor any of their respective affiliates
shall issue or cause the publication of any press release or other announcement
with respect to the Offer, the Merger, this Agreement or the other transactions
contemplated hereby without the prior consultation of the other party, except as
may be required by law or by any listing agreement with a national securities
exchange as determined in the good faith judgment of the party wanting to make
such release.
Section 5.4 Notification of Certain Matters. The Company shall
-------------------------------
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
-------- -------
delivery of any notice pursuant to this Section 5.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.5 Access to Information.
---------------------
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, the Company shall, and shall cause each
of its subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of the Parent, during normal business hours during the
period prior to the Effective Time, reasonable access to all its properties,
books, contracts, commitments and records, and to its officers, employees,
accountants, counsel and other representatives and, during such period, the
Company shall, and shall cause its subsidiaries to, make available to the Parent
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably request.
25
<PAGE>
(b) No investigation by any of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
(c) The information provided pursuant to Section 5.5(a) will
be used solely for the purpose of the transactions contemplated hereby, and
unless and until the Merger is consummated, such information will be kept secret
and confidential by Parent and Purchaser, except that the information provided
pursuant to Section 5.5(a) or portions thereof may be disclosed to those of
Parent's and Purchaser's or their affiliates' directors, officers, employees,
agents and advisors (collectively, the "Representatives") who (a) need to know
such information for the purpose of the transactions contemplated hereby, (b)
shall be advised by Parent or Purchaser, as the case may be, of this provision,
(c) agree to hold the information provided pursuant to Section 5.5(a) as secret
and confidential and (d) agree with Parent and Purchaser to be bound by the
provisions hereof. Parent and Purchaser jointly agree to be responsible for any
breach of this section by any of their Representatives. If this Agreement is
terminated, Parent shall, and shall cause the Purchaser and each of their
Representatives to, return or destroy (and certify destruction of) all
information provided pursuant to Section 5.5(a).
Section 5.6 Further Assurances.
------------------
(a) Subject to the terms and conditions of this Agreement,
each of Parent and the Company shall, and shall cause its subsidiaries to, use
all reasonable efforts (i) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which may be
imposed on such party or its subsidiaries with respect to the Merger and,
subject to the conditions set forth in Article VI hereof, to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Offer and the Merger, as promptly as practicable and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity and any other third
party which is required to be obtained by the Company or Parent or any of their
respective subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement, and to comply with the terms and conditions of
any such consent, authorization, order or approval.
(b) Subject to the terms and conditions of this Agreement,
each of Parent and the Company shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using all reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby
and using all reasonable efforts to defend any litigation seeking to enjoin,
prevent or delay the consummation of the transactions contemplated hereby or
seeking material damages.
Section 5.7 Employee Matters.
----------------
(a) For purposes of all employee benefit plans (as defined in
Section 3(3) of ERISA) and other employment agreements, arrangements and
policies of Parent under
26
<PAGE>
which an employee's benefit depends, in whole or in part, on length of service,
credit will be given to current employees of the Company for service with the
Company prior to the Effective Time, provided that such crediting of service
does not result in duplication of benefits. Parent shall, and shall cause the
Company to, honor in accordance with their terms all employee benefit plans (as
defined in Section 3(3) of ERISA) and other employment, consulting, benefit,
compensation or severance agreements, arrangements and policies of the Company
(collectively, the "Company Plans"); provided, however, that Parent or the
-------- -------
Company may amend, modify or terminate any individual Company Plans in
accordance with the terms of such Plans and applicable law (including obtaining
the consent of the other parties to and beneficiaries of such Company Plans to
the extent required thereunder); provided, further, that notwithstanding the
-------- -------
foregoing provisio, Parent will not cause the Company to (i) reduce any benefits
to employees pursuant to such Plans for a period of 12 months following the
Effective Time, (ii) reduce any benefit accruals to employees pursuant to any
such Plans that are defined benefit pension plans, or (iii) reduce the employer
contribution pursuant to any such Plans that are defined contribution pension
plans. The Company shall amend its Supplemental Executive Retirement Plans to
provide that, effective as of the Closing, participants who have been (or would
have been) employed by the Company for 10 years or more as of the later of the
Closing Date or December 31, 2000, shall be entitled to benefits under such plan
upon termination of employment, if terminated within 12 months after the
Effective Time, as if such participant was 55 years old at the date of such
termination, subject to the other provisions of such plan.
(b) Any employee of the Company employed at the time of the
Closing at the Company's corporate offices in Fort Worth, Texas ("Corporate
Employee") that is terminated by the Company without cause during the 12 months
following the Closing Date, shall be paid by the Company, in cash (i) with
respect to Company Employees who are officers of the Company at the time of
Closing ("Corporate Officers"), 12 months' base pay and (ii) with respect to
Company Employees who are not Corporate Officers, the greater of (x) two months'
base pay or (y) one-half of one week's pay for each year of service. In
addition, each Corporate Officer that is an employee of the Company at the time
annual bonuses are paid by the Company in the ordinary course of business (or
any such Officer that is terminated without cause by the Company) shall receive
a cash bonus for fiscal year 2000 that is equal to or greater than the cash
bonus paid to such Corporate Officer for fiscal year 1999.
Section 5.8 Indemnification. From and after the Effective Time,
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Parent shall, and shall cause the Surviving Corporation to, indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date of this Agreement or who becomes such prior to the Effective Time, an
officer, director, agent, fiduciary or employee of the Company or any of its
subsidiaries (the "Indemnified Parties") against (i) any and all losses, claims,
damages, costs, expenses, fines, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer,
agent, fiduciary or employee of the Company or any of its subsidiaries whether
pertaining to any action or omission existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby; provided,
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however, that, in
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the case of the Purchaser and the Surviving Corporation such indemnification
shall only be to the fullest extent a corporation is permitted under the DGCL or
the Texas Act, as applicable, to indemnify its own directors, officers, agents,
fiduciaries and employees, and in the case of Parent, such indemnification shall
not be limited by the DGCL but such indemnification shall not be applicable to
any claims made against the Indemnified Parties if a judgment or other final
adjudication established that (A) their acts or omissions were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action so deliberated or (B) arising out of, based upon or
attributable to the gaining in fact of any financial profit or other advantage
to which they were not legally entitled. Parent, Purchaser, and the Surviving
Corporation, as the case may be, will pay all expenses of each Indemnified Party
in advance of the final disposition of any such action or proceeding to the
fullest extent permitted by law upon receipt of any undertaking contemplated by
Section 145(e) of the DGCL or Article 2.02-1 of the Texas Act, as applicable.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and Parent and Purchaser, (ii) Parent shall,
and shall cause the Surviving Corporation to, pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) Parent shall, and shall cause the Surviving
Corporation to, use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that none of Parent, Purchaser or the Surviving
Corporation shall be liable for any settlement of any claim effected without its
written consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 5.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Parent, Purchaser or the Surviving Corporation (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 5.8 except to the extent such failure materially
prejudices such party), and shall deliver to the Purchaser and the Surviving
Corporation the undertaking contemplated by Section 145(e) of the DGCL or
Article 2.02-1 of the Texas Act. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
Section 5.9 Additional Agreements. In case at any time after the
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Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the merger, the proper officers and directors of each party to
this Agreement and their respective subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, Parent.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the
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Merger. The respective obligation of each party to effect the Merger shall be
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subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
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(a) Stockholder Approval. This Agreement shall have been
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duly approved and adopted by the requisite vote of the holders of Company Common
Stock, if required by applicable law in order to consummate the Merger;
(b) Statutes; Consents. No statute, rule, order, decree or
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regulation shall have been enacted or promulgated by any Governmental Entity or
authority of competent jurisdiction which prohibits the consummation of the
Merger and all foreign or domestic governmental consents, orders and approvals
required for the consummation of the Merger and the transactions contemplated
hereby shall have been obtained and shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of
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any Governmental Entity of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger; provided,
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however, that each of the parties hereto shall have used its reasonable best
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efforts to prevent the entry of any such injunction or other order and to appeal
as promptly as possible any injunction or other order that may be entered; and
(d) Purchase of Shares in Offer. Parent or Purchaser shall
---------------------------
have purchased shares of Company Common Stock pursuant to the Offer, provided
that this condition shall be deemed satisfied with respect to Parent and
Purchaser if the Purchaser shall have failed to purchase Shares pursuant to the
Offer in breach of its obligations under this Agreement.
Section 6.2 Conditions to Obligations of Parent and Purchaser to
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Effect the Merger. The obligations of Parent and Purchaser to effect the
-----------------
Merger are subject to the satisfaction of the further condition (which may be
waived in whole or in part by Parent) that the Company shall have performed in
all material respects all material obligations required to be performed by it
under this Agreement on or before the earlier of (i) such time as Parent's or
Purchaser's designees shall constitute at least a majority of the Company's
Board of Directors pursuant to Section 1.3 of this Agreement and (ii) the
Closing Date.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the
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contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual consent of the Parent and the Company.
(b) By either of the Company or Parent:
(i) if any Governmental Entity shall have issued an
order, decree