MERGER AGREEMENT
Exhibit
2.2
AGREEMENT,
made in Santiago, Chile, on May 17, 2007, entered into by and between a majority
of the controlling shareholders of S.A.C.I. Falabella (the “Falabella Group”),
of the first part; and, of the second part, the controlling shareholders of
Distribución y Servicio D&S S.A (the “D&S Group”), both groups as
identified in the signature page hereof. Each party shall be individually
referred to as a “Party” and both, collectively, shall be referred to as the
“Parties”.
The
individuals who enter into this Merger Agreement bind themselves hereunder
pro
se and by virtue of their respective controlled affiliates in the interest
held
by the Falabella Group in S.A.C.I. Falabella and in the interest held by the
D&S Group in Distribución y Servicio D&S S.A. under article 1450 of the
Civil Code.
1) SCOPE
OF AGREEMENT
The
Falabella Group and the D&S Group have agreed to merge S.A.C.I. Falabella
(“Falabella”) and Distribución y Servicio D&S S.A. (“D&S”) on the terms
set forth in articles 99 and 100 of Law 18046 (the “Merger”), in order to
integrate the business plans of Falabella and D&S and thus create a platform
for business development in the national territory and in particular in the
international markets.
Once
the
Merger is consummated, the shareholders of Falabella and the shareholders of
D&S shall become shareholders of the surviving company. To this end, one of
the companies, either Falabella or D&S, will be merged with and into the
other. The determination of which of the two companies, Falabella or D&S,
will be the surviving company (the “Surviving Company”) shall be made
considering efficiency-related factors only, with regard to (i) the time and
expediency of the procedure required to consummate the Merger and (ii) the
convenience of the Surviving Company from a taxation perspective.
2)
NAME
OF SURVIVING COMPANY
The
name
of the Surviving Company shall be determined in the course of the Merger
meetings.
The
decision in relation to the name of the Surviving Company shall be made by
a
committee of nine members designated by the Parties ratably to the interest
that
each Party shall hold in the merged entity, i.e. seven members designated by
the
Falabella Group and two members designated by the D&S Group. The decision
shall be made by an absolute majority and individual votes, upon deliberation,
and each committee member may discuss his or her points of view.
3)
EXCHANGE
RATIO
The
Parties agree that the shares of the Surviving Company shall be apportioned
among the shareholders of pre-Merger Falabella and the shareholders of
pre-Merger D&S, at a rate of 77% and 23%, respectively.
4) BOARD
OF DIRECTORS OF THE SURVIVING COMPANY
The
Surviving Company shall have a board of directors composed of 11
members.
In
case
of death, resignation, removal or inability to exercise a directorship by any
director designated by any of the Parties, the Parties agree, through the other
directors designated by them or any other adequate legal mechanism, to replace
the outgoing director with the person indicated by the Party who originally
designated said outgoing director. This paragraph shall apply to all boards
of
directors.
Each
of
the members of the Falabella Group individually agrees, for the benefit of
the
D&S Group, that as long as the D&S Group holds such number of shares as
allow it to designate one director in the Surviving Company, and as long as
the
parties to the shareholders’ agreement of Falabella (the “Falabella Agreement”)
maintain control over the Surviving Company:
| (a) |
The
D&S Group shall have the same right to designate one director in the
Relevant Subsidiaries and other subsidiaries of the Surviving Company
as a
party to the Falabella Agreement who holds sufficient shares issued
by the
Surviving Company to designate one director of the Surviving Company.
To
the extent that no third party holds any interest in a Relevant
Subsidiary, the D&S Group shall always have the right to designate a
director; and
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| (b) |
The
D&S Group shall designate at least four directors of the food
subsidiary, including the director to whom it is entitled pursuant
to
paragraph (a) above, provided that if the D&S Group no longer holds an
11.4% interest in the shares of the Surviving Company and that if the
Falabella Group combined with the D&S Group are unable to designate
nine directors, the number of directors designated by the D&S Group
shall be three. One of the directors designated by the D&S Group shall
be the Chairman of the food subsidiary. The provisions of this paragraph
(b) shall apply for a term of six years from the date of the
Merger.
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Relevant
Subsidiaries shall be the companies that engage in the following
businesses:
| (i) |
department
stores;
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| (ii) |
food
sales;
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| (iii) |
sale
of construction materials and home improvement
products;
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| (iv) |
consumer
loans;
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| (v) |
Banco
Falabella; and
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| (vi) |
Real
estate (Saitec and Xxxxxx Falabella).
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The
Relevant Subsidiaries shall have 11 directors.
5) OTHER
RIGHTS OF THE PARTIES
| 1. |
Nothing
provided herein (including the provisions of Section 4) shall restrict
the
right of the D&S Group and of the Falabella Group to dispose of all or
part of their equity interest in the Surviving Company, with all the
rights accruing thereto.
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| 2. |
In
relation to the shares held by the D&S Group in excess of 8.3334% of
the shares issued by the Surviving Company and as long as they are
held by
it, the D&S Group shall exercise the voting rights corresponding to
those shares as provided in the Falabella Agreement and as instructed
to
that effect by a representative designated by the Falabella Group,
for a
period of six years from the Merger. The D&S Group may dispose of
these shares without any restriction, with all the voting rights accruing
thereto included, at any time.
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| 3. |
To
the extent permitted by applicable law, the D&S Group may require, at
its own cost, at any time and for up to a maximum of three times, that
the
Surviving Company assist the D&S group in order that the latter sell
the shares it holds through one or more public offers, duly registered.
Likewise, if the Surviving Company considers conducting an offer of
newly
issued shares, the D&S Group may include in the respective offer by
the Surviving Company shares held by the D&S Group, and the D&S
Group shall contribute funds in such case to pay its ratable portion
of
the total offer expenses.
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| 4. |
Within
60 days following the date of this Agreement, the Falabella Group shall
advise the D&S Group whether it grants the D&S group an option to
adhere to the Falabella Agreement. To this end, and concurrently with
said
notice, the Falabella Group shall provide the execution version of
the
Falabella Agreement regarding which the D&S Group may exercise the
option. Upon granting of said option, the D&S Group shall be required
to exercise the same within 60 days.
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6) DIVIDEND
POLICY
The
Parties agree that the dividend policy of the Surviving Company shall be to
distribute, every year, at least 40% of the annual profits that are
distributable in accordance with the law and other applicable regulations,
provided the consolidated debt/equity ratio o the Surviving Company shall be
1:1
or less.
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7) MERGER
MECHANICS
The
Merger shall be conducted through a merger by absorption as provided in articles
99 and 100 of Law 18,046. In the silence of those provisions and this Agreement,
the Parties shall opt for such statutory mechanisms and corporate vehicles
as
equitably maximize the benefits and minimize the costs for the shareholders
of
Falabella and the shareholders of D&S.
8) ADDITIONAL
ACTS AND CONTRACTS TO CONSUMMATE THE MERGER
The
obligations assumed by the Parties include their individual obligation to have
the shareholders’ meetings of Falabella and D&S, as applicable, vote in
favor of the Merger of both companies on the terms provided herein and as soon
as reasonably practicable. To this end, the Parties shall make their best
efforts to carry out and enter into the definitive acts and contracts deemed
necessary or convenient to consummate the agreements set forth herein (the
“Definitive Contracts”) within 90 days from the date hereof, which shall have
the nature of a hold-over period and not of a deadline. Once the aforementioned
90-day term is over, any member of the Falabella Group or of the D&S Group
may require the Deliberative Body referred to in Exhibit A to this Merger
Agreement to fulfill its mandate.
In
this
Agreement and in the Definitive Contracts, the Falabella Group and the D&S
Group bind themselves, in their capacity as shareholders representing,
respectively and collectively, the percentage necessary to meet the requisite
quorum and majorities to approve the Merger in accordance with applicable laws,
regulations and bylaws, regardless of whether the Falabella Group and the
D&S Group hold the respective percentage by themselves or not.
9) TRANSITION
PERIOD
Between
the date of this Merger Agreement and the date when the Merger is consummated
(the “Transition Period”), the Falabella Group, on the one hand, and the D&S
Group, on the other, agree to have Falabella or D&S, as applicable (the
“Respective Controlled Entity”) (including, unless otherwise expressly
indicated, the companies controlled by the Respective Controlled Entity”),
continue conducting its activities and businesses (the “Business”) as it has
done in the past. Likewise, the Parties agree to make their best efforts to
(i)
maintain the business organization established by the Respective Controlled
Entity, (ii) maintain in force and effect the authorizations and permits whereby
the Respective Controlled Entity currently conducts its activities, and (iii)
maintain existing relationships with customers, vendors, workers, creditors,
regulators and supervisors of the Respective Controlled Entity in order that
the
financial condition and the Business of the Respective Controlled Entity as
an
ongoing activity taken as a whole should not be adversely affected during the
Transition Period. Without any limitation to the generality of the obligation
to
preserve the Business, each Party agrees to have its Respective Controlled
Entity perform the affirmative and negative covenants indicated below, the
breach of which, as well as of the generality of the obligation to preserve
the
Business, shall be sanctioned with the penalty referred to in Section
11):
| 1. |
Refrain
from materially modifying the businesses and activities of the Respective
Controlled Entity. For the avoidance of doubt, it is hereby noted that
the
securitization of accounts receivable shall not be deemed a breach
of this
paragraph;
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| 2. |
Refrain
from disposing any asset of material importance for the conduct of
the
business of the Respective Controlled Entity as it has done in the
past;
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| 3. |
Refrain
from distributing dividends in excess of US$220 million, taking both
companies as a whole, being able to distribute, in each period of 12
months from this date and until the consummation of the Merger: (i)
in the
case of Falabella, a maximum of US$169.4 million; and (ii) in the case
of
D&S, a maximum of US$50.6 million. It is hereby noted that this amount
does not include the dividend paid by D&S on May 17, 2007, nor the
right of Falabella to pay out a pre-Merger dividend in the sum of $9
per
share;
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3
| 4. |
Refrain
from agreeing to or conducting any reduction in capital or from approving
any stock repurchase program. Pre-Merger capital increases shall only
be
conducted if funds are used in relation to a specific project and,
in such
case, the company that does not increase capital may increase capital
so
that the agreed proportion for the distribution of shares in the Surviving
Company once the Merger is consummated is not altered. The capital
increase previously agreed in Falabella and pending underwriting shall
be
governed by this same rule. The exception to this rule shall be the
capital increase approved in Falabella at a shareholders’ meeting held on
April 24, 2007, destined to the executive incentives
plan;
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| 5. |
In
general, refrain from encouraging or permitting any operation, act,
contract or situation related to the Respective Controlled Entity or
its
assets such as is incompatible with the consummation of the Merger
on the
terms set forth in this Merger Agreement.
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Moreover,
the Parties agree to the following during the Transition Period:
| (a) |
To
designate a Transition Committee comprised of three members of each
Group,
the purpose of which shall be, to the extent permitted by law, to
coordinate the Merger process. This Committee shall take
minutes.
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| (b) |
To
have its Respective Controlled Entity execute, within 10 business days
following the date hereof, a confidentiality agreement the effective
term
of which shall not exceed the date of the Merger, providing the obligation
to preserve and maintain the confidential character of the information
exchanged between the Respective Controlled Entities during the Transition
Period.
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10) CONDITIONS
TO CONSUMMATE THE MERGER
The
obligation to consummate the Merger shall be subject to the following conditions
(the fulfillment or breach of which shall be verified by the Deliberative Body
referred to in Exhibit A hereto):
| 1. |
That
no administrative, judicial, legal or other resolution or standard
exist
that, as a result of the transaction contemplated hereby, imposes a
significant restriction or otherwise has a material adverse impact
on the
freedom of the Surviving Company to conduct the businesses that Falabella
and D&S have separately conducted in the
past;
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| 2. |
That
Falabella and D&S shall have complied with the provisions of Section
9) or otherwise (notwithstanding imposition of the penalty referred
to
Section 11)), the Falabella Group or the D&S Group (the “Affected
Party”), depending on whether D&S or Falabella is the company that
fails to perform such obligations, waives the condition in question
at its
entire discretion;
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| 3. |
That
between this date and the date on which the Merger is to be consummated,
no event or circumstance shall have occurred other than events or
circumstances affecting the general economy of the countries in which
they
operate, such as have a material adverse impact on the value of Falabella
or D&S, unless the Affected Party waives this condition at its entire
discretion;
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| 4. |
Register
or maintain the registration of the Surviving Company with the U.S.
Securities and Exchange Commission (“SEC”), to which end, as of the Merger
date, it must have commenced the registration process with said authority.
Once 3 years elapse from the Merger and if so determined by two thirds
of
the directors of the Surviving Company, the SEC registration will be
cancelled.
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11) BREACH
OF SECTION 9) COVENANTS
In
case
of any breach of the covenants in Section 9) above, a penalty shall be imposed
in the equivalent of twice the damage sustained by the Affected Party, as
determined by the Deliberative Body, notwithstanding the possibility that,
if
applicable, the penalty referred to in Section 15) hereof shall be additionally
imposed.
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12) REPRESENTATIONS
AND WARRANTIES
The
representations and warranties set forth in Exhibit B hereto shall
govern.
13) OBLIGATIONS
BINDING AND ENFORCEABLE
Each
member of the Falabella Group and each member of the D&S Group, individually
and indivisibly, expressly represent that they have entered into this Merger
Agreement willing and intending to be legally bound hereby and that the
obligations hereof are enforceable.
14) EFFECTIVE
TERM
The
Merger shall be consummated within 60 days from the date on which evidence
is
furnished that the last of the conditions indicated in Section 10) above has
been fulfilled. Special Shareholders’ Meetings of Falabella and D&S shall be
called to be held on the same day, as determined by the Transition Committee.
15) PENALTY
Any
Party
who fails to perform its obligation to carry out and enter into the acts and
contracts in the manner established by the Deliberative Body (the “Non-diligent
Party”) shall pay the Respective Controlled Entity of the Party who is diligent
or is willing to perform its obligation to carry out and enter into the acts
and
contracts as provided by the Deliberative Body (the “Penalty Payee” and
“Diligent Party”, respectively), a penalty totaling US$300,000,000 (three
hundred million United States dollars).
The
penalty provided in the preceding paragraph is deemed notwithstanding and in
addition to the right of the Diligent Party to demand payment of actual damages
sustained by the same as a result of the breach by the Non-diligent Party,
before the Deliberative Body.
16) JOINT
AND SEVERAL LIABILITIES
All
the
members of each Group shall be jointly and severally liable unto the other
Group
with regard to fulfillment of the obligations of all the members of its
respective Group.
17) DISPUTE
RESOLUTION
The
Parties agree to establish a swift and effective mechanism for the timely,
fair
resolution of any disputes as may arise between them in connection with the
interpretation and performance of this Agreement, all as indicated in Exhibit
A
hereto.
18) NOTICES
TO THE AUTHORITIES AND PUBLIC
Any
notices and communications required to be made by the Parties under the laws,
regulations, corporate bylaws, contractual provisions, standards of the SVS
or
international regulatory entities, shall be the responsibility of each party
and
shall not require the consent or prior approval of the other Party, provided
however that said party shall be required to advise the other Party in advance
in regard to the obligation to communicate or notify certain events and, if
possible, accompanying the contents of the respective
communication.
Publications,
press releases and other public information in relation to the Merger and not
mandatory under the laws, regulations, corporate bylaws, contractual provisions,
standards of the SVS or international regulatory entities shall be disclosed
by
mutual consent of the Parties, agreeing on the respective texts. To this end,
the Parties designate the agents referred to in Section 19) to coordinate all
the communication activities referred to in this section.
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19) COMMUNICATIONS
BETWEEN THE PARTIES
All
communications, notifications or notices to be sent between the Parties
hereunder shall be made in writing and delivered in person, by registered mail
or electronic mail to the following representatives at the addresses indicated
hereinbelow:
To
the
Falabella Group:
Xx.
Xxxx
Xxxxx Xxxxxx
E-mail:
xxxxxx@xxxxxxxxx.xx
Address:
Xxxxx 1665, Xxxxxxxx
x.x.:
Xx.
Xxxxxxxx Xxxxx Xxxxx
E-mail:
xxxxxx@xxxxxxxxxxxx.xx
Address:
Huérfanos 1022, 10th
floor,
Xxxxxxxx
To
the
D&S Group:
Xx.
Xxxx
Xxxx Oyanedel
E-mail:
xxxxx@xxxx00.xx
Address:
El Golf 99, 15th
floor,
Las Condes
c.c:
Xx.
Xxxxxxx Xxxxxxxxx Xxxxxx
E-mail:
xxxxxxxxxx@xxxxxxxxxxxxx.xx
Address:
Xxxxx xx Xxxx 2736, 6th
floor,
Las Xxxxxx, Xxxxxxxx
The
notices and communications between the Parties shall be deemed received and
consequently perfected upon delivery if sent in person; five business days
following their dispatch if sent by registered mail or courier service; and
the
following bank business day after transmission if sent by e-mail.
If
either
Party changes address or e-mail address or replaces the representative
authorized to receive communications, said Party shall advise this situation
to
the other Party within five bank business days following the occurrence of
such
change and in any case as provided in this section. Otherwise, all
communications sent to the address, e-mail or representative mentioned above
shall be fully effective for the purposes of this Merger Agreement.
20)
LEGAL
CAPACITY
Each
member of the Falabella Group and of the D&S Group represents, for the
benefit of the other members of both groups, that it has sufficient authority
and has been all other corporate or other requirements to validly assume the
obligations contemplated hereby, which are enforceable in accordance with their
terms.
21) DESIGNATION
OF REPRESENTATIVE
The
members of the Falabella Group designate Xx. Xxxx Xxxxx Xxxxxx, domiciled at
Xxxxx 1665, Santiago, and the members of the D&S Group designate Xx. Xxxx
Xxxx Oyanedel, domiciled at El Golf 99, 15th
floor,
Las Condes, as their respective representatives, with full authority in
connection with this Merger Agreement, especially including, but not limited
to,
any matter that must be known or decided by the Deliberative Body, including
any
notification required by the same, without limitation.
22) GOVERNING
LAW
The
provisions of this Merger Agreement shall be governed by the laws of the
Republic of Chile.
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23) DOMICILE
For
all
intents and purposes, the Parties establish their domicile in the municipal
district of Santiago.
| Members of the Falabella Group | Members of the D&S Group | ||
| /signed/ | /signed/ | ||
| Xxxxxxxx Xxxxxx Xxxxxxxx | Xxxxxx Xxxxxx Xxxxx, pro se and | ||
|
p.p.
Servicios e Inversiones Trucha S.A.
|
|||
| /signed/ | /signed/ | ||
| Xxxx Xxxxx Xxxxxx | Xxxxxxx Xxxx Xxxxx | ||
|
p.p.
Seprocom
S.A.
|
|||
| /signed/ | /signed/ | ||
| Xxxxxx Xxxxxxx Xxxxxx | Xxxxxxx Xxxx Xxxxx | ||
|
p.p.
Empresas Almac S.A.
|
|||
| /signed/ | /signed/ | ||
| Xxxxxxx Xxxxxx Xxxxxxxxx | Xxxxxxx Xxxx Xxxxx | ||
|
p.p.
Future Investments S.A.
|
|||
| /signed/ | /signed/ | ||
| Xxxx Xxxxxx Xxxxxx Xxxxxx | Xxxxxxx Xxxx Xxxxx | ||
|
p.p.
International Supermarket Holdings
S.A.
|
|||
| /signed/ | |||
| Xxxx Xxxx del Río Xxxxxx | |||
| p.p. Dersa S.A. |
7
EXHIBIT
A
DISPUTE
RESOLUTION MECHANISM
| 1. |
The
Parties agree to designate the deliberative body referred to herein, in an
ex
aequo et xxxx arbitration
or proxy capacity, as the case may be (the “Deliberative Body”), with the
express authority to integrate this Merger Agreement and establish
the
provisions that the Definitive Contracts are to include in all aspects
not
expressly regulated herein, in any and all aspects thereof, whether
of its
essence, inherent thereto or merely incident thereon, in the same manner
as article 1809 of the Civil Code authorizes a third party to determine
the price of a purchase & sale transaction, as well as to establish
the timing for the execution of such Definitive Contracts; determine
a
breach by any of the parties and, if applicable, establish and order
the
payment of the penalty determined by the Merger Agreement, or any other
effects of the breach of any obligation. In such case, the Deliberative
Body shall act as an irrevocable proxy for the Parties to this effect,
pursuant to article 241 of the Code of Commerce, which is deemed without
prejudice to the full jurisdictional authority of the Deliberative
Body in
its ex
aequo et xxxx
arbitration capacity.
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| 2. |
The
Deliberative Body shall be comprised of three members, two of whom
shall
not be attorney (the “Non-Attorney members”) and one shall be an attorney
(the “Deliberative Body Chair”). The Falabella Group shall designate one
Non-Attorney Member and the D&S Group shall designate the other
Non-Attorney Member. The Deliberative Body Chair will be entitled to
decide on any issue in which the Non-Attorney Members are unable to
agree,
and shall be one of the persons designated in the following paragraph,
in
the order established therein.
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| 3. |
The
Parties hereby designate, first, as Deliberative Body Chair, Xx. Xxxxxxx
Xxxxxxxx del Río. If Xx. Xxxxxxx Xxxxxxxx del Río is unwilling or unable
to accept this position, the Parties designate Xx. Xxxxxx Xxxxxxxx
Monckeberg. If Xx. Xxxxxx Xxxxxxxx Monckeberg is unwilling or unable
to
accept this position, the Parties designate Xx. Xxxxxx Xxxx Xxxxxxxxxx
Monckeberg. If Xx. Xxxxxx Xxxx Xxxxxxxxxx Monckeberg is unwilling or
unable to accept this position and the Parties are unable to agree
on
another person, the authority to integrate this Merger Agreement shall
be
deemed terminated for all intents and purposes. And in such case any
dispute theretofore or thereafter arising between the parties shall
be
resolved by the Deliberative Body, the jurisdictional authority of
which
shall survive in full force and effect, which body shall be chaired
by the
person who, in the absence of any agreement between the Non-Attorney
members, is designated by the Xxxxxxxx Chamber of Commerce. If the
third
member is designated by the Xxxxxxxx Chamber of Commerce, each Party
will
have the discretional right (without cause) to veto up to 10
persons.
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| 4. |
The
induction process for the Deliberative Body to exercise its functions
as
an ex
aequo et xxxx
arbitration panel or proxy, as the case may be, shall commence with
a
communication sent by registered mail by either of the groups to the
other
group, (i) indicating the intention to establish the procedure and
(ii)
designating the Non-Attorney Member said group is entitled to designate.
The group that receives this communication shall have a deadline of
10
business days to designate the Non-Attorney Member said group is entitled
to designate and advise the name of the designee by registered mail
to the
group that commenced the procedure. If the Party who did not commence
the
induction process does not designate the Non-Attorney member it is
entitled to designate within the stated term, said party shall by virtue
of that fact alone be deemed as having delegated the designation of
said
Non-Attorney member to the Xxxxxxxx Chamber of Commerce (the “Chamber”),
which shall designate the same from among the non-attorney members
on the
list of arbitrators kept by its Arbitration
Center.
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| 5. |
Arbitration
shall be completed within 3 months from the date on which the last
of the
members of the Deliberative Body is sworn in, except if, on reasonable
grounds, the Deliberative Body Chair decides to extend the term for
an
additional 3 months. The Parties expressly waive any remedies to which
they could be entitled against the award and any other decision made
or
issued by the Deliberative Body.
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8
| 6. |
The
Parties waive the witness challenges contemplated by sections 4 and
5 of
article 358 of the Code of Civil Procedure in relation to the inability
of
witnesses due to employment ties with the parties submitting said
witnesses, notwithstanding the authority of the arbitration panel to
weigh
the evidential value of their testimonies.
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9
EXHIBIT
B
REPRESENTATIONS
AND WARRANTIES
The
Falabella Group and the D&S Group make the following representations with
regard to its Respective Controlled Entity, including the entities controlled
by
the Respective Controlled Entity (collectively, the “Relevant Entities”) and
warrants that said representations are effective as of this date and as of
the
date of the Merger.
| 1. |
Organization:
The Relevant Entities are companies legally organized and validly existing
and licensed and authorized to conduct their businesses as they presently
do.
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| 2. |
Licenses
and Authorizations: The
Relevant Entities are in possession of all permits, patents, licenses,
franchises, concessions and government authorizations (the “Permits”)
necessary for their operations as they have been conducted in the past.,
both in Chile and in the other countries where they do business,
considering that certain establishments and warehouses are functioning
under temporary permits, and except for those permits the absence or
defect of which does not generate a material adverse
impact.
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| 3. |
Title
to Assets:
The Relevant Entities own, possess and hold the tangible and intangible
assets, chattels and real property (the “Assets”) that are recorded in
their accounting books as being under their ownership, possession or
leasehold, respectively, and said Assets are not subject to any liens,
prohibitions, limitations or litigation other than as described in
the
Pertinent Financial Statements. In case of any absence of or cloud
on
title (a “Cloud on Title”) as to the ownership, possession or leasehold of
Assets, the Cloud on Title (i) does not affect assets that, individually
or collectively considered, are of significance to the Relevant Entities
taken as a whole, and (ii) does not materially compromise or limit
the
normal conduct of activities by the Relevant Entities taken as a whole.
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| 4. |
Financial
Statements:
The Pertinent Financial Statements (i) have been prepared in accordance
with generally accepted accounting principles of Chile or the relevant
jurisdiction (the “GAAP”), (ii) fairly reflect the financial position of
the Relevant Entities, the results of their operations, assets,
liabilities and equity accounts as of their date of preparation, and
(iii)
do not contain or fail to include anything the inclusion or omission
of
which would render them misleading in any material respect. Between
the
date of the Financial Statements as of December 31, 2006 and this date
(i)
there have been no material adverse variations to the consolidated
net
worth of the Relevant Entities, (i) there has been no variation to
the
accounting policies of the Relevant Entities or on the manner they
are
applied, and (iii) no significant liabilities, actual or contingent,
have
been incurred except for those originating in the ordinary course of
business consistent with past practices. The estimations, valuations,
allowances and reserves (the “Estimations”) used by the Company in
preparing the Financial Statements as of December 31, 2006, with regard
to
trade debtors, consumer loans and inventories are sufficient and adequate
considering expected losses, GAAP and the standards of the Banking
and
Finance Commission or other competent regulatory agencies, as the case
may
be. Between the date of the Financial Statements as of December 31,
2006
and this date and the date of the Merger, there have not been and shall
not be any significant variations to the criteria used in making the
Estimations.
|
| 5. |
Agreements
and Transactions with Shareholders and Executives:
The Relevant Entities are not required by any contract or undertaking
(i)
that are contrary to the provisions of articles 44 or 89 of Law 18,046
or
(ii) with executives of the Relevant Entities, executed other than
on
arm’s length terms with regard to deliverables, effectiveness,
consequences of termination or otherwise.
|
| 6. |
Taxes:
The Relevant Entities (i) have filed in time and form all the tax returns
they are required to file under applicable laws, (ii) have paid or
withheld and paid to the tax authorities, as the case may be, in time
and
form, all taxes, fees, duties and assessments generally (the “Taxes”), and
(iii) are not the subject of any action, claim, assessment or procedures
in relation to Taxes entailing significant payments not correctly
reflected in the Financial Statements as of December 31, 2006. In case
of
any errors or inaccuracies in any such aspects, said errors or
inaccuracies do not materially affect or henceforth compromise the
normal
conduct of the activities of the entities referred to in
(a).
|
10
For
the
purposes of this section, “Pertinent Financial Statements” include the Financial
Statements as of December 31, 2006, as of December 31, 2007, and those prepared
in connection with the Merger.
Consequences
of Breach:
If
the
total effect on any inaccuracy in the representations made by D&S and
Falabella does not exceed US$50,000,000 and US$100,000,000, respectively, there
shall be no consequences.
If
the
total effect of any inaccuracy in the representations exceeds the amounts
referred to in the preceding paragraph, the Surviving Company shall be paid
damages by the non-diligent Party in the amount required to place the Surviving
Company in a position equivalent to that in which it would have been had the
inaccuracy in question not taken place, for any damage in excess of
US$50,000,000 or US$100,000,000, in each case.
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