<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) NOVEMBER 20, 1997
----------------------
PACKAGED ICE, INC.
----------------------
(Exact name of registrant as specified in charter)
TEXAS 333-29357 76-0316492
- ---------------------------- -------------------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8572 Katy Freeway, Suite 101, Houston,TX 77024
- -------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 464-9384
----------------------
N/A
----------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 5. Other Events
SALE OF PREFERRED STOCK AND WARRANTS
On December 2, 1997, Packaged Ice, Inc., a Texas corporation (the
"Company") entered into a Securities Purchase Agreement (the "Culligan
Securities Purchase Agreement") with Culligan Water Technologies, Inc., a
Delaware corporation ("Culligan") pursuant to which, Culligan will acquire
235,000 shares of the 10% Exchangeable Preferred Stock of the Company (the "10%
Exchangeable Preferred Stock"), 94 shares of Series C Preferred Stock of the
Company (the "Series C Preferred Stock"), and warrants, with an exercise price
of $13.00 per share (the "Warrants"), to purchase 1,807,692 shares of the
Company's $.01 par value Common Stock (the "Common Stock") for an aggregate
price of $23.5 million, $10 million of which was paid on December 2, 1997 and
$13.5 million of which will be paid on December 15, 1997. In addition, the
Company entered into a Securities Purchase Agreement, dated December 2, 1997
(the "Jesselson Securities Purchase Agreement") with Erica Jesselson, an
individual residing in the state of New York ("Jesselson") pursuant to which
Jesselson purchased 15,000 shares of 10% Exchangeable Preferred Stock, 6 shares
of Series C Preferred Stock and Warrants to acquire 115,385 shares of the
Company's Common Stock for an aggregate price of $1.5 million. The Warrants
are valid until the earlier to occur of (a) April 15, 2005 and (b) the first
anniversary of the last day of the first period of twenty (20) consecutive
Trading Days following a Qualifying IPO during which there is a Closing Price
on each such Trading Day and the Closing Price on each such Trading Day equals
or exceeds the Threshold Price. "Qualifying IPO" means an underwritten public
offering of Common Stock at an aggregate price to the public of at least
$40,000,000 and after which the Common Stock is listed on a national securities
exchange or automated quotation system. "Closing Price" means, with respect to
any Trading Day, the last reported sale price per share on such day of the
Common Stock on the principal national securities exchange or automated
quotation system on which the Common Stock is then listed. "Threshold Price"
means, initially, $26.00, subject to adjustment. "Trading Day" means any day
on which the principal national securities exchange or automated quotation
system on which the Common Stock is listed is open for business. The Company
intends to use the net proceeds to support the Company's plan of strategic
acquisitions and for working capital.
The 10% Exchangeable Preferred Stock is now the Company's most senior
equity security. Holders of the 10% Exchangeable Preferred Stock shall be
entitled to receive dividends equal to 10% of the liquidation preference
thereof, and all dividends shall be fully cumulative. Dividends may be paid in
cash or in kind by issuing a number of additional shares of the 10%
Exchangeable Preferred Stock. If dividends are paid in kind, the Company shall
also issue to the holders of the 10% Exchangeable Preferred Stock, additional
warrants to purchase Common Stock at an exercise price of $13 per share.
Holders of 10% Exchangeable Preferred Stock have no voting rights other than
approval rights with respect to the issuance of parity or senior securities.
The Company may redeem the 10% Exchangeable Preferred Stock at any time subject
to contractual and other restrictions with respect thereto and to applicable
provisions of the Texas Business Corporation Act and to the legal availability
of funds therefor. The Company is obligated to redeem the 10% Exchangeable
Preferred Stock for cash on April 15, 2005 subject to
<PAGE> 3
applicable provisions of the Texas Business Corporation Act. The Company may
redeem all of the 10% Exchangeable Preferred Stock for notes in an aggregate
principal amount of the liquidation preference amount of the 10% Exchangeable
Preferred Stock.
The Series C Preferred Stock was created to provide Culligan and
Jesselson the right to vote a number of shares equal to the number of warrants
issued to them, such rights to be effective only at such time or times that
Culligan owns less than twenty percent (20%) of the fully diluted Common Stock.
The Company may redeem all (but not less than all) of the Series C Preferred
Stock at such time as the investors cease to own at least 50% of the Fully
Diluted Warrant Common Stock (as defined in the Certificate of Designation of
the Series C Preferred Stock.)
The securities purchase agreements require a vote of two-thirds of the
Board of Directors before the Company may take certain action relating to
distributions, granting demand registration rights, guaranteeing indebtedness,
making loans, changing the business, making acquisitions, pledging assets and
becoming a party to a merger, consolidation or reorganization resulting in less
than 51% of the Company's assets. The securities purchase agreements also
contain certain restrictive covenants which the Company is required to adhere
to while any of the 10% Exchangeable Preferred Stock is outstanding. In
connection with the investment by Culligan, the holders of over 80% of the
outstanding capital stock of the Company executed a voting agreement pursuant
to which Culligan may designate two representatives to be elected to the Board
of Directors and the shareholders shall elect such persons to the Board. Also
in connection with the issuance of stock, Culligan was granted demand and piggy
back registration rights under a registration rights agreement. The demand
gives Culligan the right to cause the Company to register its securities at any
time after 180 days following completion by the Company of a public equity
offering. In addition, James F. Stuart, A.J. Lewis III and Steven Rosenberg
entered into a parallel exit agreement with Culligan guaranteeing Culligan the
right to participate pro rata in sales to third parties. Culligan and
Jesselson also entered into a Stock Transfer Restriction Agreement which
precludes them from transferring the Series C Preferred Stock or Common Stock
issued under the warrant to the Company's primary competitor.
OPTION TO REPURCHASE SENIOR NOTES
The Company has obtained options to repurchase $61,250,000, principal
amount of the Company's 12% Series B Senior Notes due 2004 (the "Series B
Notes") and 12% Series C Notes due 2004 (the "Series C Notes") pursuant to
option agreements dated November 20, 1997 (the "Option Agreements"). The Option
Agreements entitle the Company to repurchase the Series B Notes and the Series
C Notes from the holders of such notes at 105% of the outstanding principal,
plus accrued but unpaid interest to the date of repurchase. The option to
repurchase the notes will expire at 5:00 PM, Eastern Standard Time, on January
31, 1998. The Company paid the holders of the Series C Notes who accepted the
Option Agreements $15 for each $1,000 in principal amount of the outstanding
notes.
<PAGE> 4
REGISTRATION OF SENIOR NOTES
On October 16, 1997, the Company completed the sale of $25 million of
Series C Notes in compliance with a private placement offering which was
prepared in compliance with Rule 144a and Regulation D under the Securities Act
(the "Private Placement"). According to the terms of a registration agreement
entered into by the Company pursuant to the Private Placement, the Company
agreed to file a registration statement, on an appropriate registration form
(the "Exchange Offer Registration Statement"), under the Securities Act within
sixty (60) days from the date of the first issuance of the Series C Notes (the
"Issue Date") and to use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
120 days after the Issue Date.
The Company does not intend to file the Exchange Offer Registration
Statement with the Securities and Exchange Commission and will therefore be,
pursuant to the registration rights agreement entered into during the Private
Placement, under an obligation to pay additional interest ("Additional
Interest") to each holder of the Series C Notes during the first 90-day period
immediately following the failure of filing the Exchange Offer Registration
Statement, in an amount equal to 0.5% per annum. The amount of cash interest
will increase by an additional 0.5% per annum for each subsequent 90-day period
until such Exchange Offer Registration Statement is filed. The Company's
decision to refrain from filing the Exchange Offer Registration Statement was
based on the Company's plan to repurchase the Series C Notes.
Item 7. Financial Statements and Exhibits
a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description of Document
<S> <C>
4.1 Certificate of Designation of Series C Preferred Stock.
4.2 Certificate of Designation of 10% Exchangeable Preferred Stock
10.1 Securities Purchase Agreements with Culligan Water Technologies, Inc.
10.2 Securities Purchase Agreement with Jesselson
10.3 Warrant Agreement with Culligan
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
10.4 Warrant Agreement with Jesselson
10.5 Registration Rights Agreement
10.6 Voting Agreement
10.7 Letter Agreement
10.8 Parallel Exit Agreement
10.9 Amendment No. 3 to The Amended and Restated Voting Agreement
10.10 Transfer Restriction Agreement with Culligan
10.11 Transfer Restriction Agreement with Jesselson
10.12 Option Agreement
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACKAGED ICE, INC.
Date: December 15, 1997 By: /s/ A.J. Lewis III
----------------------------
Name: A.J. Lewis III
Title: President
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Document
-------------- -----------------------
<S> <C>
4.1 Certificate of Designation of Series C Preferred Stock.
4.2 Certificate of Designation of 10% Exchangeable Preferred Stock
10.1 Securities Purchase Agreements with Culligan Water Technologies, Inc.
10.2 Securities Purchase Agreement with Jesselson
10.3 Warrant Agreement with Culligan
10.4 Warrant Agreement with Jesselson
10.5 Registration Rights Agreement
10.6 Voting Agreement
10.7 Letter Agreement
10.8 Parallel Exit Agreement
10.9 Amendment No. 3 to The Amended and Restated Voting Agreement
10.10 Transfer Restriction Agreement with Culligan
10.11 Transfer Restriction Agreement with Jesselson
10.12 Option Agreement
</TABLE>
<PAGE> 1
EXHIBIT 4.1
PREFERRED STOCK SERIES DESIGNATION
PACKAGED ICE, INC., A TEXAS CORPORATION
CERTIFICATE OF RESOLUTION
Providing for the Issuance of
Preferred Stock
Pursuant to Article 2.13 of the
Texas Business Corporation Act
* * * *
PACKAGED ICE, INC., a Texas corporation (the "Corporation"), certifies
that pursuant to the authority contained in Article Four of its Articles of
Incorporation, and in accordance with the provisions of Article 2.13 of the
Texas Business Corporation Act, its Board of Directors adopted by unanimous
written consent, in lieu of a special meeting, dated November 14, 1997, the
following resolutions creating and providing for the issuance of a series of
shares of Preferred Stock as hereinafter described, and further providing for
the voting powers, designations, preferences, and relative, participating,
optional or other rights thereof, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in said Articles of
Incorporation, all in accordance with the provisions of Article 2.13 of the
Texas Business Corporation Act (the "Act"):
BE IT RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation under Article Four of the Articles of
Incorporation, which creates and authorizes 5,000,000 shares of preferred stock
of the par value of $.01 per share, hereinafter called the "Preferred Stock,"
of which (i) 450,000 shares have been designated as the Series A Convertible
Preferred Stock, (ii) 200,000 shares have been designated as the Series B
Convertible Preferred Stock, and (iii) 500,000 shares have been designated as
the 10% Exchangeable Preferred Stock, the Board of Directors hereby provides
for the issuance of a series of 100 shares of Preferred Stock of the par value
of $.01 per share, as follows:
1. Designation. There is hereby created a series of Preferred
Stock of the Corporation to be designated "Series C Preferred Stock" with a
liquidation preference of $10.00 per share (hereinafter referred to as the
"Series C Preferred Stock") consisting of 100 shares of Series C Preferred
Stock, and to the extent that the designations, preferences, limitations and
relative rights of the Series C
<PAGE> 2
Preferred Stock are not stated in the Articles of Incorporation of the
Corporation, they are hereby fixed and herein stated, as set forth below.
2. Dividends. The Holders (this and certain other initially
capitalized terms used herein have the meanings specified in Section 8 hereof)
of shares of Series C Preferred Stock shall be entitled to receive dividends,
when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends. The amount of dividends payable in
respect of each share of Series C Preferred Stock shall be equal to the amount
of dividends declared and paid on each share of the Corporation's Common Stock,
$.01 par value per share (the "Common Stock"). No dividend shall be paid or
declared on any share of the Common Stock, unless a dividend, payable in the
same consideration and manner and at the same time (and having identical record
dates), is simultaneously paid or declared, as the case may be, on each share
of Series C Preferred Stock in an amount determined as set forth above nor
shall any dividend be paid or declared on any share of Series C Preferred
Stock, unless a dividend, payable in the same consideration and manner and at
the same time (and having identical record dates), is simultaneously paid or
declared, as the case may be, on each share of the Common Stock, in each case
without preference or priority of any kind. For purposes of this Section 2,
the term "dividends" shall include any pro rata distribution by the Corporation
of cash, property, securities (including, but not limited to, rights, warrants
or options) or other property or assets to the holders of the Common Stock,
whether or not paid out of capital, surplus or earnings.
3. Liquidation Preference.
(i) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, after there shall have
been paid, or set apart for payment, to the holders of the outstanding shares
of any class having preference over the Series C Preferred Stock the
preferential amounts as to which they are respectively entitled, the Holders of
the Series C Preferred Stock shall be entitled to share ratably with the
holders of the Common Stock (and all other classes and series of stock entitled
to participate with the Common Stock) in the remaining assets of the
Corporation on a pro rata basis per share, provided that in the event that such
payment would be less than $10.00 per share of the Series C Preferred Stock,
the Holders of the Series C Preferred Stock shall instead be entitled to
receive out of the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings, an amount per share of
Series C Preferred Stock equal to $10.00 per share (or if less than $10.00 per
share is available for distribution in respect of the Series C Preferred Stock,
then all such
2
<PAGE> 3
remaining funds shall be distributed pro rata in respect of the Series C
Preferred Stock), before any payment or distribution shall be made to the
holders of the Common Stock (or any other class or series of stock entitled to
participate with the Common Stock). If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the Holders of shares of Series C Preferred Stock
or the holders of any capital stock ranking on a parity with the Series C
Preferred Stock upon liquidation, dissolution or winding up of the Corporation,
shall be insufficient to pay in full the preferential amounts to which such
stock would be entitled, then such assets, or the proceeds thereof, shall be
distributable among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable thereon
were payable in full.
(ii) At any time, in the event of the merger or consolidation
of the Corporation into or with another corporation or the merger or
consolidation of any other corporation into or with the Corporation or a plan
of exchange between the Corporation and any other corporation (in which
consolidation or merger or plan of exchange any shareholders of the Corporation
receive cash or securities or other property), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, then,
subject to the provisions of this section, such transaction shall be deemed,
solely for purposes of determining the amounts to be received by the holders of
the Series C Preferred Stock in such merger, consolidation, plan of exchange,
sale, transfer or other disposition, to be a liquidation or dissolution of the
Corporation if the holders of a majority of the outstanding shares of Series C
Preferred Stock so elect by giving written notice thereof to the Corporation at
least two (2) days before the effective date of such transaction. The
Corporation shall give each holder of record of Series C Preferred Stock
written notice of such impending transaction not later than fourteen (14) days
prior to the shareholders' meeting of the Corporation called to approve such
transaction, or fourteen (14) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such Holders in writing of the
final approval of such transaction. The first of such notices shall describe
the material terms and conditions of the transaction and of this section
(including, without limiting the generality of the foregoing, a description of
the value of the consideration, if any, being offered to the holders of the
Series C Preferred Stock in the transaction and the amount to which such
holders would be entitled if such transaction were (as described above) to be
deemed to be a liquidation or dissolution of the Corporation), and the
Corporation shall thereafter give such holders prompt notice of any material
changes to such terms and conditions. The transaction shall in no event take
place sooner than fourteen (14) days after the mailing by the Corporation of
the first
3
<PAGE> 4
notice provided for herein or sooner than ten (10) days after the mailing by
the Corporation of any notice of material changes provided for herein;
provided, however, that such periods may be reduced upon the written consent of
the holders of a majority of outstanding shares of Series C Preferred Stock.
4. Voting Rights.
(i) Subject to Section 4(v) hereof, so long as Culligan Water
Technologies, Inc., a Delaware corporation ("Culligan"), and Erica Jesselson,
together with their respective affiliates (collectively, the "Investors"),
continue to collectively own at least fifty percent (50%) of the Fully Diluted
Warrant Common Stock, the Holders of outstanding shares of the Series C
Preferred Stock shall be entitled to an aggregate number of votes equal to the
aggregate number of whole shares of Common Stock purchasable by the Investors
under the Warrants (as if the Warrants were exercised in full prior to the date
fixed for the determination of shareholders entitled to so vote or consent), at
each meeting of shareholders of the Corporation (and with respect to written
actions of shareholders in lieu of meetings) with respect to any and all
matters presented to the shareholders of the Corporation for their action or
consideration including, without limitation, the election of directors.
(ii) In addition, subject to Section 4(v) hereof, the Holders
of outstanding shares of the Series C Preferred Stock, voting as a separate
class, shall be entitled to elect two members of the Board of Directors of the
Corporation, so long as the Investors continue to collectively own at least
fifty percent (50%) of the Fully Diluted Warrant Common Stock.
(iii) In addition, so long as any shares of the Series C
Preferred Stock are outstanding, the Corporation shall not amend this
Certificate of Resolution so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders of shares of Series C
Preferred Stock or to authorize the issuance of any additional shares of
Series C Preferred Stock without the affirmative vote or consent of Holders of
at least a majority of the outstanding shares of Series C Preferred Stock,
voting or consenting, as the case may be, separately as one class, given in
person or by proxy, either in writing or by resolution adopted at a meeting.
(iv) In any case in which the Holders of shares of the Series
C Preferred Stock shall be entitled to vote pursuant to Section 4(i) hereof,
each Holder of shares of the Series C Preferred Stock shall be entitled to a
number of
4
<PAGE> 5
votes (rounded up to the nearest whole vote) equal to the product of (a) the
aggregate number of votes to which the Holders of all outstanding shares of the
Series C Preferred Stock are entitled pursuant to Section 4(i) hereof
multiplied by (b) a fraction, of which the numerator shall be the number of
shares of Series C Preferred Stock held by such Holder, and of which the
denominator shall be the aggregate number of shares of Series C Preferred Stock
then outstanding. In any case in which the Holders of shares of the Series C
Preferred Stock shall be entitled to vote pursuant to Section 4(ii) or 4(iii)
hereof, each Holder of shares of the Series C Preferred Stock shall be entitled
to one vote for each share of Series C Preferred Stock held. No shares of
Series C Preferred Stock owned by the Corporation or any Person directly or
indirectly controlled by the Corporation shall be considered outstanding for
purposes of this Section 4.
(v) The voting rights set forth in Sections 4(i) and 4(ii)
hereof shall be effective only at such time or times that Culligan owns less
than twenty percent (20%) of the Fully Diluted Common Stock.
5. Optional Redemption.
(i) At any time on or after the Trigger Date (but in no event
prior thereto), the Corporation may (subject to contractual and other
restrictions with respect thereto and to applicable provisions of the Act and
the legal availability of funds therefor), at the option of the Board of
Directors, redeem, in the manner provided in Section 5(ii) hereof, all, but not
less than all, of the shares of the Series C Preferred Stock, at a cash
redemption price of $10.00 per share (the "Redemption Price").
(ii) Procedures for Redemption. (1) At least 20 days and
not more than 60 days prior to the date fixed for redemption of the Series C
Preferred Stock, written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of record on the record date
fixed for such redemption at such Holder's address as the same appears on the
stock register of the Corporation, provided that no failure to give such notice
nor any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Series C Preferred Stock except as to the Holder or
Holders to whom the Corporation has failed to give said notice or except as to
the Holder or Holders whose notice was defective. The Redemption Notice shall
state:
(A) the Redemption Price;
5
<PAGE> 6
(B) the Redemption Date;
(C) the place or places where certificates representing
the shares of Series C Preferred Stock are to be
surrendered for redemption and the manner in which
such certificates are to be surrendered; and
(D) that the Holder is to surrender to the Corporation,
at the place or places referred to in clause (C)
above, in the manner designated and at the Redemption
Price, the certificate or certificates representing
the shares of Series C Preferred Stock.
(2) Each Holder of Series C Preferred Stock shall
surrender the certificate or certificates representing such shares of Series C
Preferred Stock to the Corporation, duly endorsed, in the manner and at the
place designated in the Redemption Notice, and on the Redemption Date the full
Redemption Price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired.
(3) Unless the Corporation defaults in the payment
in full of the Redemption Price, the Holders of such shares shall cease to have
any further rights with respect thereto on the Redemption Date, other than the
right to receive the Redemption Price, without interest.
6. Reissuance of Series C Preferred Stock. Shares of Series C
Preferred Stock that have been issued and reacquired by the Corporation or any
of its subsidiaries in any manner, including shares purchased or redeemed,
shall be cancelled and shall not be reissued.
7. Business Day. If any payment or redemption shall be required by
the terms hereof to be made on a day that is not a Business Day, such payment
or redemption shall be made on the immediately succeeding Business Day.
6
<PAGE> 7
8. Definitions. As used in this Certificate of Resolution, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Business Day" means any day other than a Legal Holiday.
"Fully Diluted Common Stock" means, as of any date of
determination, the sum of (x) the number of shares of Common Stock outstanding
as of such date plus (y) the number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any then outstanding rights, warrants or
options to purchase Common Stock or any securities convertible into or
exchangeable for Common Stock (whether or not such rights, warrants, options or
convertible or exchangeable securities are then exercisable or exchangeable or
"in-the-money").
"Fully Diluted Warrant Common Stock" means, as of any date of
determination, the sum of (x) the number of shares of Common Stock theretofore
issued upon exercise of the Warrants plus (y) the number of shares of Common
Stock then underlying the Warrants; and for purposes of Section 4 hereof and
for purposes of the definition of "Trigger Date" below, the holders of the
Warrants shall be deemed to own the number of shares of Common Stock then
underlying the Warrants.
"Holder" means a holder of shares of Series C Preferred Stock.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Redemption Date" means the date on which the shares of Series
C Preferred Stock are to be redeemed by the Corporation in accordance with
Section 5 hereof.
7
<PAGE> 8
"Trigger Date" means the first date on which the Investors
cease to collectively own at least fifty percent (50%) of the Fully Diluted
Warrant Common Stock.
"Warrants" means those certain Common Stock Purchase Warrants
originally issued on December , 1997 with respect to an aggregate of
1,923,077 (subject to adjustment) shares of Common Stock (including additional
warrants issued pursuant to Section 4.7 of each of the Securities Purchase
Agreements, dated December 2, 1997, between the Corporation and each of
Culligan Water Technologies, Inc. and Erica Jesselson) and any warrants or
similar instruments issued upon transfer thereof, or in exchange or
substitution therefor.
8
<PAGE> 9
RESOLVED, that, before the Corporation shall issue any shares
of the Series C Preferred Stock, a certificate pursuant to Article 2.13 of the
Act shall be made, executed, acknowledged, filed and recorded in accordance
with the provisions of said Article 2.13; and the proper officers of the
Corporation are hereby authorized and directed to do all acts and things which
may be necessary or proper in their opinion to carry into effect the purposes
and intent of this and the foregoing resolutions.
9
<PAGE> 10
IN WITNESS WHEREOF, said PACKAGED ICE, INC. has caused this
Certificate to be duly executed by its President this 2nd day of December, 1997.
PACKAGED ICE, INC.
By:
---------------------------
Name: A.J. Lewis III
Title: President
10
<PAGE> 1
EXHIBIT 4.2
PREFERRED STOCK SERIES DESIGNATION
PACKAGED ICE, INC., A TEXAS CORPORATION
CERTIFICATE OF RESOLUTION
Providing for the Issuance of
Exchangeable Preferred Stock
Pursuant to Article 2.13 of the
Texas Business Corporation Act
* * * *
PACKAGED ICE, INC., a Texas corporation (the "Corporation"), certifies
that pursuant to the authority contained in Article Four of its Articles of
Incorporation, and in accordance with the provisions of Article 2.13 of the
Texas Business Corporation Act, its Board of Directors adopted by unanimous
written consent, in lieu of a special meeting, dated November 14, 1997, the
following resolutions creating and providing for the issuance of a series of
shares of Preferred Stock as hereinafter described, and further providing for
the voting powers, designations, preferences, and relative, participating,
optional or other rights thereof, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in said Articles of
Incorporation, all in accordance with the provisions of Article 2.13 of the
Texas Business Corporation Act (the "Act"):
BE IT RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation under Article Four of the Articles of
Incorporation, which creates and authorizes 5,000,000 shares of preferred stock
of the par value of $.01 per share, hereinafter called the "Preferred Stock,"
of which (i) 450,000 shares have been designated as the Series A Convertible
Preferred Stock (the "Series A Preferred Stock"), and (ii) 200,000 shares have
been designated as the Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), the Board of Directors hereby provides for the issuance of a
series of 500,000 shares of Preferred Stock of the par value of $.01 per share,
as follows:
1. Designation. There is hereby created a series of Preferred
Stock of the Corporation to be designated "10% Exchangeable Preferred Stock"
with a liquidation preference of $100.00 per share (hereinafter referred to as
the "10% Preferred Stock") consisting of an initial issuance of 250,000 shares
of 10% Preferred Stock plus up to 250,000 shares of 10% Preferred Stock that
may be
<PAGE> 2
issued in lieu of cash dividends thereon (and in lieu of cash dividends on such
shares that may be so issued in lieu of cash dividends) if the Corporation
elects to pay dividends in additional shares, and to the extent that the
designations, preferences, limitations and relative rights of the 10%
Preferred Stock are not stated in the Articles of Incorporation of the
Corporation, they are hereby fixed and herein stated, as set forth below.
2. Dividends.
(i) Beginning on the Issue Date (this and certain other
initially capitalized terms used herein have the meanings specified in Section
10 hereof), the Holders of the outstanding shares of 10% Preferred Stock, shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of funds legally available therefor, dividends on each share of 10% Preferred
Stock, at a rate per annum equal to 10% of the liquidation preference of one
share of 10% Preferred Stock, or $10.00 per whole share per annum. All
dividends shall be fully cumulative and shall accrue, whether or not earned or
declared, on a daily basis from the Issue Date and shall be payable
semiannually in arrears on each Dividend Payment Date, commencing on May 1,
1998. Any dividend on the 10% Preferred Stock accrued and payable as provided
in this Section 2 (including, without limitation, Default Dividends (as defined
below)) shall be paid either, as so elected by the Board of Directors of the
Corporation (subject, however, to Section 2(ix) below), (x) in cash or (y) by
issuing a number of additional shares (and/or fractional shares) of the 10%
Preferred Stock (the "Additional Shares of 10% Preferred Stock") for each such
share (or fractional share) of 10% Preferred Stock then outstanding equal to
the dividend then payable on each such share (or fractional share) of 10%
Preferred Stock for the Dividend Period then ended (or such shorter period for
which dividends are so being paid) (expressed as a dollar amount) divided by
the liquidation preference of one share of 10% Preferred Stock (expressed as a
dollar amount) or (z) in any combination thereof; provided, however, that on
each Dividend Payment Date which occurs after December , 2001, such dividend
amount shall be paid in cash except to the extent prohibited by Section 4.22 of
each of (i) the Indenture, dated April 17, 1997, relating to $50,000,000 of 12%
Senior Notes (Series A and Series B) of the Corporation and (ii) the Indenture,
dated October 16, 1997, relating to $25,000,000 of 12% Senior Notes (Series C
and Series D) of the Corporation (collectively, the "Indentures"), or, in each
case, any amendment, modification or supplement thereto.
(ii) If at any time dividends are not declared and paid on any
Dividend Payment Date, whether in cash or Additional Shares of 10% Preferred
2
<PAGE> 3
Stock or any combination thereof (the "Omitted Dividends"), the shares of 10%
Preferred Stock in respect of which such Omitted Dividends were not paid shall
accrue additional dividends as though such Omitted Dividends had been paid in
Additional Shares of 10% Preferred Stock at a rate per annum of 10% multiplied
by the amount of such Omitted Dividends (expressed as a dollar amount) (the
"Default Dividends"). Such Default Dividends shall be fully cumulative and
shall accrue (whether or not earned or declared) on a daily basis and shall be
deemed to constitute accrued and unpaid dividends for all purposes hereof even
if such additional dividends are not specifically mentioned in any particular
context. For purposes of this Section 2, all Default Dividends shall be
considered to be in arrears at all times.
(iii) Each distribution in the form of a dividend (whether in
cash or in Additional Shares of 10% Preferred Stock) shall be payable to
Holders of record as they appear on the stock books of the Corporation on such
record dates, not less than 10 nor more than 60 days preceding the related
Dividend Payment Date, as shall be fixed by the Board of Directors. Dividends
shall cease to accumulate in respect of shares of the 10% Preferred Stock on
the Exchange Date or on the date of their earlier redemption unless the
Corporation shall have failed to issue the appropriate aggregate principal
amount of Exchange Notes in respect of the 10% Preferred Stock on the Exchange
Date or shall have failed to pay the relevant redemption price on the date
fixed for redemption.
(iv) All dividends paid with respect to shares of the 10%
Preferred Stock pursuant to Section 2(i) shall be paid pro rata to the Holders
entitled thereto.
(v) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant to
Section 5(i) may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to Holders of record on such date, not more than
45 days prior to the payment thereof, as may be fixed by the Board of
Directors.
(vi) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for the payment of dividends by the
Corporation on any Parity Securities (as defined in Section 4 hereof) for any
period unless full cumulative dividends shall have been or contemporaneously
are declared and paid in full, or declared and (in the case of dividends
payable in cash) a sum in cash set apart in trust sufficient for such payment,
on the 10% Preferred Stock for all dividend periods terminating on or prior to
the date of payment of such full dividends on such Parity Securities. If any
dividends are not paid in full, as
3
<PAGE> 4
aforesaid, upon the shares of the 10% Preferred Stock and any other Parity
Securities, all dividends declared upon shares of the 10% Preferred Stock and
any other Parity Securities shall be declared pro rata so that the amount of
dividends declared per share on the 10% Preferred Stock and such Parity
Securities shall in all cases bear to each other the same ratio that accrued
dividends per share on the 10% Preferred Stock and such Parity Securities bear
to each other.
(vii) (1) Holders of shares of the 10% Preferred Stock
shall be entitled to receive the dividends provided for in Section 2(i) hereof
in preference to and in priority over any dividends upon any of the Junior
Securities (as defined in Section 4 hereof).
(2) So long as any shares of 10% Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment
any dividend on any of the Junior Securities or make any payment on account of,
or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Securities or
any warrants, rights, calls or options exercisable for or convertible into any
of the Junior Securities, or make any distribution in respect thereof, either
directly or indirectly, and whether in cash, obligations or shares of the
Corporation or other property (other than dividends on Junior Securities paid
solely in additional shares of Junior Securities), and shall not permit any
person or entity directly or indirectly controlled by the Corporation to
purchase or redeem any of the Junior Securities or any such warrants, rights,
calls or options.
(3) So long as any shares of the 10% Preferred Stock
are outstanding, the Corporation shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Securities or
any warrants, rights, calls or options exercisable for or convertible into any
of the Parity Securities, and shall not permit any person or entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the
Parity Securities or any such warrants, rights, calls or options unless the
dividends determined in accordance herewith on the 10% Preferred Stock have
been paid in full.
Notwithstanding the foregoing, these provisions do
not prohibit (a) the acquisition of Junior Securities or warrants, rights,
calls or options exercisable for or convertible into Junior Securities either
(i) solely in exchange for shares of Junior Securities or (ii) through the
application of the net proceeds of a substantially concurrent sale for cash
(other than to a person or entity directly or
4
<PAGE> 5
indirectly controlled by the Corporation) of shares of Junior Securities or
warrants, rights, calls or options to acquire Junior Securities or (b) the
acquisition of Parity Securities or warrants, rights, calls or options
exercisable for or convertible into Parity Securities either (i) solely in
exchange for shares of Junior Securities or Parity Securities or a combination
thereof or (ii) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a person or entity directly or
indirectly controlled by the Corporation) of shares of Junior Securities or
Parity Securities or warrants, rights, calls or options to acquire Junior
Securities or Parity Securities (or any combination thereof).
(viii) Dividends payable on shares of the 10% Preferred Stock
for any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable. If any Dividend Payment Date occurs on a day that is
not a Business Day, any accrued dividends otherwise payable on such Dividend
Payment Date shall be paid on the next succeeding Business Day.
(ix) Notwithstanding anything to the contrary contained
herein, dividends payable on any Dividend Payment Date shall be paid in cash
unless the Corporation also issues to the holders of the 10% Preferred Stock,
on or prior to such Dividend Payment Date, warrants to purchase common stock of
the Corporation in accordance with Section 4.7 of each of the Securities
Purchase Agreements, dated December , 1997, between the Corporation and each
of Culligan Water Technologies, Inc. and Erica Jesselson.
3. Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders of
shares of 10% Preferred Stock then outstanding shall be entitled to be paid,
out of the assets of the Corporation available for distribution to its
stockholders, $100.00 per share of 10% Preferred Stock, plus an amount in cash
equal to all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the last Dividend Payment Date to the date fixed
for liquidation, dissolution or winding-up), before any payment shall be made
or any assets distributed to the holders of any of the Junior Securities,
including, without limitation, common stock of the Corporation. Except as
provided in the preceding sentence, Holders of shares of 10% Preferred Stock
shall not be entitled to any distribution in the event of liquidation,
dissolution or winding-up of the affairs of the Corporation. If the
5
<PAGE> 6
assets of the Corporation are not sufficient to pay in full the liquidation
preference payable to the Holders of outstanding shares of the 10% Preferred
Stock and all Parity Securities, then the holders of all such shares shall
share equally and ratably in such distribution of assets of the Corporation in
accordance with the amounts which would be payable on such distribution if the
amount to which the Holders of outstanding shares of 10% Preferred Stock and
the holders of outstanding shares of all Parity Securities are entitled were
paid in full.
(ii) After payment of the full amount of the liquidation
preferences and all accumulated and unpaid dividends to which they are
entitled, the holders of shares of the 10% Preferred Stock shall not be
entitled to any further participation in any distribution of assets of the
Corporation upon any such liquidation, dissolution or winding-up.
6
<PAGE> 7
(iii) At any time, in the event of the merger or consolidation
of the Corporation into or with another corporation or the merger or
consolidation of any other corporation into or with the Corporation or a plan
of exchange between the Corporation and any other corporation (in which
consolidation or merger or plan of exchange any shareholders of the Corporation
receive cash or securities or other property), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, then,
subject to the provisions of this section, such transaction shall be deemed,
solely for purposes of determining the amounts to be received by the holders of
the 10% Preferred Stock in such merger, consolidation, plan of exchange, sale,
transfer or other disposition, and for purposes of determining the priority of
receipt of such amounts as between the holders of the 10% Preferred Stock, the
holders of the Senior Securities and the holders of the Junior Securities, to
be a liquidation or dissolution of the Corporation if the holders of a majority
of the outstanding shares of 10% Preferred Stock so elect by giving written
notice thereof to the Corporation at least two (2) days before the effective
date of such transaction. The Corporation shall give each holder of record of
10% Preferred Stock written notice of such impending transaction not later than
fourteen (14) days prior to the shareholders' meeting of the Corporation called
to approve such transaction, or fourteen (14) days prior to the closing of such
transaction, whichever is earlier, and shall also notify such Holders in
writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the transaction and of this
section (including, without limiting the generality of the foregoing, a
description of the value of the consideration, if any, being offered to the
holders of the 10% Preferred Stock in the transaction and the amount to which
such holders would be entitled if such transaction were (as described above) to
be deemed to be a liquidation or dissolution of the Corporation), and the
Corporation shall thereafter give such holders prompt notice of any material
changes to such terms and conditions. The transaction shall in no event take
place sooner than fourteen (14) days after the mailing by the Corporation of
the first notice provided for herein or sooner than ten (10) days after the
mailing by the Corporation of any notice of material changes provided for
herein; provided, however, that such periods may be reduced upon the written
consent of the holders of a majority of outstanding shares of 10% Preferred
Stock.
4. Rank. The 10% Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Corporation, rank senior to (i) all classes of common stock of the
Corporation and (ii) each other class of capital stock or series of Preferred
Stock of the
7
<PAGE> 8
Corporation now existing or hereafter created by the Board of Directors the
terms of which do not expressly provide that it ranks senior to or on a parity
with the 10% Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to with the common stock of the Corporation as "Junior
Securities"). The 10% Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Corporation, rank on a parity with any class of capital stock or series
of Preferred Stock now existing or hereafter created by the Board of Directors,
the terms of which expressly provide that such class or series shall rank on a
parity with the 10% Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the
Corporation (collectively referred to as "Parity Securities"); provided that
any such Parity Securities that were not approved by the Holders in accordance
with paragraph Section 7(ii)(1) hereof shall be deemed to be Junior Securities
and not Parity Securities. The 10% Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Corporation, rank junior to each class of capital stock or
series of Preferred Stock hereafter created which has been approved by the
Holders of the 10% Preferred Stock in accordance with Section 7(ii)(2) hereof
and which expressly provides that it ranks senior to the 10% Preferred Stock as
to dividend distributions or distributions upon the liquidation, winding-up or
dissolution of the Corporation (collectively referred to as "Senior
Securities"). The 10% Preferred Stock will rank senior to the Series A
Preferred Stock and the Series B Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up or dissolution of the
Corporation and the Series A Preferred Stock and the Series B Preferred stock
shall be deemed to be Junior Securities.
5. Redemption.
(i) Optional Redemption. The Corporation may (subject to
contractual and other restrictions with respect thereto and to applicable
provisions of the Act and to the legal availability of funds therefor), at the
option of the Board of Directors, redeem at any time or from time to time, in
whole or in part, in the manner provided in Section 5(iv) hereof, any or all of
the shares of the 10% Preferred Stock, at a cash redemption price of $100.00
per share plus an amount equal to all accumulated and unpaid dividends thereon,
whether or not earned or declared (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Optional Redemption
Price"), provided that no optional redemption pursuant to this Section 5(i)
shall be authorized or made unless prior
8
<PAGE> 9
thereto full unpaid cumulative dividends for all Dividend Periods terminating
on or prior to the Redemption Date and for an amount equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date shall have been or immediately prior to
the Redemption Notice (as defined in Section 5(iv) hereof), are declared and
paid in cash or declared and a sum set apart sufficient for such cash payment
on the Redemption Date, on the outstanding shares of the 10% Preferred Stock.
(ii) In the event of a redemption pursuant to Section 5(i)
hereof of only a portion of the then outstanding shares of the 10% Preferred
Stock, the Corporation shall effect such redemption, pro rata according to the
number of shares held by each Holder of the 10% Preferred Stock.
(iii) Mandatory Redemption. Subject to applicable provisions
of the Act, on April 15, 2005, the Corporation shall redeem, in a manner
provided in Section 5(iv) hereof, all of the shares of the 10% Preferred Stock
then outstanding at a cash redemption price of $100.00 per share plus an amount
equal to all accumulated and unpaid dividends thereon, whether or not earned or
declared (including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption Date
to the Redemption Date) (the "Mandatory Redemption Price").
(iv) Procedures for Redemption. (1) At least 20 days and
not more than 60 days prior to the date fixed for any redemption of the 10%
Preferred Stock, written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of record on the record date
fixed for such redemption of the 10% Preferred Stock at such Holder's address
as the same appears on the stock register of the Corporation, provided that no
failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the redemption of any shares of 10% Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Corporation
has failed to give said notice or except as to the Holder or Holders whose
notice was defective and except that any failure to give such notice or any
deficiency therein shall have no effect on the Corporation's obligation to
effect a mandatory redemption pursuant to Section 5(iii) hereof. The
Redemption Notice shall state:
(A) whether the redemption is pursuant to Section 5(i) or
5(iii) hereof;
(B) the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be;
9
<PAGE> 10
(C) whether all or less than all (in the case of a
redemption pursuant to Section 5(i)) the outstanding
shares of the 10% Preferred Stock are to be redeemed
and the total number of shares of the 10% Preferred
Stock being redeemed;
(D) in the case of a redemption pursuant to Section 5(i),
the number of shares of 10% Preferred Stock held, as
of the appropriate record date, by the Holder that
the Corporation intends to redeem;
(E) the Redemption Date;
(F) the place or places where certificates representing
the shares of 10% Preferred Stock are to be
surrendered for redemption and the manner in which
such certificates are to be surrendered;
(G) that the Holder is to surrender to the Corporation,
at the place or places referred to in clause (F)
above, in the manner designated and at the Optional
Redemption Price or the Mandatory Redemption Price,
as the case may be, the certificate or certificates
representing the shares of 10% Preferred Stock; and
(H) that dividends on the shares of the 10% Preferred
Stock to be redeemed shall cease to accrue on such
Redemption Date unless the Corporation defaults in
the payment of the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be.
(2) Each Holder of 10% Preferred Stock shall
surrender the certificate or certificates representing such shares of 10%
Preferred Stock to the Corporation, duly endorsed, in the manner and at the
place designated in the Redemption Notice, and on the Redemption Date the full
Optional Redemption Price or Mandatory Redemption Price, as the case may be,
for such shares shall be payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are
10
<PAGE> 11
redeemed, a new certificate shall be issued representing the unredeemed shares.
(3) Unless the Corporation defaults in the payment
in full of the applicable redemption price, dividends on the 10% Preferred
Stock called for redemption shall cease to accumulate on the Redemption Date,
and the Holders of such shares to be redeemed shall cease to have any further
rights with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price or the Mandatory Redemption Price, as
case may be, without interest.
6. Exchange for Debt Securities.
(i) Requirements. (1) The Corporation may at its option
redeem all, but not less than all, of the then outstanding shares of 10%
Preferred Stock through the issuance, in redemption of and in exchange for the
shares of 10% Preferred Stock, Exchange Notes in an aggregate principal amount
equal to the sum of $100.00 per share of 10% Preferred Stock to be redeemed
plus the amount of accrued and unpaid dividends thereon whether or not earned
or declared (including an amount equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Exchange Date to the
Exchange Date), provided that on the date of such exchange: (a) there shall be
no contractual or legal impediments to such exchange; (b) there shall be
legally available funds sufficient therefor; (c) the Corporation shall have
delivered to the Holders a written opinion of counsel of national prominence
that the Exchange Notes have been duly authorized, executed and delivered by
the Corporation, have been validly issued, have not been issued in violation of
any law, rule, regulation or agreement and constitute valid and legally binding
obligations of the Corporation enforceable (subject to customary
exceptions)against the Corporation in accordance with their terms and entitled
to the benefits of the Exchange Notes Indenture; (d) the Corporation shall have
executed and delivered to the Holders an Exchange Notes Indenture in form and
substance satisfactory to the holders of a majority of the outstanding shares
of 10% Preferred Stock and such Exchange Notes Indenture shall comply with the
definition thereof in Section 10; and (e) immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the Exchange
Notes Indenture) would exist under the Exchange Notes Indenture.
(ii) Procedures for Exchange. (1) At least 20 days and not
more than 60 days prior to the date fixed for exchange (the "Exchange Date"),
written notice (the "Exchange Notice") shall be given by first-class mail
postage prepaid,
11
<PAGE> 12
to each Holder of record on the date fixed for such exchange at such Holder's
address as the same appears on the stock register of the Corporation, provided
that no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of 10% Preferred Stock
to be exchanged except as to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder or Holders whose notice
was defective. The Exchange Notice shall state:
(A) that the Corporation is exercising its option to
exchange the 10% Preferred Stock for Exchange Notes
pursuant to this Certificate of Resolution;
(B) the date fixed for exchange (the "Exchange Date"),
which date shall not be less than 20 days nor more
than 60 days following the date on which the Exchange
Notice is mailed (except as provided in the last
sentence of this paragraph);
(C) the place or places where certificates representing
the shares of 10% Preferred Stock are to be
surrendered for exchange and the manner in which such
certificates are to be surrendered;
(D) that the Holder is to surrender to the Corporation,
at the place or places referred to in clause (C)
above, in the manner designated, the certificate or
certificates representing the shares of 10% Preferred
Stock;
(E) that dividends on the shares of 10% Preferred Stock
to be exchanged shall cease to accrue on the Exchange
Date whether or not certificates for shares of 10%
Preferred Stock are surrendered for exchange on the
Exchange Date unless the Corporation shall default in
the delivery of Exchange Notes; and
(F) that interest on the Exchange Notes shall accrue from
the Exchange Date whether or not certificates for
shares of 10% Preferred Stock are surrendered for
exchange on the Exchange Date.
12
<PAGE> 13
On the Exchange Date, if the conditions set forth in clauses (a) through (e) in
Section 6(i) are satisfied, the Corporation shall issue Exchange Notes in
exchange for the 10% Preferred Stock as provided in the next paragraph.
(2) Upon any exchange pursuant to Section 6,
Exchange Notes shall be issued in exchange for 10% Preferred Stock, in
registered form without coupons. Exchange Notes will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issued in principal amounts less than $1,000 so that each Holder
of 10% Preferred Stock will receive certificates representing the entire amount
of Exchange Notes to which his shares of 10% Preferred Stock entitles him,
provided that the Corporation may, at its option, pay cash in lieu of issuing
Exchange Notes in a principal amount of less than $1,000.
(iii) (1) On or before the date fixed for exchange, each
Holder of 10% Preferred Stock shall surrender the certificate or certificates
representing such shares of 10% Preferred Stock, in the manner and at the place
designated in the Exchange Notice. The Corporation shall cause the Exchange
Notes to be executed on or prior to the Exchange Date and, upon surrender in
accordance with the Exchange Notice of the certificates for any shares of 10%
Preferred Stock so exchanged (properly endorsed or assigned for transfer, if
the notice shall so state), such shares shall be redeemed by the Corporation in
exchange for Exchange Notes. The Corporation shall pay interest on the
Exchange Notes at the rate and on the date or dates specified therein from the
Exchange Date.
(2) If notice has been mailed as aforesaid, and if
before the Exchange Date (a) the Exchange Notes Indenture shall have been duly
executed and delivered by the Corporation and (b) all Exchange Notes necessary
for such exchange shall have been duly executed and delivered by the
Corporation, then on the Exchange Date, dividends shall cease to accrue on the
outstanding shares of 10% Preferred Stock and all of the rights of the Holders
of shares of the 10% Preferred Stock as stockholders of the Corporation shall
cease (except the right to receive Exchange Notes), and the Person or Persons
entitled to receive the Exchange Notes issuable upon exchange shall be treated
for all purposes as the registered holder or holders of such Exchange Notes as
of the Exchange Date.
13
<PAGE> 14
7. Voting Rights.
(i) The Holders of shares of the 10% Preferred Stock, except
as otherwise required by applicable law or as set forth in Section 7(ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Corporation.
(ii) (1) So long as any shares of the 10% Preferred Stock
are outstanding, the Corporation shall not authorize, create, issue or sell any
class of Parity Securities without the affirmative vote or consent of Holders
of at least a majority of the outstanding shares of 10% Preferred Stock, voting
or consenting, as the case may be, separately as one class, given in person or
by proxy, either in writing or by resolution adopted at a meeting, except that
without the approval of Holders of the 10% Preferred Stock, the Corporation may
authorize or issue shares of Parity Securities in exchange for, or the proceeds
of which are used to redeem all (but not less than all) shares of 10%
Preferred Stock then outstanding.
(2) So long as any shares of the 10% Preferred Stock
are outstanding, the Corporation shall not authorize any class of Senior
Securities without the affirmative vote or consent of Holders of at least a
majority of the outstanding shares of 10% Preferred Stock, voting or
consenting, as the case may be, separately as one class, given in person or by
proxy, either in writing or by resolution adopted at a meeting.
(3) So long as any shares of the 10% Preferred Stock
are outstanding, the Corporation shall not amend this Certificate of Resolution
so as to affect adversely the specified rights, preferences, privileges or
voting rights of Holders of shares of 10% Preferred Stock or to authorize the
issuance of any additional shares of 10% Preferred Stock without the
affirmative vote or consent of Holders of at least a majority of the
outstanding shares of 10% Preferred Stock, voting or consenting, as the case
may be, separately as one class, given in person or by proxy, either in writing
or by resolution adopted at a meeting.
(4) Except as set forth in Section 7(ii)(1) and (2)
above, (a) the creation, authorization or issuance of any shares of any Junior
Securities, Parity Securities or Senior Securities or (b) the increase or
decrease in the amount of authorized capital stock of any class, including any
preferred stock, shall not require the consent of Holders of 10% Preferred
Stock and shall not, unless not complying with Section 7(ii)(1) and (2)
above, be deemed to affect adversely the
14
<PAGE> 15
rights, preferences, privileges or voting rights of Holders of shares of 10%
Preferred Stock.
(iii) In any case in which the Holders of shares of the 10%
Preferred Stock shall be entitled to vote pursuant to this Section 7 or
pursuant to applicable law, each Holder of shares of the 10% Preferred Stock
shall be entitled to one vote for each share of 10% Preferred Stock held.
8. Reissuance of 10% Preferred Stock. Shares of 10% Preferred Stock
that have been issued and reacquired by the Corporation or any of its
subsidiaries in any manner, including shares purchased or redeemed or
exchanged, shall be cancelled and shall not be reissued.
9. Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
10. Definitions. As used in this Certificate of Resolution, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Business Day" means any day other than a Legal Holiday.
"Dividend Payment Date" means May 1 and November 1 of each
year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Semiannual Dividend Period.
"Exchange Date" means a date on which shares of 10% Preferred
Stock are exchanged by the Corporation for Exchange Notes.
"Exchange Notes" means subordinated notes of the Corporation
having an interest rate of 10% per annum, payable semiannually on May 1 and
November 1 of each year, a maturity date of April 15, 2005, and having the
benefit of, and subject to the terms and conditions of, the Exchange Notes
Indenture.
15
<PAGE> 16
"Exchange Notes Indenture" means an indenture or other
agreement of the Corporation containing covenants, events of default,
redemption provisions and other terms substantially identical to the Indentures
(except that the interest rate, payment dates and maturity date shall be as
described in the definition of "Exchange Notes" and except that subordination
provisions customary at the time of exchange for high yield securities shall be
included therein), all in form and substance reasonably acceptable to the
Holders of a majority of the 10% Preferred Stock.
"Holder" means a holder of shares of 10% Preferred Stock.
"Initial Dividend Period" means the dividend period commencing
on the Issue Date and ending on the day before the first Dividend Payment Date
to occur thereafter.
"Issue Date" means the date on which the 10% Preferred Stock
is originally issued by the Corporation under this Certificate of Resolution.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Redemption Date" with respect to any shares of 10% Preferred
Stock, means the date on which such shares of 10% Preferred Stock are to be
redeemed by the Corporation.
"Semiannual Dividend Period" shall mean the six-month period
commencing on each May 1 and November 1 and ending on the day before the
following Dividend Payment Date.
RESOLVED, that, before the Corporation shall issue any shares
of the 10% Preferred Stock, a certificate pursuant to Article 2.13 of the Act
shall be made, executed, acknowledged, filed and recorded in accordance with
the provisions of said Article 2.13; and the proper officers of the Corporation
are
16
<PAGE> 17
hereby authorized and directed to do all acts and things which may be necessary
or proper in their opinion to carry into effect the purposes and intent of this
and the foregoing resolutions.
17
<PAGE> 18
IN WITNESS WHEREOF, said PACKAGED ICE, INC. has caused this
Certificate to be duly executed by its President this 2nd day of December, 1997.
PACKAGED ICE, INC.
By:
---------------------------------
Name: A.J. Lewis III
Title: President
18
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 2nd day of December, 1997, between Packaged Ice, Inc.,
a Texas corporation (the "Company"), and Culligan Water Technologies, Inc., a
Delaware corporation (the "Investor").
W I T N E S S E T H:
WHEREAS to obtain additional equity financing, the Company desires to
issue and sell 235,000 shares of its 10% Exchangeable Preferred Stock, par
value $.01 per share ("10% Preferred Stock"), 94 shares of its Series C
Preferred Stock, par value $.01 per share ("Series C Preferred Stock"), and
warrants to purchase 1,807,692 shares of common stock, par value $.01 per share
("Common Stock"), at an exercise price of $13.00 per share (the "Warrants") to
the Investor, and the Investor desires to purchase such 10% Preferred Stock,
Series C Preferred Stock and Warrants at the price and on the terms and
subject to the conditions as set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SECURITIES
1.1 Issuance and Sale of Securities. At the First
Closing (as defined below), subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to issue and sell to the Investor, and the Investor
agrees to purchase from the Company, 100,000 shares of the 10% Preferred Stock,
40 shares of the Series C Preferred Stock and Warrants to purchase 769,231
shares of Common Stock, for an aggregate purchase price of $10,000,000. At the
Second Closing (as defined below), subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to issue and sell to the Investor, and the Investor
agrees to purchase from the Company, 135,000 shares of the 10% Preferred Stock,
54 shares of the Series C Preferred Stock and Warrants to purchase 1,038,461
shares of Common Stock, for an aggregate
<PAGE> 2
purchase price of $13,500,000. The 10% Preferred Stock, the Series C Preferred
Stock and the Warrants are sometimes collectively hereinafter referred to as
the "Securities."
1.2 Delivery and Payment. At the First Closing, the
Company will execute and deliver to the Investor certificates evidencing
100,000 shares of the 10% Preferred Stock and 40 shares of the Series C
Preferred Stock purchased hereunder and Warrants in the form of Exhibit A
attached hereto to purchase 769,231 shares of Common Stock, against payment, in
immediately available funds, by the Investor to the Company of $10,000,000. At
the Second Closing, the Company will execute and deliver to the Investor
certificates evidencing 135,000 shares of the 10% Preferred Stock and 54 shares
of the Series C Preferred Stock purchased hereunder and Warrants in the form of
Exhibit A attached hereto to purchase 1,038,461 shares of Common Stock, against
payment, in immediately available funds, by the Investor to the Company of
$13,500,000.
1.3 Closings. The consummation of the issuance, sale and
purchase of the Securities shall be effected on December 2, 1997 (the "First
Closing Date") and on December 15, 1997 (the "Second Closing Date")
(collectively, the "Closing Dates") at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 300 Convent, 1500 NationsBank Plaza, San Antonio, Texas
78205 commencing at 10:00 a.m. on December 2, 1997 (the "First Closing") and
December 15, 1997 (the "Second Closing") (collectively, the "Closings"),
respectively, or at such other time or place as the Company and the Investor
shall mutually agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor as
follows:
2.1 Organization and Standing of the Company. The Company
and each of its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to issue the Securities and to own
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted. The Company and each of its subsidiaries is duly
qualified to transact business and is in good standing in all jurisdictions in
which such qualification is
2
<PAGE> 3
required. The copies of the Articles of Incorporation and bylaws, each as
amended and restated as of the date hereof, of the Company and each of its
subsidiaries delivered to the Investor prior to the execution of this Agreement
are true and complete copies of the duly and legally adopted Articles of
Incorporation and bylaws, each as amended and restated as of the date hereof,
of the Company and its subsidiaries in effect as of the date of this Agreement.
2.2 Capitalization of the Company. The authorized capital
stock of the Company consists of 50,000,000 shares of common stock, par value
$.01 per share (the "Common Stock"), of which 4,127,750 shares are issued and
outstanding, and 5,000,000 shares of preferred stock, par value $.01 per share.
The Company's Board of Directors has authorized the designation of 450,000
shares of the preferred stock as the Series A Convertible Preferred Stock (the
"Series A Preferred Stock"), and all of the authorized shares of Series A
Preferred Stock are issued and outstanding. The Company's Board of Directors
has authorized the designation of 200,000 shares of the preferred stock as the
Series B Convertible Preferred Stock (the "Series B Preferred Stock"), of which
124,831 shares are issued and outstanding. The Company's Board of Directors
has authorized the designation of 500,000 shares of the preferred stock as the
10% Preferred Stock, of which 115,000 shares will be issued and outstanding
upon the First Closing and 250,000 shares will be issued and outstanding upon
the Second Closing. The Company's Board of Directors has authorized the
designation of 100 shares of the preferred stock as the Series C Preferred
Stock, of which 46 shares will be issued and outstanding upon the First Closing
and 100 shares will be issued and outstanding upon the Second Closing. Except
as set forth on Section 2.2 of the Disclosure Schedule, attached hereto and
incorporated herein by reference (the "Disclosure Schedule"), at the Closings
there will be no other warrants, options, subscriptions or other rights or
preferences (including conversion or preemptive rights) outstanding to acquire
capital stock of the Company or its subsidiaries, or notes, securities or other
instruments convertible into or exchangeable for capital stock of the Company,
nor any commitments, agreements or understandings by or with the Company with
respect to the issuance thereof, nor any obligation to repurchase or redeem any
capital stock of the Company. Except as set forth on Section 2.2 of the
Disclosure Schedule, no shareholders of the Company have any right to require
the registration of any securities of the Company or to participate in any such
registration. All outstanding securities of the Company have been issued in
full compliance with an exemption or exemptions from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act") and from the registration and qualification requirements of
all applicable state securities laws.
3
<PAGE> 4
2.3 Duly Issued. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized, are validly
issued, fully paid and non-assessable. Upon issuance and delivery to the
Investor of the 235,000 shares of the 10% Preferred Stock and the 94 shares of
Series C Preferred Stock against payment of the purchase price therefor
pursuant to this Agreement, such shares will be validly issued, fully paid and
non-assessable, and free and clear of all claims, liens, pledges, options,
charges, security interests, mortgages, deeds of trust, encumbrances or rights
of any third party of any nature whatsoever. The issuance and sale of the 10%
Preferred Stock and the Series C Preferred Stock pursuant hereto will not give
rise to any preemptive rights or rights of first refusal and will not violate
any laws to which the Company or any of its assets are subject. The shares of
Common Stock issuable upon exercise of the Warrants have been reserved for
issuance, and when issued upon exercise, will be duly authorized, validly
issued and outstanding, fully paid and nonassessable.
2.4 Authorization. This Agreement, the Warrants in the
form attached hereto as Exhibit A, the Registration Rights Agreement, dated
December , 1997, among the Company, the Investor and Erica Jesselson (the
"Registration Rights Agreement") in the form attached hereto as Exhibit B, the
Trademark License Agreement, dated October 31, 1997, between Culligan
International Company, a Delaware corporation, as licensor, and the Company
(the "License Agreement"), the Preferred Stock Series Designation Certificate
of Resolution of the Company, providing for the issuance of the 10% Preferred
Stock (the "10% Preferred Stock Certificate of Resolution") in the form
attached hereto as Exhibit C, the Preferred Stock Series Designation
Certificate of Resolution of the Company, providing for the issuance of the
Series C Preferred Stock (the "Series C Preferred Stock Certificate of
Resolution" and, together with the 10% Preferred Stock Certificate of
Resolution, the "Certificates of Resolution") in the form attached hereto as
Exhibit D, and each other agreement required to be entered into by the Company
pursuant to the terms and conditions hereof, when executed and delivered by the
Company, will have been duly authorized, executed and delivered by and on
behalf of the Company, and will constitute the valid and binding agreements of
the Company, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally. The Company has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.
4
<PAGE> 5
2.5 Subsidiaries. Except as set forth on Section 2.5 of
the Disclosure Schedule, the Company has no subsidiaries and does not, directly
or indirectly, own any interest in any corporation, partnership, firm or other
business entity. The Company is not a participant in any joint venture,
partnership or similar agreement. Section 2.5 of the Disclosure Schedule
accurately sets forth the name of each corporation, partnership, firm or other
business entity in which the Company has an interest, the state of
organization, and the percentage ownership by the Company.
2.6 Financial Position.
(a) The Company has furnished to the Investor the
financial statements described in Section 2.6 of the Disclosure
Schedule (collectively referred to herein as the "Financial
Statements"). The Financial Statements present fairly the financial
position of the Company and its subsidiaries as of such dates,
respectively, all in conformity with generally accepted accounting
principles, consistently applied, following in the case of the
unaudited interim financial statements the Company's normal internal
accounting practices and year end adjustments.
(b) Except as set forth on Section 2.6 of the
Disclosure Schedule, since September 30, 1997, no event or condition
has occurred, and no event or condition is to the knowledge of the
Company's executive officers threatened which has had a materially
adverse effect, or could reasonably be expected to have a materially
adverse effect, on the Company's or any subsidiary's properties,
assets, or financial position.
2.7 Tax Returns. Each of the Company and its
subsidiaries has timely filed all Tax Returns (as defined below), required by
law and has paid all Taxes required to be paid, together with any penalties and
interest. The Tax Returns are true and correct in all material respects. There
is no pending dispute with any taxing authority relating to any of the
Company's or its subsidiaries' Tax Returns. There is no tax audit of any Tax
Return of the Company or any subsidiaries pending or currently in process. The
Company and its subsidiaries have paid all Taxes and assessments determined to
be owing as a result of any prior audit. The Company has not elected pursuant
to the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as
an S corporation or a collapsible corporation pursuant to Section 1362(a) or
Section 34L(f) of the Code, nor has it made other elections that would have a
material adverse effect on the business, properties, prospects or financial
condition of the Company or its subsidiaries. The
5
<PAGE> 6
Company and its subsidiaries have withheld or collected from each payment made
to each employee, the amount of all Taxes, including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving offices or authorized
depositories. For purposes of this Agreement, (i) the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, occupation, use,
service, service use, license, payroll, franchise, transfer and recording
taxes, fees and charges imposed by the United States or any state, local or
foreign government or subdivision or agency thereof, whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, liabilities, additional amounts, penalties and
additions to tax and (ii) the term "Tax Return" shall mean any report, return,
information return or other document (including related or supporting
information) filed or required to be filed by the Company or its subsidiaries
with any governmental or regulatory authority or other authority in connection
with the determination, assessment or collection of any Taxes (whether or not
such Taxes are imposed on the Company or its subsidiaries) or the
administration of any law, regulation or administrative requirements relating
to any Taxes.
2.8 Title to Properties. Except as set forth on Section
2.8 of the Disclosure Schedule, each of the Company and its subsidiaries has
good and marketable title to, and the exclusive use of, all of its tangible
properties and assets, free and clear of all mortgages, liens, claims and
encumbrances except liens that do not materially affect the operation of the
business of the Company.
2.9 ERISA.
(a) The Company, each subsidiary and each ERISA
Affiliate have complied in all material respects with the Employee
Retirement Income Security Act of 1974, as amended from time to time
("ERISA"), and, where applicable, the Code, regarding each Plan.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or any subsidiary would
be deemed to be a "single employer" within the meaning of Section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414
of the Code.
(b) Each Plan is, and has been, maintained in
substantial compliance with ERISA and, where applicable, the Code.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of
6
<PAGE> 7
ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Company, any subsidiary or an ERISA Affiliate or
(ii) was at any time during the preceding six calendar years,
sponsored, maintained or contributed to, by the Company, any
subsidiary or an ERISA Affiliate.
(c) No act, omission or transaction has occurred
that could result in imposition on the Company, any subsidiary or any
ERISA Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution
plan) or any trust created under any such Plan has been terminated
since September 2, 1974. No liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (other than for the payment of current
premiums that are not past due) by the Company, any subsidiary or any
ERISA Affiliate has been or is expected by the Company, any subsidiary
or any ERISA Affiliate to be incurred with respect to any Plan. No
ERISA Event with respect to any Plan has occurred. "ERISA Event"
shall mean (i) a "Reportable Event" described in Section 4043 of ERISA
and the regulations issued thereunder, (ii) the withdrawal of the
Company, any subsidiary or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, (iv) the institution of proceedings to
terminate a Plan by the PBGC, or (v) any other event or condition that
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan.
(e) Full payment when due has been made of all
amounts that the Company, any subsidiary or any ERISA Affiliate is
required under the terms of each Plan or applicable law to have paid
as contributions to such Plan, and no accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit
liabilities under each Plan that is subject to Title IV of ERISA does
not, as of the end
7
<PAGE> 8
of the Company's most recently ended fiscal year, exceed the current
value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of
ERISA.
(g) None of the Company, any subsidiary or any
ERISA Affiliate sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(l) of ERISA, including,
without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by the
Borrower, a subsidiary or any ERISA Affiliate in its sole discretion
at any time without any material liability.
(h) None of the Company, any subsidiary or any
ERISA Affiliate sponsors, maintains or contributes to, or has at any
time in the preceding six calendar years sponsored, maintained or
contributed to, any Multiemployer Plan. "Multiemployer Plan" shall
mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA.
(i) None of the Company, any subsidiary or any
ERISA Affiliate is required to provide security under Section
401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.
2.10 No Breach, Etc. Neither the Company nor its
subsidiaries is in breach or default of any term or provision of their
respective Articles of Incorporation or bylaws, or any material term or
provision of any mortgage, indenture, instrument, lease, contract, commitment
or other agreement to which the Company or any of its subsidiaries is a party
or by which it is bound, or of any provision of any governmental statute, rule
or regulation applicable to or binding upon the Company or any of its
subsidiaries. Neither the execution and delivery of this Agreement and the
other agreements required to be executed and delivered pursuant to the terms
and conditions of this Agreement nor the consummation of the transactions
contemplated thereby will (a) conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, (i) the
Articles of Incorporation or bylaws of the Company or any of its subsidiaries,
(ii) any agreement or instrument to which the Company or any of its
subsidiaries is now a party or by which any of them is bound, or (iii) any
provision of any judgment, decree, order, statute, rule or regulation
applicable to or binding on the Company
8
<PAGE> 9
or any of its subsidiaries or (b) result in the creation of any mortgage,
pledge, lien, encumbrance, or charge upon any of the properties or assets of
the Company or any of its subsidiaries. Except as contemplated by Sections 5.8
and 5.10 hereof, neither the issuance and sale of the Securities, the
execution, delivery and performance by the Company of this Agreement, the
Warrants, the Registration Rights Agreement, the License Agreement or the
Certificates of Resolution, nor the consummation by the Company of the
transactions contemplated hereby or thereby requires any consent, approval,
authorization or other order of or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official, or any other third party.
2.11 Litigation. There is no litigation or other legal,
administrative or governmental proceeding pending or, to the knowledge of the
officers of the Company, threatened against or relating to the Company, its
subsidiaries, or their respective properties or business, that if determined
adversely to the Company or its subsidiaries may reasonably be expected to have
a material adverse effect on the present or future operations or financial
condition of the Company.
2.12 Court Orders, Decrees, Etc. There is no outstanding
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal against or adversely affecting the Company, its
subsidiaries, or their respective properties or business.
2.13 Franchises, Permits, and Consents. Each of the
Company and its subsidiaries possesses all governmental franchises, licenses,
permits, consents, authorizations, exemptions and orders, required by the
Company and its subsidiaries to carry on their businesses as now being
conducted. All registrations, designations and filings with all governmental
authorities required in the conduct of the businesses of the Company or its
subsidiaries or in connection with the consummation of the transactions
contemplated by this Agreement have been made or obtained.
2.14 Insurance. The Company and its subsidiaries have
been and are insured by financially sound and reputable insurers unaffiliated
with the Company in such amounts and against such risks as are sufficient for
compliance with law and as are adequate in the judgment of the Company to
protect the properties and businesses of the Company.
2.15 Securities Law Compliance. The offer, issuance and
sale of the Securities to be issued hereunder has been made in compliance with
all
9
<PAGE> 10
applicable federal and state securities laws. Neither the Company nor anyone
acting on its behalf has offered any of the Securities (or similar securities)
for sale to, or solicited offers to buy any of the Securities (or similar
securities) from, any prospective purchaser, so as to make the issuance and
sale of the Securities hereunder subject to the registration requirements of
the Securities Act or applicable state securities laws.
2.16 Finders' Fees. The Company has incurred no liability
for commissions or other fees to any finder or broker in connection with the
transactions contemplated by this Agreement, except the fee to James M. Raines
and Jefferies & Company, Inc., which shall each be a liability of the Company
and not of the Investor.
2.17 Intellectual Property. Except as set forth on
Section 2.17 of the Disclosure Schedule, to the actual knowledge of the
Company's officers:
(a) The Company and its subsidiaries own or have
the right to use pursuant to license, sublicense, public domain,
agreement, or permission (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, together with all reissuances, revisions,
extensions, and reexaminations thereof, (ii) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, including
all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask
works and all applications, registrations and renewals in connection
therewith, (v) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and
marketing plans and proposals), (vi) all other proprietary rights, and
(vii) all copies and tangible embodiments thereof (in whatever form or
radius) (collectively, "Intellectual Property"), currently being used
or reasonably anticipated to be used in the operation of the Company's
business.
(b) None of the Company and its subsidiaries has
knowingly interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and
10
<PAGE> 11
none of the Company's officers has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation, including any claim that
any of the Company and its subsidiaries must license or refrain from
using any Intellectual Property rights of any third party. To the
knowledge of any of the officers of the Company and its subsidiaries,
no third party has interfered with, infringed upon, or misappropriated
in any material respect any Intellectual Property rights of any of the
Company or its subsidiaries.
(c) The Disclosure Schedule identifies each
patent or registration that has been issued to any of the Company and
its subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration that any of the Company and its subsidiaries has made
with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission that any of the Company and
its subsidiaries has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). Section
2.17 of the Disclosure Schedule also identifies each trade name or
unregistered trademark used by any of the Company and its
subsidiaries. With respect to each such item of Intellectual Property
required to be identified in the Disclosure Schedule:
(i) The Company and its subsidiaries
possess all right, title, and interest in and to the item,
free and clear of any security interest, license, or other
restriction;
(ii) except as set forth on the
Disclosure Schedule the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) except as set forth on the
Disclosure Schedule no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the knowledge of any of the officers of the Company and
its subsidiaries, is threatened that challenges the legality,
validity, enforceability, use, or ownership of the item; and
(d) Section 2.17 of the Disclosure Statement
identifies each material item of Intellectual Property that any third
party owns and that any of the Company and its subsidiaries uses
pursuant to license,
11
<PAGE> 12
sublicense, agreement, or permission. The Company has delivered or
made available at its offices to the Investor correct and complete
copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each such item of Intellectual
Property required to be identified in the Disclosure Schedule:
(i) the license, sublicense, agreement,
or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the license, sublicense, agreement
or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby;
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred that with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) except as set forth on the
Disclosure Schedule none of the Company and its subsidiaries
has granted any sublicense or similar right with respect to
the license, sublicense, agreement, or permission.
2.18 Environment, Health, and Safety. To the actual
knowledge of the Company's officers, each of the Company and its subsidiaries
has complied in all material respects with all laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) that have jurisdiction over the Company and its
subsidiaries concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
12
<PAGE> 13
industrial, hazardous, or toxic materials or wastes, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure to so
comply. Without limiting the generality of the preceding sentence, each of the
Company and its subsidiaries has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
that are required under, and has complied, in all material respects, with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in
such laws.
2.19 Product Liability. To the actual knowledge of the
Company's officers, none of the Company and its subsidiaries has any liability
(and to such officers' actual knowledge there is no factual basis for any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by any of the
Company and its subsidiaries.
2.20 Conflicts of Interest. Except as disclosed in
Section 2.20 of the Disclosure Schedule, no officer, director or shareholder of
the Company or its subsidiaries or any affiliate of any such person has any
direct or indirect interest (a) in any entity that does business with the
Company or its subsidiaries or (b) in any property, asset or right that is used
by the Company or any subsidiary in the conduct of business, or (c) in any
contractual relationship with the Company or any of its subsidiaries other than
as an employee.
2.21 Company Equipment. The Company's ice bagging
equipment manufactured by Lancer Corporation has received approval by the
National Sanitation Foundation. The ice making equipment manufactured by
Hoshizaki America, Inc. has received approval by the National Sanitation
Foundation.
2.22 Disclosure. The Company has not knowingly withheld
from the Investor any material facts relating to the assets, business,
operations, financial condition or prospects of the Company or its
subsidiaries. The representations and warranties contained in this Agreement
and all other agreements being entered into in connection with this Agreement
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained herein not misleading.
13
<PAGE> 14
2.23 SEC Documents. The Company has provided to the
Investor its Registration Statement on Form S-4 (Registration No. 333-29357)
(the "Registration Statement"), which Registration Statement has been declared
effective by the U.S. Securities and Exchange Commission (the "Commission").
As of the date hereof, and as supplemented by the Disclosure Schedule, the
Registration Statement does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of the
Company included in the Registration Statement have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of 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 (except in the
case of interim period financial information for normal year-end adjustments).
The Company has included in the Registration Statement all material agreements,
contracts and other documents that it reasonably believes are required to be
filed as exhibits to the Registration Statement. As of the date hereof, and as
supplemented by the Disclosure Schedule, to the Company's knowledge, the
Company and its subsidiaries have in all material respects substantially
performed all obligations required to be performed by them and are not in
default in any material respect under any of such agreements, contracts or
other documents to which any of them is a party or by which any of them is
otherwise bound. As of the date hereof, and as supplemented by the Disclosure
Schedule, to the Company's knowledge, all instruments referred to above are in
effect and enforceable according to their respective terms, and there is not
under any of such instruments any existing material default or event of default
or event that with notice or lapse of time or both, would constitute an event
of default thereunder. As of the date hereof, and as supplemented by the
Disclosure Schedule, to the Company's knowledge, all parties having material
contractual arrangements with the Company or any of its subsidiaries are in
substantial compliance therewith and none are in material default in any
respect thereunder.
14
<PAGE> 15
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, as
follows:
3.1 Authorization. This Agreement has been duly executed
and delivered by the Investor and constitutes the valid and binding agreement
of the Investor enforceable in accordance with its terms, and each other
agreement required to be entered into by the Investor pursuant to the terms and
conditions hereof, when executed and delivered by the Investor will constitute
the valid and binding agreement of the Investor enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' right generally. The
Investor has all requisite power and authority to enter into this Agreement and
to perform its obligations hereunder.
3.2 Securities Not Registered. The Investor is acquiring
the Securities for investment purposes only, for its own account and not with a
view to, or for resale in connection with, any distribution thereof in
violation of applicable securities laws. The Investor has been advised that
the Securities being purchased and issued hereunder have not been registered
under the Securities Act or applicable state securities laws and that such
shares must be held indefinitely unless the offer and sale thereof are
subsequently registered under the Securities Act or an exemption from such
registration is available. The Investor acknowledges and agrees that the
certificates evidencing the Securities will bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND THEY
MAY NOT BE OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
and that such instruments will bear such restrictive or other legends as are
required by applicable state laws.
3.3 Access to Information. The Company has made
available to the Investor the opportunity to ask questions of and to receive
answers from the Company's officers, directors and other authorized
representatives concerning the Company and its business and prospects and the
Investor has been permitted to have access to all information that it has
requested in order to evaluate the merits and risks of the purchase of the
Securities hereunder.
15
<PAGE> 16
3.4 Investor Due Diligence. In making the investment in
the Company and its Securities, the Investor has performed its own due
diligence and has independently made such studies and investigations of the
Company's business, the market for the Company's products and services, the
Company and its management, as the Investor deems necessary to formulate its
decision to purchase Securities pursuant to the terms of this Agreement.
3.5 Investment Experience. The Investor (i) has such
knowledge, skill and experience in financial, business and investment matters
relating to an investment of this type, that it is capable of evaluating the
merits and risks of the purchase of the Securities, (ii) is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act, and (iii) has the ability to bear the risk of losing
its entire investment in the Securities.
3.6 Finder's Fees. The Investor has incurred no
liability for commissions or other fees to any finder or broker in connection
with the transactions contemplated by this Agreement.
ARTICLE 4
COVENANTS OF THE COMPANY
The Company covenants and agrees that, unless a written waiver
from the Investor in accordance with the provisions of Section 9.1 of this
Agreement is first obtained, from and after the First Closing Date, and so long
as any shares of the 10% Preferred Stock or the Exchange Notes (as defined in
the 10% Preferred Stock Certificate of Resolution) are outstanding, the Company
will fully comply with each of the covenants set forth in Sections 4.1 through
4.12 of this Article 4:
4.1 Books of Account. The Company will, and will cause
each of its subsidiaries to, keep books of record and account in which full,
true and correct entries are made of all of its and their respective dealings,
business and affairs, in accordance with generally accepted accounting
principles. The Company will employ certified public accountants selected by
the Board of Directors of the Company who are "independent" within the meaning
of the accounting regulations of the Commission and who are one of the
so-called "Big Six" accounting firms, and have annual audits made by such
independent public accountants in the course of which such accountants shall
make such examinations,
16
<PAGE> 17
in accordance with generally accepted auditing standards, as will enable them
to give such reports or opinions with respect to the financial statements of
the Company and its subsidiaries as will satisfy the requirements of the
Commission in effect at such time with respect to certificates and opinions of
accountants.
4.2 Furnishing of Financial Statements and Information.
The Company will deliver to the Investor:
(a) as soon as practicable, but in any event
within 30 days after the closing of each month, unaudited consolidated
balance sheets of the Company and its subsidiaries as of the end of
such month, together with the related consolidated statements of
operations and cash flow for such month, setting forth the budgeted
figures of such month prepared and submitted in connection with the
Company's annual plan as required under Section 4.3 hereof, all in
reasonable detail in a form consistent with prior periods and
certified by an authorized accounting officer of the Company, subject
to year-end adjustments;
(b) as soon as practicable, but in any event
within 90 days after the end of each fiscal year, a consolidated
balance sheet of the Company and its subsidiaries, as of the end of
such fiscal year, together with the related consolidated statements of
operations, shareholders' equity and cash flow for such fiscal year,
setting forth in comparative form figures for the previous fiscal
year, all in reasonable detail and duly certified by the Company's
independent public accountants, which accountants shall have given the
Company an opinion, unqualified as to the scope of the audit,
regarding such statements;
(c) promptly after the submission thereof to the
Company, copies of all reports and recommendations submitted by
independent public accountants in connection with any annual or
interim audit of the accounts of the Company or any of its
subsidiaries made by such accountants;
(d) promptly after transmission thereof, copies
of all reports, proxy statements, registration statements and
notifications filed by it with the Commission pursuant to any act
administered by the Commission or furnished to shareholders of the
Company or to any national securities exchange;
17
<PAGE> 18
(e) with reasonable promptness, such other
financial data relating to the business, affairs and financial
condition of the Company and any subsidiaries as is available to the
Company and as from time to time the Investor may reasonably request;
(f) promptly following the issuance of any
additional shares of Common Stock or any securities convertible into
Common Stock, or any options, warrants or other rights to purchase
additional shares of Common Stock or convertible securities, written
notice of the amount of securities so issued and the total
consideration received therefor; and
(g) within 10 days after the Company learns in
writing of the commencement or threatened commencement of any material
suit, legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company, any of its
subsidiaries or their respective businesses, assets or properties,
written notice of the nature and extent of such suit or proceeding.
4.3 Preparation and Approval of Budgets. At least one
month prior to the beginning of each fiscal year of the Company, the Company
shall prepare and submit to its Board of Directors, for its review and
approval, an annual plan for such year; that shall include monthly capital and
operating expense budgets, cash flow statements and profit and loss projections
itemized in such detail as the Board of Directors may reasonably request. Each
annual plan shall be modified as often as necessary in the judgment of the
Board of Directors to reflect changes required as a result of operating results
and the other events that occur, or may be reasonably expected to occur, during
the year covered by the annual plan and copies of each such modification shall
be submitted to the Board of Directors. The Company will, simultaneously with
the submission thereof to the Board of Directors, deliver a copy of each such
annual plan and modification thereof to the Investor.
4.4 Inspection. The Company will permit the Investor, or
any designees thereof, to visit and inspect the properties of the Company or
any of its subsidiaries, including the financial books and records thereof, and
the right to take extracts therefrom, and discuss the affairs, finances and
accounts thereof with the appropriate officers, all at reasonable times upon
reasonable notice, and as often as reasonably may be requested.
18
<PAGE> 19
4.5 Directors' and Shareholders' Meetings. Pursuant to
the terms of the Series C Preferred Stock, the Investor shall have the right to
elect two directors of the Company as set forth in the Culligan Voting
Agreement and the Voting Agreement Amendments (each referred to in Section 5.7
hereof).
(a) The Company shall reimburse the Investor for
the reasonable out-of-pocket expenses incurred by it or directors
elected by it in connection with the attending of meetings by such
directors or carrying out any other duties by such director designees
that may be specified by the Board of Directors; shall pay such
director designees the same director's fees paid to the other
non-employee directors of the Company; shall maintain as part of its
Articles of Incorporation or bylaws a provision for the
indemnification of its directors to the full extent permitted by law,
and enter into indemnity agreements reasonably satisfactory to the
Investor.
(b) In addition, the Company shall notify the
Investor's board designees of all regular meetings and special
meetings of the Board of Directors of the Company at least two
business days in advance of such meetings.
(c) The Company agrees, as a general practice, to
hold a meeting of its Board of Directors at least once every three
months, and during each year to hold its annual meeting of
shareholders within 30 days of delivery of the audited financial
statements.
4.6 Use of Proceeds. The Company will use the proceeds
of the investment made by the Investor to fund acquisitions and for general
corporate purposes.
4.7 Additional Warrants. In the event that the Company
makes any dividend payments on the 10% Preferred Stock in the form of
Additional Shares of 10% Preferred Stock (as defined in the 10% Preferred Stock
Certificate of Resolution) rather than in cash, the Company shall, on or prior
to the applicable dividend payment date, issue to the Investor additional
warrants to purchase a number of shares of Common Stock (including fractional
shares) in an amount equal to the liquidation preference of such Additional
Shares of 10% Preferred Stock divided by the per share exercise price of the
Warrants in effect immediately prior to such dividend payment date.
4.8 Change of Control, Etc. Upon any event, including
but not limited to the occurrence of a Change of Control or Asset Sale (each as
defined in
19
<PAGE> 20
Section 1.01 of each of the Indentures (as defined in the 10% Preferred Stock
Certificate of Resolution)), requiring the making of an offer to repurchase the
12% Senior Notes of the Company, then the provisions governing such event,
including but not limited to the Change in Control Offer (set forth in Section
4.16 of each of the Indentures) and the Asset Proceeds Offer (set forth in
Section 4.17 of each of the Indentures), shall apply to the 10% Preferred Stock
and the Company shall make an offer to repurchase the outstanding shares of 10%
Preferred Stock at an offer price equal to 100% of the aggregate liquidation
preference thereof plus accrued and unpaid dividends thereon to the date of
purchase, and within the time periods and on the other terms and conditions
provided for in the Indentures. In the event of any amendment, modification,
supplement or termination of the Indentures, notwithstanding such amendment,
modification, supplement or termination, this Section 4.8 shall continue to
apply as an obligation of the Company.
4.9 Other Restrictions. Except as contemplated by the
Certificates of Resolution, without the prior approval of the Board of
Directors of the Company by an affirmative vote of at least two-thirds of its
members, neither the Company nor its subsidiaries will do any of the following:
(a) declare or pay any dividend or make any other
distribution on any shares of its capital stock other than those
payable solely in shares of Common Stock, and other than those payable
on the 10% Preferred Stock as provided in Section 4.10 hereof, or
purchase, redeem or otherwise acquire for any consideration, or set
aside a sinking fund or other fund for the redemption or repurchase of
any shares of capital stock or any warrants, rights or options to
purchase shares of capital stock (except that any subsidiary may pay
dividends to the Company);
(b) grant to the holders of any securities issued
or to be issued by the Company a "demand" right to register such
securities under the Securities Act;
(c) guarantee, endorse or otherwise be or become
contingently liable, or permit any subsidiary to guarantee, endorse or
otherwise become contingently liable, in connection with obligations
in excess of one million dollars ($1,000,000) in the aggregate,
securities or dividends of any person, firm, association or
corporation (other than the Company and any 100% owned subsidiary),
except that the Company and any subsidiary may endorse negotiable
instruments for collection in the ordinary course of business;
20
<PAGE> 21
(d) make or permit any subsidiary to make loans
or advances to any person (including without limitation to any
officer, director or shareholder of the Company or any officer or
director of any subsidiary), firm, association or corporation (other
than the Company and any 100% owned subsidiary), except advances to
suppliers, customers and employees made in the ordinary course of
business;
(e) make any material change in the nature of its
business as carried on at the date of this Agreement;
(f) organize any subsidiary, joint venture,
partnership, or acquire a business (by asset purchase, stock purchase,
merger or otherwise), or acquire any assets or make any investment
(all of the foregoing being hereinafter referred to as an
"Investment"), except that:
(i) in the case of an Investment that is
in the same line of business as the Company (i.e., the
distribution of packaged ice systems and the sale of bags for
use in such systems or the traditional methods of
manufacturing and distributing ice) or to be used in or in
connection with the Company's business as currently conducted,
the Company and its subsidiaries may make such Investment to
the extent that the total expenditure for such Investment does
not exceed $500,000; and
(ii) in the case of any other Investment,
the Company and its subsidiaries may make such Investment only
to the extent permitted by the Indentures, as such agreements
are in effect on the date hereof, without giving effect to any
amendment, modification, or supplement thereto after the date
hereof;
(g) mortgage, pledge, or create a security
interest in all or substantially all of the Company's assets as
collateral except that the Company has pledged substantially all of
its assets as security for its $20,000,000 senior credit facility that
expires September, 2003, from Frost National Bank and Zions National
Bank; and
(h) become a party to a merger, consolidation or
reorganization with any other Person as a result of which at least 51%
of the voting power of the Company will not be held, directly or
indirectly, by
21
<PAGE> 22
persons or entities who held at least 51% of the voting power before
such merger, consolidation or reorganization, or sell or otherwise
dispose of, or enter into any agreement to sell or otherwise dispose
of, all or substantially all of the assets of the Company to any other
Person. For purposes hereof, "Person" shall mean any individual,
corporation, partnership, venture or proprietorship or other
enterprise or entity.
4.10 Compliance with the Indentures. The Company will
comply with all of the covenants contained in each of the Indentures, in each
case as in effect on the date hereof and without giving effect to any
amendment, modification, supplement or termination thereof. Notwithstanding
the foregoing, (a) this Section 4.10 shall not apply to Sections 4.04(c) and
(d) of each of the Indentures, (b) this Section 4.10 shall not apply to Section
4.03 of each of the Indentures to the extent that such Sections prohibit
payments related to the repurchase of the 10% Preferred Stock and payments of
principal on Subordinated Indebtedness (as defined in the Indentures) of the
Company, provided, that with respect to such payments of principal, no default
or Event of Default (as defined below) shall have occurred or be continuing at
the time of such payment or as a result thereof, (c) this Section 4.10 shall
not apply to Section 4.22 of each of the Indentures to the extent that such
Sections prohibit the payment of dividends on the 10% Preferred Stock, (d) the
ratios of "2.0 to 1.0" and "2.50 to 1.0" in Section 4.04 (b) of each of the
Indentures shall, for purposes of this Section 4.10, be deemed to be replaced
with the greater of (i) "1.75 to 1.0" and "2.25 to 1.0", respectively, and (ii)
the highest analogous ratio test or tests contained in any amendment,
modification or supplement to either of the Indentures or in any indenture,
agreement or other instrument governing indebtedness the proceeds of which are
used to refinance or replace indebtedness outstanding under the Indentures, (e)
the amount "$15,000,000" in clause (ix) of the definition of "Permitted
Indebtedness" in each of the Indentures shall, for purposes of this Section
4.10, be deemed to be replaced with "$45,000,000" until Qualified Refinancing
Debt (as defined below) is issued, after which time such amount shall, for
purposes of this Section 4.10, be deemed to be replaced with the lesser of (i)
$75,000,000 and (ii) the lowest analogous debt basket contained in any
indenture governing Qualified Refinancing Debt and (f) the Company may incur
Qualified Refinancing Debt. "Qualified Refinancing Debt" means indebtedness of
the Company that meets all of the following conditions: (i) the aggregate
principal amount thereof (or, if issued with original issue discount, the
aggregate gross issue price thereof) does not exceed $200 million, (ii) the
proceeds from the issuance thereof are used to refinance in full all
outstanding indebtedness under the Indentures (as currently in effect), (iii)
the interest rate thereon (or, if issued with original issue discount, the
yield to maturity thereof)
22
<PAGE> 23
shall not exceed 12.0% per annum, (iv) no obligation in respect of such
indebtedness (including, but not limited to, principal, interest, premium or
fees, costs or expenses associated therewith) is secured by any Lien (as
defined in the Indentures as in effect on the date hereof) on any properties or
assets of the Company or any of its subsidiaries, (v) such indebtedness is not
convertible or exchangeable into, exercisable for, or issued with or
accompanied by, directly or indirectly, any right to acquire (including, but
not limited to, rights, warrants or options) any capital stock or other equity
interest in the Company or any of its subsidiaries and (vi) none of the
restrictive covenants contained in the Indentures or other instrument governing
such indebtedness is more restrictive to the Company and its subsidiaries than
the restrictive covenants contained in the Indentures as in effect on the date
hereof.
4.11 Additional Preferred Stock Issuances. Except as set
forth in the 10% Preferred Stock Certificate of Resolution, the Company shall
not issue preferred stock that ranks senior to or on a parity with the 10%
Preferred Stock as to dividend distributions or distributions upon the
liquidation, winding-up or dissolution of the Company, or that matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to April 15, 2005.
4.12 No Reissuance or Further Issuance of Series A
Preferred Stock and Series B Preferred Stock. The Company shall not reissue
shares of its Series A Preferred Stock and Series B Preferred Stock acquired or
redeemed by the Company or issue any authorized shares of the Series A
Preferred Stock and Series B Preferred Stock that have not been issued as of
the date hereof.
23
<PAGE> 24
4.13 Remedies. If an Event of Default (as defined below)
occurs, the Investor shall have the right to either (as the Investor may elect)
(i) as set forth in the Culligan Voting Agreement and the Voting Agreement
Amendments (each referred to in Section 5.7 hereof), have the number of
directors of the Company increased to an even number and designate one-half of
the directors of the Company until such Event of Default is cured or waived, or
(ii) require the Company to repurchase all outstanding shares of the 10%
Preferred Stock (or Exchange Notes, if issued) at a repurchase price equal to
the aggregate liquidation preference (or principal amount, as the case may be)
thereof plus accrued and unpaid dividends (or interest, as the case may be)
thereon to the repurchase date. For purposes hereof, an "Event of Default"
shall have occurred if (a) any of the events that constitute an Event of
Default as defined in either of the Indentures as in effect on the date hereof
(without giving effect to any amendment, modification, supplement or
termination thereof) shall have occurred or (b) if the Company fails to perform
or observe any of the covenants set forth in Sections 4.1 through 4.12 hereof
(which failure does not otherwise constitute an Event of Default under the
foregoing clause (a)), which failure continues for a period of 30 days after
the Company receives written notice from the Investor specifying the failure.
ARTICLE 5
CONDITIONS TO THE INVESTOR'S OBLIGATION
The obligation of the Investor to purchase and pay for the
Securities to be delivered to it hereunder at a Closing is subject to the
fulfillment by the Company, at or before such Closing, of the following
conditions:
5.1 Compliance with Representations and Warranties. The
representations and warranties contained in Article 2 hereof shall be true on
and as of such Closing with the same effect as though made on and as of such
date, and the Company shall have performed and complied with all agreements and
conditions contained herein required to be performed or complied with by the
Company prior to or at such Closing.
5.2 Compliance Certificates. At each of the Closings,
the Company shall have delivered to the Investor a certificate dated as of the
applicable Closing Date, signed by the Company's President, certifying that the
conditions in this Article 5 required to be fulfilled prior to such Closing
have been fulfilled.
24
<PAGE> 25
5.3 Stock Certificates. At the First Closing , the
Company shall have delivered to the Investor stock certificates evidencing
100,000 shares of 10% Preferred Stock and 40 shares of Series C Preferred Stock
purchased hereunder. At the Second Closing, the Company shall have delivered
to the Investor stock certificates evidencing 135,000 shares of 10% Preferred
Stock and 54 shares of Series C Preferred Stock purchased hereunder.
5.4 Registration Rights Agreement. On the First Closing
Date, the Company shall have executed and delivered the Registration Rights
Agreement in the form of Exhibit B attached hereto.
5.5 Warrants. At the First Closing, the Company shall
have executed and delivered Warrants in the form of Exhibit A attached hereto
to purchase 769,231 shares of Common Stock. At the Second Closing, the Company
shall have executed and delivered Warrants in the form of Exhibit A attached
hereto to purchase 1,038,461 shares of Common Stock.
5.6 Opinions of Counsel. On each of the Closing Dates,
the Company shall have delivered to the Investor the opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. dated the applicable Closing Date, each
substantially in the form of Exhibit E attached hereto.
5.7 Culligan Voting Agreement and the Voting Agreement
Amendments. On the First Closing Date, the holders of at least 80% of the
outstanding shares of Common Stock and Series A Preferred Stock and Series B
Preferred Stock calculated as a single class shall have executed and delivered
(i) the Voting Agreement, dated December 2, 1997, by and among the Company, the
Investor and the shareholders of the Company (the "Culligan Voting Agreement")
in the form attached as Exhibit F hereto and (ii) each of Amendment No. 1 and
Amendment No. 3 to the Amended and Restated Voting Agreement, dated September
20, 1995 (the "Original Voting Agreement"), as amended, by and among the Company
and the shareholders of the Company (the "Voting Agreement Amendments") in the
form attached hereto as Exhibit G, and the Company warrants and covenants that
the holders of at least 80% of such shares have executed the Culligan Voting
Agreement and the Voting Agreement Amendments.
5.8 Waivers of Rights of First Refusal. On the First
Closing Date, the rights of first refusal to purchase all or any part of any
issue of specified securities, which right could include the Securities,
granted by the Company to each of the shareholders set forth in Exhibit H
attached hereto, (the "Consenting
25
<PAGE> 26
Shareholders"), pursuant to Article 8 of each of certain stock purchase
agreements between the Company and the Consenting Shareholders shall be waived
by the Consenting Shareholders in accordance with the waiver provisions set
forth in the agreements granting such rights of first refusal.
5.9 Parallel Exit Agreement. On the First Closing Date,
James F. Stuart, A. J. Lewis, III, Steven P. Rosenberg, the Company and the
Investor shall have entered into the Parallel Exit Agreement in the form of
Exhibit I attached hereto (the "Parallel Exit Agreement").
5.10 Series A Preferred Stock and Series B Preferred Stock
Consents. On the First Closing Date, the holders of the outstanding shares of
the Series A Preferred Stock and the Series B Preferred Stock set forth on
Exhibit H attached hereto, each voting as a separate class, by unanimous
written consent or the affirmative vote given in writing or by vote at a
meeting, shall have approved the issuance of the 10% Preferred Stock and all of
its terms.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Securities
to the Investor hereunder at a Closing is subject to the fulfillment by the
Investor, at or before such Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The
representations and warranties of the Investor contained in Article 3 hereof
shall be true on and as of each of the Closing Dates with the same effect as
though made on that date (except to the extent that any representations and
warranties of the Company specifically apply to conditions existing at a
particular date).
6.2 Other Agreements. On the First Closing Date, the
Investor shall have entered into the Culligan Voting Agreement, the Original
Voting Agreement, the Voting Agreement Amendments, the Parallel Exit Agreement,
the Registration Rights Agreement, the Voting Agreement, dated July 17, 1997,
by and among the Company, SV Capital Partners, L.P., and certain shareholders
of the Company in the form of Exhibit K attached hereto, and the Transfer
Restriction Agreement, dated December 2, 1997, between the Company and the
Investor in the form of Exhibit L attached hereto.
26
<PAGE> 27
ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investor,
and the Investor shall indemnify and hold harmless the Company, against all
claims, liability, damage, loss, cost and expense (including reasonable
attorneys' and accountants' fees) incurred by the indemnified party or parties
as a result of or in connection with the breach by the indemnifying party or
parties of any representation, warranty or covenant contained in this Agreement
or in any other agreement entered into pursuant to the terms and conditions of
this Agreement and any and all actions, suits, proceedings, claims, demands and
judgments incident to or alleged to be incident to any of the foregoing.
ARTICLE 8
RIGHT TO PURCHASE ADDITIONAL SECURITIES
8.1 First Refusal Rights. Subject to the terms and
conditions of this Article 8, the Company hereby grants to the Investor
(referred to hereinafter in this Article as the "Offeree") a right of first
refusal to purchase all or any part of any issue of New Securities (as defined
below) that the Company (or any subsidiary whose capital stock will not be
wholly owned, directly or indirectly, by the Company upon completion of any
such issuance) may from time to time after the First Closing propose to issue.
8.2 New Securities. "New Securities" shall mean any
capital stock, any rights, options or warrants to purchase or subscribe for
capital stock, and any securities or other instruments of any type whatsoever
that are, or may become, convertible into or exchangeable for capital stock,
which are issued for cash; provided, however, that "New Securities" shall not
include: (i) securities offered and sold by the Company pursuant to a Public
Offering (as hereinafter defined); (ii) shares of the Company's Common Stock
(or related options or rights) issued to the Company's employees and directors
pursuant to a plan adopted by the Board of Directors; (iii) Common Stock issued
by the Company upon the conversion of the Series A Preferred Stock or Series B
Preferred Stock of the Company; and (iv) shares of the Company's capital stock
issued in connection with
27
<PAGE> 28
any existing warrant, option or right listed on the Disclosure Schedule, stock
split or stock dividend by the Company.
8.3 Notice and Allocation Periods. For purposes of this
Section 8.3, the Investor shall be deemed to own the number of shares of Common
Stock theretofore issued upon exercise of the Warrants plus the number of
shares of Common Stock then underlying the Warrants. If the Company or, when
applicable, its subsidiary, proposes to undertake a bona fide issuance of New
Securities, then it shall give the Offeree written notice of its intention,
describing the type of New Securities, the price, the number of shares to be
offered, and the general terms upon which such securities are proposed to be
offered. Offeree shall be given at least 20 days' prior written notice within
which to agree to purchase all or any part of its Pro Rata Share (as
hereinafter defined) of such issuance of New Securities for the price and upon
the general terms specified in said notice by giving written notice to the
issuer within such period and stating therein the quantity of New Securities to
be purchased by it. "Pro Rata Share" shall mean, with respect to the Offeree,
that portion of the number of shares of New Securities proposed to be issued
that equals the proportion that (a) the number of shares of Common Stock held
by the Offeree immediately prior to the proposed issuance, plus the number of
shares of Common Stock that would then be issuable to the Offeree assuming that
all securities of the Company convertible into or exchangeable for Common Stock
had been converted or exchanged, bears to (b) the total number of shares of
Common Stock issued and outstanding immediately prior to the proposed issuance,
assuming that all securities of the Company convertible into or exchangeable
for Common Stock had been converted or exchanged.
8.4 Right of Company to Sell New Securities. If the
Offeree fails to exercise in full its right of first refusal within the
applicable period set forth above, then the Company or, when applicable, its
subsidiary shall have 120 days thereafter to sell the New Securities respecting
that the rights set forth herein were not exercised at a price and upon general
terms no more favorable to the purchaser thereof than specified in the notice
to the Offeree. If such New Securities have not been sold within such 120-day
period, then the Company or, when applicable, its subsidiary shall not
thereafter issue or sell any New Securities without first offering them to the
Offeree in the manner provided above.
8.5 Public Offering. Reference to the term "Public
Offering" in this Agreement shall mean a bona fide firm commitment underwritten
public offering of shares of the Company's Common Stock made through a
nationally recognized underwriting firm pursuant to an effective registration
statement under the
28
<PAGE> 29
Securities Act, which results in gross proceeds to the Company of not less than
$7,500,000.
8.6 Termination. This Article 8 shall continue in effect
from the date of this Agreement until the Company has completed a Public
Offering.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other
communications hereunder, and each other agreement to be entered into pursuant
to the terms and conditions of this Agreement, shall be in writing and shall be
delivered by hand, overnight courier, facsimile transmission, or by United
States Mail, and shall be deemed to have been duly given when actually
received, or when mailed, first class postage prepaid, certified mail, return
receipt requested, to the addresses set forth below, or to such other address
as may be designated hereafter by prior written notice from the recipient to
the sender:
If to the Company: Packaged Ice, Inc.
Attention: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With a copy to: Akin, Gump, Strauss,
Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
1500 NationsBank Plaza
300 Convent
San Antonio, Texas 78205
Facsimile: (210) 224-2035
If to the Investor: Culligan Water Technologies, Inc.
Attention: Edward A. Christensen, Esq.
One Culligan Parkway
Northbrook, Illinois 60062-6209
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
Attention: Gregory A. Fernicola, Esq.
29
<PAGE> 30
919 Third Avenue
New York, NY 10022-3897
Facsimile: (212) 735-2000
9.2 Side Letter. Pursuant to a letter between the
Company and the Investor, dated December 2, 1997, in the form attached hereto
as Exhibit J (the "Side Letter"), the Company and the Investor have set forth
their agreements related to use of the Investor's sale and service network, the
development of a grocery store vended bottled water business and the use of the
Investor's name in that business and the grant by the Company to the Investor
of a right of first negotiation to supply all water filtration and treatment
componentry that the Company may require following the date of this Agreement
for the Company's ice machines, ice plants and water vending machines.
9.3 Modification and Waiver.
(a) No amendment or modification to this
Agreement shall be made without the written approval of the Company
and the Investor.
(b) Approval, waiver and consent by the Investor
hereunder shall be in writing and shall be delivered to the Company in
the manner provided for in Section 9.1 herein.
9.4 Conflicts. If there shall be any conflict between
any provision of this Agreement and any provision of the other agreements
required to be entered into pursuant to the terms and conditions of this
Agreement, the conflicting provision of such other agreements shall control.
9.5 Gender. Whenever herein, and in each other agreement
required to be entered into pursuant to the terms and conditions of this
Agreement, the singular number is used, the same shall include the plural, and
the masculine gender shall include the feminine and neuter genders, and vice
versa, as the context may require.
9.6 Headings. The headings contained in this Agreement,
and in each other agreement required to be entered into pursuant to the terms
and conditions of this Agreement, are for reference purposes only and shall not
in any way affect their meaning or interpretation.
30
<PAGE> 31
9.7 Counterparts. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
9.8 Parties in Interest. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, shall, except as may otherwise be specifically provided to the
contrary therein, inure to the benefit of and be binding upon each of the
parties hereto and thereto, as the case may be, and their respective heirs,
executors, legal representatives, successors and assigns.
9.9 Survival. All covenants, agreements, representations
and warranties made herein, and in each other agreement required to be entered
into pursuant to the terms and conditions of this Agreement, or otherwise in
writing in connection therewith, shall survive the execution and delivery
thereof and the consummation of the transactions contemplated thereby.
9.10 Entire Agreement. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, embody the entire agreement and understanding between the
parties thereto, and supersede all prior agreements and understandings, written
and oral, relating to the subject matter thereof, including, without
limitation, all letter of intent and summary term sheets heretofore executed or
examined by the parties.
9.11 Governing Law. THIS AGREEMENT AND EACH OTHER
AGREEMENT REQUIRED TO BE ENTERED INTO PURSUANT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT, SHALL, EXCEPT AS MAY OTHERWISE BE SPECIFICALLY PROVIDED TO THE
CONTRARY THEREIN, BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
9.12 Arbitration. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, including, without
limitation any claim for violation of securities laws, shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, in St. Louis, Missouri and judgment upon the
award reentered by the arbitrator may be entered in any court having
jurisdiction thereof, and shall not be appealable.
31
<PAGE> 32
9.13 Expenses and Attorneys' Fees. The Company and the
Investor shall pay their respective expenses that are incurred by them with
respect to the negotiation, execution, closing, delivery and performance of
this Agreement, and each other agreement required to be entered into pursuant
to the terms and conditions of this Agreement.
9.14 Language. The language used in this Agreement, and
the other agreements required to be entered into pursuant to the terms and
conditions of this Agreement, shall be deemed to be language chosen by the
parties thereto to express their mutual intent, and no rule of strict
construction against any party shall apply to any term or condition thereof.
9.15 Severability. In case any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
9.16 Waiver. No waiver by any party of the performance of
any provision, condition or requirement herein shall be deemed to be a waiver
of, or in any manner release the other party from, performance of any other
provision, condition or requirement herein; nor deemed to be a waiver of, or in
any manner release the other party from future performance of the same
provision, condition or requirement; nor shall any delay or omission by any
party to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter.
9.17 No Third-Party Beneficiaries. Nothing contained in
this Agreement shall be construed to give any person other than the Company and
the Investor, their successors and assigns, any legal or equitable right,
remedy or claim under or with respect to this Agreement.
(SIGNATURE PAGE FOLLOWS)
32
<PAGE> 33
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
PACKAGED ICE, INC.
By:
-----------------------------------
Name: A.J. Lewis III
Title: President
THE INVESTOR:
CULLIGAN WATER TECHNOLOGIES, INC.
By:
-----------------------------------
Name: Edward A. Christensen
Title: Vice President, General Counsel and
Secretary
33
<PAGE> 1
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 2nd day of December, 1997, between Packaged Ice, Inc.,
a Texas corporation (the "Company"), and Erica Jesselson, a resident of the
State of New York (the "Investor").
W I T N E S S E T H:
WHEREAS to obtain additional equity financing, the Company desires to
issue and sell 15,000 shares of its 10% Exchangeable Preferred Stock, par value
$.01 per share ("10% Preferred Stock"), 6 shares of its Series C Preferred
Stock, par value $.01 per share ("Series C Preferred Stock"), and warrants to
purchase 115,385 shares of common stock, par value $.01 per share ("Common
Stock"), at an exercise price of $13.00 per share (the "Warrants") to the
Investor, and the Investor desires to purchase such 10% Preferred Stock, Series
C Preferred Stock and Warrants at the price and on the terms and subject to
the conditions as set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SECURITIES
1.1 Issuance and Sale of Securities. At the Closing (as
defined below), subject to the terms and conditions of this Agreement and on
the basis of the representations and warranties set forth herein, the Company
agrees to issue and sell to the Investor, and the Investor agrees to purchase
from the Company, 15,000 shares of the 10% Preferred Stock, 6 shares of the
Series C Preferred Stock and the Warrants for an aggregate purchase price of
$1,500,000. The 10% Preferred Stock, the Series C Preferred Stock and the
Warrants are sometimes collectively hereinafter referred to as the
"Securities."
1.2 Delivery and Payment. At the Closing, the Company
will execute and deliver to the Investor certificates evidencing the 15,000
shares of the 10% Preferred Stock and the 6 shares of Series C Preferred Stock
purchased
<PAGE> 2
hereunder and the Warrants in the form of Exhibit A attached hereto, against
payment, in immediately available funds, by the Investor to the Company of
$1,500,000.
1.3 Closing. The consummation of the issuance, sale and
purchase of the Securities shall be effected (the "Closing") at the offices of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 300 Convent, 1500 NationsBank Plaza,
San Antonio, Texas 78205 commencing at 10:00 a.m. on December 2, 1997 ("Closing
Date") or at such other time or place as the Company and the Investor shall
mutually agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor as
follows:
2.1 Organization and Standing of the Company. The Company
and each of its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to issue the Securities and to own
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted. The Company and each of its subsidiaries is duly
qualified to transact business and is in good standing in all jurisdictions in
which such qualification is required. The copies of the Articles of
Incorporation and bylaws, each as amended and restated as of the date hereof,
of the Company and each of its subsidiaries delivered to the Investor prior to
the execution of this Agreement are true and complete copies of the duly and
legally adopted Articles of Incorporation and bylaws, each as amended and
restated as of the date hereof, of the Company and its subsidiaries in effect
as of the date of this Agreement.
2.2 Capitalization of the Company. The authorized capital
stock of the Company consists of 50,000,000 shares of common stock, par value
$.01 per share (the "Common Stock"), of which 4,127,750 shares are issued and
outstanding, and 5,000,000 shares of preferred stock, par value $.01 per share.
The Company's Board of Directors has authorized the designation of 450,000
shares of the preferred stock as the Series A Convertible Preferred Stock (the
"Series A Preferred Stock"), and all of the authorized shares of Series A
Preferred Stock are issued and outstanding. The Company's Board of Directors
has authorized the designation of 200,000 shares of the preferred stock as the
Series B Convertible Preferred Stock (the
2
<PAGE> 3
"Series B Preferred Stock"), of which 124,831 shares are issued and
outstanding. The Company's Board of Directors has authorized the designation
of 500,000 shares of the preferred stock as the 10% Preferred Stock, of which
115,000 will be issued and outstanding upon the Closing. The Company's Board
of Directors has authorized the designation of 100 shares of the preferred
stock as the Series C Preferred Stock, of which 46 of the authorized shares of
Series C Preferred Stock will be issued and outstanding upon the Closing.
Except as set forth on Section 2.2 of the Disclosure Schedule, attached hereto
and incorporated herein by reference (the "Disclosure Schedule"), at the
Closing there will be no other warrants, options, subscriptions or other rights
or preferences (including conversion or preemptive rights) outstanding to
acquire capital stock of the Company or its subsidiaries, or notes, securities
or other instruments convertible into or exchangeable for capital stock of the
Company, nor any commitments, agreements or understandings by or with the
Company with respect to the issuance thereof, nor any obligation to repurchase
or redeem any capital stock of the Company. Except as set forth on Section 2.2
of the Disclosure Schedule, no shareholders of the Company have any right to
require the registration of any securities of the Company or to participate in
any such registration. All outstanding securities of the Company have been
issued in full compliance with an exemption or exemptions from the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended
(the "Securities Act") and from the registration and qualification requirements
of all applicable state securities laws.
2.3 Duly Issued. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized, are validly
issued, fully paid and non-assessable. Upon issuance and delivery to the
Investor of the 15,000 shares of the 10% Preferred Stock and the 6 shares of
Series C Preferred Stock against payment of the purchase price therefor
pursuant to this Agreement, such shares will be validly issued, fully paid and
non-assessable, and free and clear of all claims, liens, pledges, options,
charges, security interests, mortgages, deeds of trust, encumbrances or rights
of any third party of any nature whatsoever. The issuance and sale of the 10%
Preferred Stock and the Series C Preferred Stock pursuant hereto will not give
rise to any preemptive rights or rights of first refusal and will not violate
any laws to which the Company or any of its assets are subject. The shares of
Common Stock issuable upon exercise of the Warrants have been reserved for
issuance, and when issued upon exercise, will be duly authorized, validly
issued and outstanding, fully paid and nonassessable.
2.4 Authorization. This Agreement, the Warrants in the
form attached hereto as Exhibit A, the Registration Rights Agreement, dated
December 2, 1997,
3
<PAGE> 4
among the Company, the Investor and Culligan Water Technologies, Inc. (the
"Registration Rights Agreement") in the form attached hereto as Exhibit B, the
Preferred Stock Series Designation Certificate of Resolution of the Company,
dated December 2, 1997, providing for the issuance of the 10% Preferred
Stock (the "10% Preferred Stock Certificate of Resolution") in the form
attached hereto as Exhibit C, the Preferred Stock Series Designation
Certificate of Resolution of the Company, dated December 2, 1997, providing
for the issuance of the Series C Preferred Stock (the "Series C Preferred Stock
Certificate of Resolution" and, together with the 10% Preferred Stock
Certificate of Resolution, the "Certificates of Resolution") in the form
attached hereto as Exhibit D, and each other agreement required to be entered
into by the Company pursuant to the terms and conditions hereof, when executed
and delivered by the Company, will have been duly authorized, executed and
delivered by and on behalf of the Company, and will constitute the valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally. The Company has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
2.5 Subsidiaries. Except as set forth on Section 2.5 of
the Disclosure Schedule, the Company has no subsidiaries and does not, directly
or indirectly, own any interest in any corporation, partnership, firm or other
business entity. The Company is not a participant in any joint venture,
partnership or similar agreement. Section 2.5 of the Disclosure Schedule
accurately sets forth the name of each corporation, partnership, firm or other
business entity in which the Company has an interest, the state of
organization, and the percentage ownership by the Company.
2.6 Financial Position.
(a) The Company has furnished to the Investor the
financial statements described in Section 2.6 of the Disclosure
Schedule (collectively referred to herein as the "Financial
Statements"). The Financial Statements present fairly the financial
position of the Company and its subsidiaries as of such dates,
respectively, all in conformity with generally accepted accounting
principles, consistently applied, following in the case of the
unaudited interim financial statements the Company's normal internal
accounting practices and year end adjustments.
(b) Except as set forth on Section 2.6 of the
Disclosure Schedule, since September 30, 1997, no event or condition
has occurred, and no event
4
<PAGE> 5
or condition is to the knowledge of the Company's executive officers
threatened which has had a materially adverse effect, or could
reasonably be expected to have a materially adverse effect, on the
Company's or any subsidiary's properties, assets, or financial
position.
2.7 Tax Returns. Each of the Company and its
subsidiaries has timely filed all Tax Returns (as defined below), required by
law and has paid all Taxes required to be paid, together with any penalties and
interest. The Tax Returns are true and correct in all material respects. There
is no pending dispute with any taxing authority relating to any of the
Company's or its subsidiaries' Tax Returns. There is no tax audit of any Tax
Return of the Company or any subsidiaries pending or currently in process. The
Company and its subsidiaries have paid all Taxes and assessments determined to
be owing as a result of any prior audit. The Company has not elected pursuant
to the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as
an S corporation or a collapsible corporation pursuant to Section 1362(a) or
Section 34L(f) of the Code, nor has it made other elections that would have a
material adverse effect on the business, properties, prospects or financial
condition of the Company or its subsidiaries. The Company and its subsidiaries
have withheld or collected from each payment made to each employee, the amount
of all Taxes, including, but not limited to, federal income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving offices or authorized depositories. For purposes of this
Agreement, (i) the term "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, property, sales, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges imposed by
the United States or any state, local or foreign government or subdivision or
agency thereof, whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest, liabilities,
additional amounts, penalties and additions to tax and (ii) the term "Tax
Return" shall mean any report, return, information return or other document
(including related or supporting information) filed or required to be filed by
the Company or its subsidiaries with any governmental or regulatory authority
or other authority in connection with the determination, assessment or
collection of any Taxes (whether or not such Taxes are imposed on the Company
or its subsidiaries) or the administration of any law, regulation or
administrative requirements relating to any Taxes.
2.8 Title to Properties. Except as set forth on Section
2.8 of the Disclosure Schedule, each of the Company and its subsidiaries has
good and marketable title to, and the exclusive use of, all of its tangible
properties and assets, free and clear
5
<PAGE> 6
of all mortgages, liens, claims and encumbrances except liens that do not
materially affect the operation of the business of the Company.
2.9 ERISA.
(a) The Company, each subsidiary and each ERISA
Affiliate have complied in all material respects with the Employee
Retirement Income Security Act of 1974, as amended from time to time
("ERISA"), and, where applicable, the Code, regarding each Plan.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or any subsidiary would
be deemed to be a "single employer" within the meaning of Section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414
of the Code.
(b) Each Plan is, and has been, maintained in
substantial compliance with ERISA and, where applicable, the Code.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored,
maintained or contributed to by the Company, any subsidiary or an
ERISA Affiliate or (ii) was at any time during the preceding six
calendar years, sponsored, maintained or contributed to, by the
Company, any subsidiary or an ERISA Affiliate.
(c) No act, omission or transaction has occurred
that could result in imposition on the Company, any subsidiary or any
ERISA Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution
plan) or any trust created under any such Plan has been terminated
since September 2, 1974. No liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (other than for the payment of current
premiums that are not past due) by the Company, any subsidiary or any
ERISA Affiliate has been or is expected by the Company, any subsidiary
or any ERISA Affiliate to be incurred with respect to any Plan. No
ERISA Event with respect to any Plan has occurred. "ERISA Event"
shall mean (i) a "Reportable Event" described in Section 4043 of ERISA
and the regulations issued thereunder, (ii) the withdrawal of the
Company, any subsidiary or any ERISA Affiliate from a Plan during a
plan year in which it was a
6
<PAGE> 7
"substantial employer" as defined in Section 4001(a)(2) of ERISA,
(iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings to terminate a Plan by the
PBGC, or (v) any other event or condition that might constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
(e) Full payment when due has been made of all
amounts that the Company, any subsidiary or any ERISA Affiliate is
required under the terms of each Plan or applicable law to have paid
as contributions to such Plan, and no accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit
liabilities under each Plan that is subject to Title IV of ERISA does
not, as of the end of the Company's most recently ended fiscal year,
exceed the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities. The term "actuarial present value of the
benefit liabilities" shall have the meaning specified in section 4041
of ERISA.
(g) None of the Company, any subsidiary or any
ERISA Affiliate sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(l) of ERISA, including,
without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by the
Borrower, a subsidiary or any ERISA Affiliate in its sole discretion
at any time without any material liability.
(h) None of the Company, any subsidiary or any
ERISA Affiliate sponsors, maintains or contributes to, or has at any
time in the preceding six calendar years sponsored, maintained or
contributed to, any Multiemployer Plan. "Multiemployer Plan" shall
mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA.
(i) None of the Company, any subsidiary or any
ERISA Affiliate is required to provide security under Section
401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.
7
<PAGE> 8
2.10 No Breach, Etc. Neither the Company nor its
subsidiaries is in breach or default of any term or provision of their
respective Articles of Incorporation or bylaws, or any material term or
provision of any mortgage, indenture, instrument, lease, contract, commitment
or other agreement to which the Company or any of its subsidiaries is a party
or by which it is bound, or of any provision of any governmental statute, rule
or regulation applicable to or binding upon the Company or any of its
subsidiaries. Neither the execution and delivery of this Agreement and the
other agreements required to be executed and delivered pursuant to the terms
and conditions of this Agreement nor the consummation of the transactions
contemplated thereby will (a) conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, (i) the
Articles of Incorporation or bylaws of the Company or any of its subsidiaries,
(ii) any agreement or instrument to which the Company or any of its
subsidiaries is now a party or by which any of them is bound, or (iii) any
provision of any judgment, decree, order, statute, rule or regulation
applicable to or binding on the Company or any of its subsidiaries or (b)
result in the creation of any mortgage, pledge, lien, encumbrance, or charge
upon any of the properties or assets of the Company or any of its subsidiaries.
Except as contemplated by Sections 5.8 and 5.10 hereof, neither the issuance
and sale of the Securities, the execution, delivery and performance by the
Company of this Agreement, the Warrants, the Registration Rights Agreement, the
License Agreement or the Certificates of Resolution, nor the consummation by
the Company of the transactions contemplated hereby or thereby requires any
consent, approval, authorization or other order of or registration or filing
with, any court, regulatory body, administrative agency or other governmental
body, agency or official, or any other third party.
2.11 Litigation. There is no litigation or other legal,
administrative or governmental proceeding pending or, to the knowledge of the
officers of the Company, threatened against or relating to the Company, its
subsidiaries, or their respective properties or business, that if determined
adversely to the Company or its subsidiaries may reasonably be expected to have
a material adverse effect on the present or future operations or financial
condition of the Company.
2.12 Court Orders, Decrees, Etc. There is no outstanding
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal against or adversely affecting the Company, its
subsidiaries, or their respective properties or business.
2.13 Franchises, Permits, and Consents. Each of the
Company and its subsidiaries possesses all governmental franchises, licenses,
permits, consents,
8
<PAGE> 9
authorizations, exemptions and orders, required by the Company and its
subsidiaries to carry on their businesses as now being conducted. All
registrations, designations and filings with all governmental authorities
required in the conduct of the businesses of the Company or its subsidiaries or
in connection with the consummation of the transactions contemplated by this
Agreement have been made or obtained.
2.14 Insurance. The Company and its subsidiaries have
been and are insured by financially sound and reputable insurers unaffiliated
with the Company in such amounts and against such risks as are sufficient for
compliance with law and as are adequate in the judgment of the Company to
protect the properties and businesses of the Company.
2.15 Securities Law Compliance. The offer, issuance and
sale of the Securities to be issued hereunder has been made in compliance with
all applicable federal and state securities laws. Neither the Company nor
anyone acting on its behalf has offered any of the Securities (or similar
securities) for sale to, or solicited offers to buy any of the Securities (or
similar securities) from, any prospective purchaser, so as to make the issuance
and sale of the Securities hereunder subject to the registration requirements
of the Securities Act or applicable state securities laws.
2.16 Finders' Fees. The Company has incurred no liability
for commissions or other fees to any finder or broker in connection with the
transactions contemplated by this Agreement, except the fee to James M. Raines
and Jefferies & Company, Inc., which shall each be a liability of the Company
and not of the Investor.
2.17 Intellectual Property. Except as set forth on
Section 2.17 of the Disclosure Schedule, to the actual knowledge of the
Company's officers:
(a) The Company and its subsidiaries own or have
the right to use pursuant to license, sublicense, public domain,
agreement, or permission (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, together with all reissuances, revisions,
extensions, and reexaminations thereof, (ii) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, including
all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask
works and all applications, registrations and renewals in connection
therewith, (v) all trade secrets and confidential business information
(including ideas, research and
9
<PAGE> 10
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals),
(vi) all other proprietary rights, and (vii) all copies and tangible
embodiments thereof (in whatever form or radius) (collectively,
"Intellectual Property"), currently being used or reasonably
anticipated to be used in the operation of the Company's business.
(b) None of the Company and its subsidiaries has
knowingly interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and none of the Company's officers has ever received
any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation, including
any claim that any of the Company and its subsidiaries must license or
refrain from using any Intellectual Property rights of any third
party. To the knowledge of any of the officers of the Company and its
subsidiaries, no third party has interfered with, infringed upon, or
misappropriated in any material respect any Intellectual Property
rights of any of the Company or its subsidiaries.
(c) The Disclosure Schedule identifies each
patent or registration that has been issued to any of the Company and
its subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration that any of the Company and its subsidiaries has made
with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission that any of the Company and
its subsidiaries has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). Section
2.17 of the Disclosure Schedule also identifies each trade name or
unregistered trademark used by any of the Company and its
subsidiaries. With respect to each such item of Intellectual Property
required to be identified in the Disclosure Schedule:
(i) The Company and its subsidiaries
possess all right, title, and interest in and to the item,
free and clear of any security interest, license, or other
restriction;
(ii) except as set forth on the
Disclosure Schedule the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
10
<PAGE> 11
(iii) except as set forth on the
Disclosure Schedule no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the knowledge of any of the officers of the Company and
its subsidiaries, is threatened that challenges the legality,
validity, enforceability, use, or ownership of the item; and
(d) Section 2.17 of the Disclosure Statement
identifies each material item of Intellectual Property that any third
party owns and that any of the Company and its subsidiaries uses
pursuant to license, sublicense, agreement, or permission. The
Company has delivered or made available at its offices to the Investor
correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to
each such item of Intellectual Property required to be identified in
the Disclosure Schedule:
(i) the license, sublicense, agreement,
or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the license, sublicense, agreement
or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby;
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred that with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) except as set forth on the
Disclosure Schedule none of the Company and its subsidiaries
has granted any sublicense or similar right with respect to
the license, sublicense, agreement, or permission.
2.18 Environment, Health, and Safety. To the actual
knowledge of the Company's officers, each of the Company and its subsidiaries
has complied in all material respects with all laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local,
11
<PAGE> 12
and foreign governments (and all agencies thereof) that have jurisdiction over
the Company and its subsidiaries concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure to so comply. Without limiting the generality of the
preceding sentence, each of the Company and its subsidiaries has obtained and
been in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations that are required under, and has complied,
in all material respects, with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in such laws.
2.19 Product Liability. To the actual knowledge of the
Company's officers, none of the Company and its subsidiaries has any liability
(and to such officers' actual knowledge there is no factual basis for any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by any of the
Company and its subsidiaries.
2.20 Conflicts of Interest. Except as disclosed in
Section 2.20 of the Disclosure Schedule, no officer, director or shareholder of
the Company or its subsidiaries or any affiliate of any such person has any
direct or indirect interest (a) in any entity that does business with the
Company or its subsidiaries or (b) in any property, asset or right that is used
by the Company or any subsidiary in the conduct of business, or (c) in any
contractual relationship with the Company or any of its subsidiaries other than
as an employee.
2.21 Company Equipment. The Company's ice bagging
equipment manufactured by Lancer Corporation has received approval by the
National Sanitation Foundation. The ice making equipment manufactured by
Hoshizaki America, Inc. has received approval of the National Sanitation
Foundation.
2.22 Disclosure. The Company has not knowingly withheld
from the Investor any material facts relating to the assets, business,
operations, financial condition
12
<PAGE> 13
or prospects of the Company or its subsidiaries. The representations and
warranties contained in this Agreement and all other agreements being entered
into in connection with this Agreement do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein not misleading.
2.23 SEC Documents. The Company has provided to the
Investor its Registration Statement on Form S-4 (Registration No. 333-29357)
(the "Registration Statement"), which Registration Statement has been declared
effective by the U.S. Securities and Exchange Commission (the "Commission").
As of the date hereof, and as supplemented by the Disclosure Schedule, the
Registration Statement does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of the
Company included in the Registration Statement have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of 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 (except in the
case of interim period financial information for normal year-end adjustments).
The Company has included in the Registration Statement all material agreements,
contracts and other documents that it reasonably believes are required to be
filed as exhibits to the Registration Statement. As of the date hereof, and as
supplemented by the Disclosure Schedule, to the Company's knowledge, the
Company and its subsidiaries have in all material respects substantially
performed all obligations required to be performed by them and are not in
default in any material respect under any of such agreements, contracts or
other documents to which any of them is a party or by which any of them is
otherwise bound. As of the date hereof, and as supplemented by the Disclosure
Schedule, to the Company's knowledge, all instruments referred to above are in
effect and enforceable according to their respective terms, and there is not
under any of such instruments any existing material default or event of default
or event that with notice or lapse of time or both, would constitute an event
of default thereunder. As of the date hereof, and as supplemented by the
Disclosure Schedule, to the Company's knowledge, all parties having material
contractual arrangements with the Company or any of its subsidiaries are in
substantial compliance therewith and none are in material default in any
respect thereunder.
13
<PAGE> 14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, as
follows:
3.1 Authorization. This Agreement has been duly executed
and delivered by the Investor and constitutes the valid and binding agreement
of the Investor enforceable in accordance with its terms, and each other
agreement required to be entered into by the Investor pursuant to the terms and
conditions hereof, when executed and delivered by the Investor will constitute
the valid and binding agreement of the Investor enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' right generally. The
Investor has all requisite power and authority to enter into this Agreement and
to perform its obligations hereunder.
3.2 Securities Not Registered. The Investor is acquiring
the Securities for investment purposes only, for its own account and not with a
view to, or for resale in connection with, any distribution thereof in
violation of applicable securities laws. The Investor has been advised that
the Securities being purchased and issued hereunder have not been registered
under the Securities Act or applicable state securities laws and that such
shares must be held indefinitely unless the offer and sale thereof are
subsequently registered under the Securities Act or an exemption from such
registration is available. The Investor acknowledges and agrees that the
certificates evidencing the Securities will bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND THEY
MAY NOT BE OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
and that such instruments will bear such restrictive or other legends as are
required by applicable state laws.
14
<PAGE> 15
3.3 Access to Information. The Company has made
available to the Investor the opportunity to ask questions of and to receive
answers from the Company's officers, directors and other authorized
representatives concerning the Company and its business and prospects and the
Investor has been permitted to have access to all information that it has
requested in order to evaluate the merits and risks of the purchase of the
Securities hereunder.
3.4 Investor Due Diligence. In making the investment in
the Company and its Securities, the Investor has performed its own due
diligence and has independently made such studies and investigations of the
Company's business, the market for the Company's products and services, the
Company and its management, as the Investor deems necessary to formulate its
decision to purchase the Securities pursuant to the terms of this Agreement.
3.5 Investment Experience. The Investor (i) has such
knowledge, skill and experience in financial, business and investment matters
relating to an investment of this type, that it is capable of evaluating the
merits and risks of the purchase of the Securities, (ii) is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act, and (iii) has the ability to bear the risk of losing
its entire investment in the Securities.
3.6 Finder's Fees. The Investor has incurred no
liability for commissions or other fees to any finder or broker in connection
with the transactions contemplated by this Agreement.
ARTICLE 4
COVENANTS OF THE COMPANY
The Company covenants and agrees that, unless a written waiver
from the holders of a majority of the outstanding shares of 10% Preferred Stock
is first obtained, from and after the Closing Date, and so long as any shares
of the Series C Preferred Stock, the 10% Preferred Stock or the Exchange Notes
(as defined in the 10% Preferred Stock Certificate of Designation) are
outstanding, the Company will fully comply with each of the covenants set forth
in Sections 4.1 through 4.13 of this Article 4:
4.1 Books of Account. The Company will, and will cause
each of its subsidiaries to, keep books of record and account in which full,
true and correct
15
<PAGE> 16
entries are made of all of its and their respective dealings, business and
affairs, in accordance with generally accepted accounting principles. The
Company will employ certified public accountants selected by the Board of
Directors of the Company who are "independent" within the meaning of the
accounting regulations of the Commission and who are one of the so-called "Big
Six" accounting firms, and have annual audits made by such independent public
accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of the Company and its subsidiaries as will satisfy the requirements
of the Commission in effect at such time with respect to certificates and
opinions of accountants.
4.2 Furnishing of Financial Statements and Information.
The Company will deliver to the Investor:
(a) as soon as practicable, but in any event
within 30 days after the closing of each month, unaudited consolidated
balance sheets of the Company and its subsidiaries as of the end of
such month, together with the related consolidated statements of
operations and cash flow for such month, setting forth the budgeted
figures of such month prepared and submitted in connection with the
Company's annual plan as required under Section 4.3 hereof, all in
reasonable detail in a form consistent with prior periods and
certified by an authorized accounting officer of the Company, subject
to year-end adjustments;
(b) as soon as practicable, but in any event
within 90 days after the end of each fiscal year, a consolidated
balance sheet of the Company and its subsidiaries, as of the end of
such fiscal year, together with the related consolidated statements of
operations, shareholders' equity and cash flow for such fiscal year,
setting forth in comparative form figures for the previous fiscal
year, all in reasonable detail and duly certified by the Company's
independent public accountants, which accountants shall have given the
Company an opinion, unqualified as to the scope of the audit,
regarding such statements;
(c) promptly after the submission thereof to the
Company, copies of all reports and recommendations submitted by
independent public accountants in connection with any annual or
interim audit of the accounts of the Company or any of its
subsidiaries made by such accountants;
(d) promptly after transmission thereof, copies
of all reports, proxy statements, registration statements and
notifications filed by it with the
16
<PAGE> 17
Commission pursuant to any act administered by the Commission or
furnished to shareholders of the Company or to any national securities
exchange;
(e) with reasonable promptness, such other
financial data relating to the business, affairs and financial
condition of the Company and any subsidiaries as is available to the
Company and as from time to time the Investor may reasonably request;
(f) promptly following the issuance of any
additional shares of Common Stock or any securities convertible into
Common Stock, or any options, warrants or other rights to purchase
additional shares of Common Stock or convertible securities, written
notice of the amount of securities so issued and the total
consideration received therefor; and
(g) within 10 days after the Company learns in
writing of the commencement or threatened commencement of any material
suit, legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company, any of its
subsidiaries or their respective businesses, assets or properties,
written notice of the nature and extent of such suit or proceeding.
4.3 Preparation and Approval of Budgets. At least one
month prior to the beginning of each fiscal year of the Company, the Company
shall prepare and submit to its Board of Directors, for its review and
approval, an annual plan for such year; that shall include monthly capital and
operating expense budgets, cash flow statements and profit and loss projections
itemized in such detail as the Board of Directors may reasonably request. Each
annual plan shall be modified as often as necessary in the judgment of the
Board of Directors to reflect changes required as a result of operating results
and the other events that occur, or may be reasonably expected to occur, during
the year covered by the annual plan and copies of each such modification shall
be submitted to the Board of Directors. The Company will, simultaneously with
the submission thereof to the Board of Directors, deliver a copy of each such
annual plan and modification thereof to the Investor.
4.4 Inspection. The Company will permit the Investor, or
any designees thereof, to visit and inspect the properties of the Company or
any of its subsidiaries, including the financial books and records thereof, and
the right to take extracts therefrom, and discuss the affairs, finances and
accounts thereof with the appropriate officers, all at reasonable times upon
reasonable notice, and as often as reasonably may be requested.
17
<PAGE> 18
4.5 Directors' and Shareholders' Meetings. The Company
agrees, as a general practice, to hold a meeting of its Board of Directors at
least once every three months, and during each year to hold its annual meeting
of shareholders within 30 days of delivery of the audited financial statements.
4.6 Use of Proceeds. The Company will use the proceeds
of the investment made by the Investor to fund acquisitions and for general
corporate purposes.
4.7 Additional Warrants. In the event that the Company
makes any dividend payments on the 10% Preferred Stock in the form of
Additional Shares of 10% Preferred Stock (as defined in the 10% Preferred Stock
Certificate of Resolution) rather than in cash, the Company shall, on or prior
to the applicable dividend payment date, issue to the Investor additional
warrants to purchase a number of shares of Common Stock (including fractional
shares) in an amount equal to the liquidation preference of such Additional
Shares of 10% Preferred Stock divided by the per share exercise price of the
Warrants in effect immediately prior to such dividend payment date.
4.8 Change of Control, Etc. Upon any event, including
but not limited to the occurrence of a Change of Control or Asset Sale (each as
defined in Section 1.01 of each of the Indentures (as defined in the 10%
Preferred Stock Certificate of Resolution)), requiring the making of an offer
to repurchase the 12% Senior Notes of the Company, then the provisions
governing such event, including but not limited to the Change in Control Offer
(set forth in Section 4.16 of each of the Indentures) and the Asset Proceeds
Offer (set forth in Section 4.17 of each of the Indentures), shall apply to the
10% Preferred Stock and the Company shall make an offer to repurchase the
outstanding shares of 10% Preferred Stock at an offer price equal to 100% of
the aggregate liquidation preference thereof plus accrued and unpaid dividends
thereon to the date of purchase, and within the time periods and on the other
terms and conditions provided for in the Indentures. In the event of any
amendment, modification, supplement or termination of the Indentures,
notwithstanding such amendment, modification, supplement or termination, this
Section 4.8 shall continue to apply as an obligation of the Company.
4.9 Other Restrictions. Except as contemplated by the
Certificates of Resolution, without the prior approval of the Board of
Directors of the Company by an affirmative vote of at least two-thirds of its
members, neither the Company nor its subsidiaries will do any of the following:
(a) declare or pay any dividend or make any other
distribution on any shares of its capital stock other than those
payable solely in shares of
18
<PAGE> 19
Common Stock, and other than those payable on the 10% Preferred Stock
as provided in Section 4.10 hereof, or purchase, redeem or otherwise
acquire for any consideration, or set aside a sinking fund or other
fund for the redemption or repurchase of any shares of capital stock
or any warrants, rights or options to purchase shares of capital stock
(except that any subsidiary may pay dividends to the Company);
(b) grant to the holders of any securities issued
or to be issued by the Company a "demand" right to register such
securities under the Securities Act;
(c) guarantee, endorse or otherwise be or become
contingently liable, or permit any subsidiary to guarantee, endorse or
otherwise become contingently liable, in connection with obligations
in excess of one million dollars ($1,000,000) in the aggregate,
securities or dividends of any person, firm, association or
corporation (other than the Company and any 100% owned subsidiary),
except that the Company and any subsidiary may endorse negotiable
instruments for collection in the ordinary course of business;
(d) make or permit any subsidiary to make loans
or advances to any person (including without limitation to any
officer, director or shareholder of the Company or any officer or
director of any subsidiary), firm, association or corporation (other
than the Company and any 100% owned subsidiary), except advances to
suppliers, customers and employees made in the ordinary course of
business;
(e) make any material change in the nature of its
business as carried on at the date of this Agreement;
(f) organize any subsidiary, joint venture,
partnership, or acquire a business (by asset purchase, stock purchase,
merger or otherwise), or acquire any assets or make any investment
(all of the foregoing being hereinafter referred to as an
"Investment"), except that:
(i) in the case of an Investment that is
in the same line of business as the Company (i.e., the
distribution of packaged ice systems and the sale of bags for
use in such systems or the traditional methods of
manufacturing and distributing ice) or to be used in or in
connection with the Company's business as currently conducted,
the
19
<PAGE> 20
Company and its subsidiaries may make such Investment to the
extent that the total expenditure for such Investment does not
exceed $500,000; and
(ii) in the case of any other Investment,
the Company and its subsidiaries may make such Investment only
to the extent permitted by the Indentures, as such agreements
are in effect on the date hereof, without giving effect to any
amendment, modification, or supplement thereto after the date
hereof;
(g) mortgage, pledge, or create a security
interest in all or substantially all of the Company's assets as
collateral except that the Company has pledged substantially all of
its assets as security for its $20,000,000 senior credit facility that
expires September, 2003, from Frost National Bank and Zions National
Bank; and
(h) become a party to a merger, consolidation or
reorganization with any other Person as a result of which at least 51%
of the voting power of the Company will not be held, directly or
indirectly, by persons or entities who held at least 51% of the voting
power before such merger, consolidation or reorganization, or sell
or otherwise dispose of, or enter into any agreement to sell or
otherwise dispose of, all or substantially all of the assets of the
Company to any other Person. For purposes hereof, "Person" shall mean
any individual, corporation, partnership, venture or proprietorship or
other enterprise or entity.
4.10 Compliance with Indentures. The Company will comply
with all of the covenants contained in each of the Indentures, in each case as
in effect on the date hereof and without giving effect to any amendment,
modification, supplement or termination thereof. Notwithstanding the
foregoing, (a) this Section 4.10 shall not apply to Sections 4.04(c) and (d) of
each of the Indentures, (b) this Section 4.10 shall not apply to Section 4.03
of each of the Indentures to the extent that such Sections prohibit payments
related to the repurchase of the 10% Preferred Stock and payments of principal
on Subordinated Indebtedness (as defined in the Indentures) of the Company,
provided, that with respect to such payments of principal, no default or Event
of Default (as defined below) shall have occurred or be continuing at the time
of such payment or as a result thereof, (c) this Section 4.10 shall not apply
to Section 4.22 of each of the Indentures to the extent that such Sections
prohibit the payment of dividends on the 10% Preferred Stock, (d) the ratios of
"2.0 to 1.0" and "2.50 to 1.0" in Section 4.04 (b) of each of the Indentures
shall, for purposes of this Section 4.10, be deemed to be replaced with
20
<PAGE> 21
the lesser of (i) "1.75 to 1.0" and "2.25 to 1.0", respectively, and (ii) the
highest analogous ratio test or tests contained in any amendment, modification
or supplement to either of the Indentures or in any indenture, agreement or
other instrument governing indebtedness the proceeds of which are used to
refinance or replace indebtedness outstanding under the Indentures, (e) the
amount "$15,000,000" in clause (ix) of the definition of "Permitted
Indebtedness" in each of the Indentures shall, for purposes of this Section
4.10, be deemed to be replaced with "$45,000,000" until Qualified Refinancing
Debt (as defined below) is issued, after which time such amount shall, for
purposes of this Section 4.10, be deemed to be replaced with the lesser of (i)
$75,000,000 and (ii) the lowest analogous debt basket contained in any
indenture governing Qualified Refinancing Debt and (f) the Company may incur
Qualified Refinancing Debt. "Qualified Refinancing Debt" means indebtedness of
the Company that meets all of the following conditions: (i) the aggregate
principal amount thereof (or, if issued with original issued discount, the
aggregate gross issue price thereof) does not exceed $200 million, (ii) the
proceeds from the issuance thereof are used to refinance in full all
outstanding indebtedness under the Indentures (as currently in effect), (iii)
the interest rate thereon (or, if issued with original issue discount, the
yield to maturity thereof) shall not exceed 12.0% per annum, (iv) no obligation
in respect of such indebtedness (including, but not limited to, principal,
interest, premium or fees, costs or expenses associated therewith) is secured
by any Lien (as defined in the Indentures as in effect on the date hereof) on
any properties or assets of the Company or any of its subsidiaries, (v) such
indebtedness is not convertible or exchangeable into, exercisable for, or
issued with or accompanied by, directly or indirectly, any right to acquire
(including, but not limited to, rights, warrants or options) any capital stock
or other equity interest in the Company or any of its subsidiaries and (vi)
none of the restrictive covenants contained in the Indentures or other
instrument governing such indebtedness is more restrictive to the Company and
its subsidiaries than the restrictive covenants contained in the Indentures as
in effect on the date hereof.
4.11 Additional Preferred Stock Issuances. Except as set
forth in the 10% Preferred Stock Certificate of Resolution, the Company shall
not issue preferred stock that ranks senior to or on a parity with the 10%
Preferred Stock as to dividend distributions or distributions upon the
liquidation, winding-up or dissolution of the Company, or that matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to April 15, 2005.
4.12 No Reissuance or Further Issuance of Series A
Preferred Stock and Series B Preferred Stock. The Company shall not reissue
shares of its Series A Preferred Stock and Series B Preferred Stock acquired or
redeemed by the Company
21
<PAGE> 22
or issue any authorized shares of the Series A Preferred Stock and Series B
Preferred Stock that have not been issued as of the date hereof.
ARTICLE 5
CONDITIONS TO THE INVESTOR'S OBLIGATION
The obligation of the Investor to purchase and pay for the
Securities to be delivered to it hereunder at the Closing Date is subject to
the fulfillment, on or before the Closing Date, of each of the following
conditions:
5.1 Compliance with Representations and Warranties. The
representations and warranties contained in Article 2 hereof shall be true on
and as of the Closing Date with the same effect as though made on and as of
such date, and the Company shall have performed and complied with all
agreements and conditions contained herein required to be performed or complied
with by the Company prior to or at the Closing.
5.2 Compliance Certificate. The Company shall have
delivered to the Investor a certificate, dated as of the Closing Date and
signed by the Company's President, certifying that the conditions in this
Article 5 required to be fulfilled prior to the Closing Date have been
fulfilled.
5.3 Stock Certificates. The Company shall have delivered
to the Investor stock certificates evidencing the 15,000 shares of 10%
Preferred Stock and the 6 shares of Series C Preferred Stock purchased
hereunder.
5.4 Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement in the form of
Exhibit B attached hereto.
5.5 Warrants. The Company shall have executed and
delivered the Warrants in the form of Exhibit A attached hereto.
5.6 Opinion of Counsel. The Company shall have delivered
to the Investor the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated
the Closing Date substantially in the form of Exhibit E attached hereto.
5.7 Culligan Voting Agreement and the Voting Agreement
Amendment. The holders of at least 80% of the outstanding shares of Common
Stock and Series A
22
<PAGE> 23
Preferred Stock and Series B Preferred Stock calculated as a single class shall
have executed and delivered (i) the Voting Agreement, dated December 2, 1997,
by and among the Company, the Investor and the shareholders of the Company (the
"Culligan Voting Agreement") in the form attached as Exhibit F hereto, and (ii)
Amendment No. 3 to the Amended and Restated Voting Agreement, dated September
20, 1995, as amended, by and among the Company and the shareholders of the
Company (the "Voting Agreement Amendment") in the form attached hereto as
Exhibit G, and the Company warrants and covenants that the holders of at least
80% of such shares have executed the New Voting Agreement and the Voting
Agreement Amendment.
5.8 Waivers of Rights of First Refusal. The rights of
first refusal to purchase all or any part of any issue of specified securities,
which right could include the Securities, granted by the Company to each of the
shareholders set forth in Exhibit H attached hereto, (the "Consenting
Shareholders"), pursuant to Article 8 of each of certain stock purchase
agreements between the Company and the Consenting Shareholders shall be waived
by the Consenting Shareholders.
5.9 Parallel Exit Agreement. James F. Stuart, A. J.
Lewis, III, Steven P. Rosenberg, the Company and the Investor shall have
entered into the Parallel Exit Agreement in the form of Exhibit I attached
hereto (the "Parallel Exit Agreement").
5.10 Series A Preferred Stock and Series B Preferred Stock
Consents. The holders of the outstanding shares of the Series A Preferred
Stock and the Series B Preferred Stock set forth on Exhibit H attached hereto,
each voting as a separate class, by unanimous written consent or the
affirmative vote given in writing or by vote at a meeting, shall have approved
the issuance of the 10% Preferred Stock and all of its terms.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Securities
to the Investor hereunder is subject to the fulfillment by the Investor, at or
before the Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The
representations and warranties of the Investor contained in Article 3 hereof
shall be
23
<PAGE> 24
true on and as of the Closing Date with the same effect as though made on that
date (except to the extent that any representations and warranties of the
Company specifically apply to conditions existing at a particular date).
6.2 Other Agreements. The Investor shall have entered
into the Culligan Voting Agreement, the Voting Agreement Amendment, the Parallel
Exit Agreement, the Registration Rights Agreement, the Transfer Restriction
Agreement, dated December 2, 1997, by and between the Company and the Investor
(the "Transfer Restriction Agreement") in the form attached as Exhibit L
hereto.
6.3 Voting Agreements. The Investor shall have entered
into the Amended and Restated Voting Agreement, dated September 20, 1995, as
amended, by and among the Company and the shareholders of the Company, and the
Voting Agreement, dated July 17, 1997, by and among the Company, SV Capital
Partners, L.P., and certain shareholders of the Company (the "SV Capital Voting
Agreement") in the form attached hereto as Exhibit K.
ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investor,
and the Investor shall indemnify and hold harmless the Company, against all
claims, liability, damage, loss, cost and expense (including reasonable
attorneys' and accountants' fees) incurred by the indemnified party or parties
as a result of or in connection with the breach by the indemnifying party or
parties of any representation, warranty or covenant contained in this Agreement
or in any other agreement entered into pursuant to the terms and
24
<PAGE> 25
conditions of this Agreement and any and all actions, suits, proceedings,
claims, demands and judgments incident to or alleged to be incident to any of
the foregoing.
ARTICLE 8
RIGHT TO PURCHASE ADDITIONAL SECURITIES
8.1 First Refusal Rights. Subject to the terms and
conditions of this Article 8, the Company hereby grants to the Investor
(referred to hereinafter in this Article as the "Offeree") a right of first
refusal to purchase all or any part of any issue of New Securities (as defined
below) that the Company (or any subsidiary whose capital stock will not be
wholly owned, directly or indirectly, by the Company upon completion of any
such issuance) may from time to time after the Closing Date propose to issue.
8.2 New Securities. "New Securities" shall mean any
capital stock, any rights, options or warrants to purchase or subscribe for
capital stock, and any securities or other instruments of any type whatsoever
that are, or may become, convertible into or exchangeable for capital stock,
which are issued for cash; provided, however, that "New Securities" shall not
include: (i) securities offered and sold by the Company pursuant to a Public
Offering (as hereinafter defined); (ii) shares of the Company's Common Stock
(or related options or rights) issued to the Company's employees and directors
pursuant to a plan adopted by the Board of Directors; (iii) Common Stock issued
by the Company upon the conversion of the Series A Preferred Stock or Series B
Preferred Stock of the Company; and (iv) shares of the Company's capital stock
issued in connection with any existing warrant, option or right listed on the
Disclosure Schedule, stock split or stock dividend by the Company.
8.3 Notice and Allocation Periods. For purposes of this
Section 8.3, the Investor shall be deemed to own the number of shares of Common
Stock theretofore issued upon exercise of the Warrants plus the number of
shares of Common Stock then underlying the Warrants. If the Company or, when
applicable, its subsidiary, proposes to undertake a bona fide issuance of New
Securities, then it shall give the Offeree written notice of its intention,
describing the type of New Securities, the price, the number of shares to be
offered, and the general terms upon which such securities are proposed to be
offered. Offeree shall be given at least 20 days' prior written notice within
which to agree to purchase all or any part of its Pro Rata Share (as
hereinafter defined) of such issuance of New Securities for the price and upon
the general terms specified in said notice by giving written notice to the
issuer within such period and stating therein the
25
<PAGE> 26
quantity of New Securities to be purchased by it. "Pro Rata Share" shall mean,
with respect to the Offeree, that portion of the number of shares of New
Securities proposed to be issued that equals the proportion that (a) the number
of shares of Common Stock held by the Offeree immediately prior to the proposed
issuance, plus the number of shares of Common Stock that would then be issuable
to the Offeree assuming that all securities of the Company convertible into or
exchangeable for Common Stock had been converted or exchanged, bears to (b) the
total number of shares of Common Stock issued and outstanding immediately prior
to the proposed issuance, assuming that all securities of the Company
convertible into or exchangeable for Common Stock had been converted or
exchanged.
8.4 Right of Company to Sell New Securities. If the
Offeree fails to exercise in full its right of first refusal within the
applicable period set forth above, then the Company or, when applicable, its
subsidiary shall have 120 days thereafter to sell the New Securities respecting
that the rights set forth herein were not exercised at a price and upon general
terms no more favorable to the purchaser thereof than specified in the notice
to the Offeree. If such New Securities have not been sold within such 120-day
period, then the Company or, when applicable, its subsidiary shall not
thereafter issue or sell any New Securities without first offering them to the
Offeree in the manner provided above.
8.5 Public Offering. Reference to the term "Public
Offering" in this Agreement shall mean a bona fide firm commitment underwritten
public offering of shares of the Company's Common Stock made through a
nationally recognized underwriting firm pursuant to an effective registration
statement under the Securities Act, which results in gross proceeds to the
Company of not less than $7,500,000.
8.6 Termination. This Article 8 shall continue in effect
from the date of this Agreement until the Company has completed a Public
Offering.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other
communications hereunder, and each other agreement to be entered into pursuant
to the terms and conditions of this Agreement, shall be in writing and shall be
delivered by hand, overnight courier, facsimile transmission, or by United
States Mail, and shall be deemed to have been
26
<PAGE> 27
duly given when actually received, or when mailed, first class postage prepaid,
certified mail, return receipt requested, to the addresses set forth below, or
to such other address as may be designated hereafter by prior written notice
from the recipient to the sender:
If to the Company: Packaged Ice, Inc.
Attention: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With a copy to: Akin, Gump, Strauss,
Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
1500 NationsBank Plaza
300 Convent
San Antonio, Texas 78205
Facsimile: (210) 224-2035
If to the Investor: Erica Jesselson
c/o Michael Jesselson
1301 Avenue of America, Suite 4101
New York, NY 10019
9.2 Intentionally Omitted.
9.3 Modification and Waiver.
(a) No amendment or modification to this
Agreement shall be made without the written approval of the Company
and the Investor.
(b) Approval, waiver and consent by the Investor
hereunder shall be in writing and shall be delivered to the Company in
the manner provided for in Section 9.1 herein.
9.4 Conflicts. If there shall be any conflict between
any provision of this Agreement and any provision of the other agreements
required to be entered into pursuant to the terms and conditions of this
Agreement, the conflicting provision of such other agreements shall control.
27
<PAGE> 28
9.5 Gender. Whenever herein, and in each other agreement
required to be entered into pursuant to the terms and conditions of this
Agreement, the singular number is used, the same shall include the plural, and
the masculine gender shall include the feminine and neuter genders, and vice
versa, as the context may require.
9.6 Headings. The headings contained in this Agreement,
and in each other agreement required to be entered into pursuant to the terms
and conditions of this Agreement, are for reference purposes only and shall not
in any way affect their meaning or interpretation.
9.7 Counterparts. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
9.8 Parties in Interest. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, shall, except as may otherwise be specifically provided to the
contrary therein, inure to the benefit of and be binding upon each of the
parties hereto and thereto, as the case may be, and their respective heirs,
executors, legal representatives, successors and assigns.
9.9 Survival. All covenants, agreements, representations
and warranties made herein, and in each other agreement required to be entered
into pursuant to the terms and conditions of this Agreement, or otherwise in
writing in connection therewith, shall survive the execution and delivery
thereof and the consummation of the transactions contemplated thereby.
9.10 Entire Agreement. This Agreement, and each other
agreement required to be entered into pursuant to the terms and conditions of
this Agreement, embody the entire agreement and understanding between the
parties thereto, and supersede all prior agreements and understandings, written
and oral, relating to the subject matter thereof, including, without
limitation, all letter of intent and summary term sheets heretofore executed or
examined by the parties.
9.11 Governing Law. THIS AGREEMENT AND EACH OTHER
AGREEMENT REQUIRED TO BE ENTERED INTO PURSUANT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT, SHALL, EXCEPT AS MAY OTHERWISE BE SPECIFICALLY PROVIDED TO THE
CONTRARY THEREIN,
28
<PAGE> 29
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
9.12 Arbitration. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, including, without
limitation any claim for violation of securities laws, shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, in St. Louis, Missouri and judgment upon the
award reentered by the arbitrator may be entered in any court having
jurisdiction thereof, and shall not be appealable.
9.13 Expenses and Attorneys' Fees. The Company and the
Investor shall pay their respective expenses that are incurred by them with
respect to the negotiation, execution, closing, delivery and performance of
this Agreement, and each other agreement required to be entered into pursuant
to the terms and conditions of this Agreement.
9.14 Language. The language used in this Agreement, and
the other agreements required to be entered into pursuant to the terms and
conditions of this Agreement, shall be deemed to be language chosen by the
parties thereto to express their mutual intent, and no rule of strict
construction against any party shall apply to any term or condition thereof.
9.15 Severability. In case any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
9.16 Waiver. No waiver by any party of the performance of
any provision, condition or requirement herein shall be deemed to be a waiver
of, or in any manner release the other party from, performance of any other
provision, condition or requirement herein; nor deemed to be a waiver of, or in
any manner release the other party from future performance of the same
provision, condition or requirement; nor shall any delay or omission by any
party to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter.
9.17 No Third-Party Beneficiaries. Nothing contained in
this Agreement shall be construed to give any person other than the Company and
the Investor, their successors and assigns, any legal or equitable right,
remedy or claim under or with respect to this Agreement.
29
<PAGE> 30
(SIGNATURE PAGE FOLLOWS)
30
<PAGE> 31
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
PACKAGED ICE, INC.
By:
-------------------------------------
A.J. Lewis III, President
THE INVESTOR:
----------------------------------------
ERICA JESSELSON
<PAGE> 1
EXHIBIT 10.3
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Date: December 2, 1997 WARRANT NO. CWT-1
PACKAGED ICE, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CULLIGAN WATER TECHNOLOGIES, INC., a
Delaware corporation (the "Investor"), or its registered assigns, is entitled
to purchase from PACKAGED ICE, INC., a Texas corporation (the "Company"), at
any time or from time to time during the period specified in Section 2 hereof,
One Million Eight Hundred Seven Thousand Six Hundred Ninety Two (1,807,692)
fully paid and nonassessable shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), at an exercise price (the "Exercise Price") of
$13.00 per share. The number of shares of Common Stock purchasable hereunder
(the "Warrant Shares") and the Exercise Price are subject to adjustment as
provided in Section 4 hereof. The term "Warrant" means this Warrant of the
Company issued pursuant to the Securities Purchase Agreement (as hereinafter
defined). The term "Warrant Period" as used herein means the period commencing
on the date this Warrant is issued and delivered pursuant to the terms of that
certain Securities Purchase Agreement, dated as of December , 1997, by and
between the Company and the Investor (the "Securities Purchase Agreement") and
ending on the Expiration Date (as defined below).
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE, ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. Subject
to the provisions hereof, this Warrant may be exercised by the holder, in whole
at any time, or in part from time to time, prior to
<PAGE> 2
the Expiration Date, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of
the Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) delivery to the Company of a
written notice of an election to effect a Cashless Exercise (as defined in
Section 11(c) below) for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such shares as set forth above. Certificates
for the Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to the holder
hereof within a reasonable time, not exceeding five (5) business days, after
this Warrant shall have been so exercised. The certificates so delivered shall
be in such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be designated
by such holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised. Notwithstanding the foregoing, if any such exercise
is in connection with a registered public offering of Warrant Shares to be
received upon exercise, then the Exercise Agreement to be delivered in
connection with such exercise need not contain the agreement with respect to
the restrictive legend contained in the form of Exercise Agreement attached
hereto.
2. PERIOD OF EXERCISE. This Warrant may be exercised at any time on or after
the date hereof (the "Effective Date") and ending on the Expiration Date. As
used herein, "Expiration Date" means 5:00 p.m., New York time, on the earlier
to occur of (a) April 15, 2005 and (b) the first anniversary of the last day of
the first period of twenty (20) consecutive Trading Days following a Qualifying
IPO during which there is a Closing Price on each such Trading Day and the
Closing Price on each such Trading Day equals or exceeds the Threshold Price.
"Qualifying IPO" means an underwritten public offering of Common Stock at an
aggregate price to the public of at least $40,000,000 and after which the
Common Stock is listed on a national securities exchange or automated quotation
system.
2
<PAGE> 3
"Closing Price" means, with respect to any Trading Day, the last reported sale
price per share on such day of the Common Stock on the principal national
securities exchange or automated quotation system on which the Common Stock is
then listed. "Threshold Price" means, initially, $26.00, subject to adjustment
as provided in Section 4 hereof. "Trading Day" means any day on which the
principal national securities exchange or automated quotation system on which
the Common Stock is listed is open for business.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Warrant Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or become listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in
3
<PAGE> 4
order to protect the exercise privilege of the holder of this Warrant against
dilution or other impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE. The number
and kind of Warrant Shares purchasable upon the exercise of this Warrant, the
Exercise Price and the Threshold Price shall be subject to adjustment, from
time to time as follows:
(a) STOCK SPLITS, COMBINATIONS, ETC. In case the Company shall
hereafter (i) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (ii) subdivide its outstanding shares of Common Stock or
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares, then (1) the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the holder of this
Warrant thereafter exercised shall be entitled to receive the number of Warrant
Shares (and/or other capital stock referred to in clause (i) above) that such
holder would have owned immediately following such action had this Warrant been
exercised immediately prior thereto, (2) the Exercise Price shall be adjusted
to the product obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of Warrant Shares immediately prior to the adjustment required pursuant
to clause (1) above and the denominator of which shall be the number of Warrant
Shares immediately thereafter and (3) the Threshold Price shall be adjusted to
the product obtained by multiplying the Threshold Price in effect immediately
prior to such adjustment by the fraction referred to in clause (2) above. An
adjustment made pursuant to this paragraph shall become effective immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If as a result of an adjustment made pursuant to this
paragraph, the holder of this Warrant
4
<PAGE> 5
thereafter exercised shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) RECLASSIFICATION, COMBINATIONS, MERGERS, ETC. In case of any
reclassification or change of outstanding shares of Common Stock (other than as
set forth in Section 4(a) above and other than a change in par value, or from
par value to no par value, or from no par value to par value), or in case of
any consolidation or merger of the Company with or into another corporation
(other than a merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination)) or in case of any
sale or conveyance to another corporation of all or substantially all of the
assets of the Company, then, as a condition of such reclassification, change,
consolidation, merger, sale or conveyance, the Company or such a successor or
purchasing corporation, as the case may be, shall forthwith make lawful and
adequate provision whereby the holder of such Warrant then outstanding shall
have the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance and enter into a supplemental warrant agreement so
providing. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 4. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental warrant agreement is an affiliate of the
formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this paragraph (b)
shall similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In case of any such reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such
5
<PAGE> 6
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of
shares of the Common Stock for which this Warrant is exercisable that shall be
as nearly equivalent as practicable to the adjustments provided for in this
Section 4. The foregoing provisions of this Section 4(b) shall similarly apply
to successive reorganizations, reclassifications, mergers, consolidations or
dispositions of assets.
(c) ISSUANCE OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES. For
the purposes of this Warrant, "Additional Shares Of Common Stock" shall mean
all shares of Common Stock issued or deemed to be issued by the Company after
the Effective Date, other than Excluded Shares (as defined below).
In the event the Company shall, at any time or from time to time after the
Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) (i) shares of Common Stock or (ii) any rights to
subscribe for or to purchase, or any warrants or options for the purchase of,
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (any such rights, warrants or options being herein called
"Options" and any such convertible or exchangeable stock or securities being
herein called "Convertible Securities") or (iii) any Convertible Securities,
whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise and/or conversion of such Options or
Convertible Securities, shall be deemed to be Additional Shares of Common
Stock.
For purposes of this Warrant Agreement, "Issuance Date" shall mean (i) with
respect to Additional Shares of Common Stock deemed to have been issued in
connection with the issuance of an Option or Convertible Security, the date
such Option or Convertible Security is issued and (ii) in all other cases, the
actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall mean:
(i) shares for which the consideration per share as determined pursuant to
paragraph (d) below would be equal to or more than the Current Market Value
determined on the day prior to the Issuance Date; (ii) shares of Common Stock
issuable upon the exercise of Options or conversion of Convertible Securities
existing as of the Effective Date; and (iii) shares of Common Stock
(appropriately
6
<PAGE> 7
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes) issued pursuant to any stock options
granted or obtained after the Effective Date pursuant to the Company's Stock
Option Plan adopted July 26, 1994, as may be amended from time to time by the
Company's Board of Directors. The issuance of Excluded Shares shall not be an
issuance of Additional Shares of Common Stock, and shall not give rise to a
right to purchase the securities pursuant to paragraph (d) below.
In any such case in which the Additional Shares of Common Stock are deemed to
be issued, no right to purchase securities under Section 4(d) below will accrue
upon the subsequent issue of shares of Common Stock upon the exercise and/or
conversion or exchange of such Option or Convertible Security unless such
Option or Convertible Security shall have been amended or modified prior to
exercise or conversion or exchange so as to increase the number of Additional
Shares of Common Stock deemed to have been issued thereunder or decrease the
exercise and/or conversion or exchange price payable thereunder to an amount
less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is issued or Common
Stock is issuable upon the exercise of any Options or upon the conversion or
exchange of any Convertible Securities (determined by dividing (i) the
aggregate amount, if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or granting of such Common
Stock or Options or any such Convertible Security, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance of Common Stock or the exercise of all such Options or upon conversion
or exchange of all such Convertible Securities, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of shares of Common
Stock issued, sold, distributed or granted or to be issued or issuable upon the
exercise of all such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all Options) shall be less than the
Current Market Value per share of Common Stock (determined pursuant to Section
4(f)) on the record date for the issuance, sale, distribution or granting of
such Common Stock, Convertible Securities or Options then, the Company shall
offer to sell to each holder of Warrants, at the same price and on the same
terms offered to all other prospective buyers (provided that the holders of
Warrants shall not be required to buy any other securities in order to buy such
Common Stock, Options or Convertible Securities), a portion of
7
<PAGE> 8
such Common Stock, Options or Convertible Securities that is equal to such
holder's portion of the Common Stock then outstanding if immediately prior
thereto all the Warrants had been exercised. Each such holder may elect to buy
all or any portion of the Common Stock or Convertible Securities offered or may
decline to purchase any such securities. The purchase price of such Common
Stock or Convertible Securities may be payable, at the option of such holder,
(w) in cash, (x) by delivering to the Company a number of shares of 10%
Exchangeable Preferred Stock of the Company with an aggregate liquidation
preference (plus accumulated and unpaid dividends thereon) equal to the
purchase price, (y) by surrendering the right to exercise this Warrant with
respect to such number of shares of Common Stock in respect of which such right
has an "in-the-money" value equal to the purchase price (for purposes of this
clause (y) the "in-the-money" value of the right to exercise this Warrant shall
be deemed to equal the number of shares of Common Stock in respect of which
such right is exercisable multiplied by the difference between the then Current
Market Value per share of the Common Stock and the per share Exercise Price) or
(z) any combination of the foregoing.
(e) If the Company shall declare or pay a dividend or make a
distribution to all or substantially all holders of outstanding Common Stock,
in either case, of evidences of its indebtedness, cash or other property or
securities (excluding dividends and distributions referred to in paragraph (a)
above) or shall issue to all or substantially all holders of outstanding Common
Stock rights or warrants to subscribe for or purchase any of its securities
(other than Options or Convertible Securities in respect of which the holder of
this Warrant becomes entitled to purchase Common Stock or Convertible
Securities pursuant to paragraph (d) above), then in each such case, the
Exercise Price and the Threshold Price shall be adjusted so that the same shall
equal the price determined by multiplying each of the Exercise Price and
Threshold Price, respectively, in effect immediately prior to the close of
business on the date (the "Record Date") fixed for the determination of holders
of Common Stock entitled to receive such dividend or distribution by a
fraction, of which the numerator shall be the Current Market Value of the
Common Stock as of the business day next preceding the Record Date less the
fair market value (as determined by the Board of Directors of the Company), as
of the Record Date, of the portion of the evidences of indebtedness, cash or
other property or securities so distributed, or of such rights or warrants, in
each case, applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Value, such adjustment to become
effective immediately prior to the opening of business on the day following the
Record Date. In addition, the number of Warrant Shares purchasable upon
exercise of this Warrant shall be adjusted to
8
<PAGE> 9
the product obtained by multiplying the number of Warrant Shares by a fraction,
of which the numerator shall be the Exercise Price in effect immediately prior
to the adjustment referred to in the preceding sentence, and of which the
denominator shall be the Exercise Price immediately following the adjustment
referred to in the preceding sentence. Notwithstanding the foregoing, in the
event that, with respect to any dividend or distribution to which this
paragraph (e) would otherwise apply, the numerator in the fraction referred to
in the first sentence of this paragraph (e) is zero (or is a negative number),
then the Company may, at its option, elect to have the adjustment provided by
this paragraph (e) not be made and in lieu of such adjustment, the Company
shall deliver to the Investor on the date fixed for payment to stockholders of
such dividend or distribution, the evidences of indebtedness, assets, other
property or securities, rights, or warrants so distributed in respect of the
number of Warrant Shares (determined as of the close of business on the Record
Date).
(f) CURRENT MARKET VALUE. As used herein, the term "Current Market
Value" per share of Common Stock or any other security at any date means, on
any date of determination (a) the average of the daily closing sale prices for
each of the fifteen (15) business days immediately preceding such date (or such
shorter number of days during which such security has been listed or traded),
if the security has been listed on the New York Stock Exchange, the American
Stock Exchange, or other national securities exchanges or the NASDAQ National
Market for at least ten (10) business days prior to such date, (b) if such
security is not so listed or traded, the average of the daily closing bid
prices for each of the fifteen (15) business days immediately preceding such
date (or such shorter number of days during which such security had been
quoted), if the security has been quoted on a national over-the-counter market
for at least ten (10) business days, and (e) otherwise, the fair value of the
security most recently determined as of a date within the six months preceding
such day by the Board of Directors of the Company.
(g) CONSIDERATION RECEIVED. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by
the Company in respect thereof shall be deemed to be the then fair market value
of such consideration (as determined by the Board of Directors of the Company).
If any Options shall be issued in connection with the issuance and sale of
other securities of the Company, together comprising one integral transaction
in which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued without
consideration; provided,
9
<PAGE> 10
however, that if such Options have an exercise price equal to or greater than
the Current Market Value of the Common Stock on the date of issuance of such
Options, then such Options shall be deemed to have been issued for
consideration equal to such exercise price.
(h) CHANGES IN OPTIONS AND CONVERTIBLE SECURITIES. If (1) the issue,
sale or grant price of any Common Stock referred to in Section 4(d), (2) the
exercise price provided for in any Options referred to in Section 4(d) or 4(g)
above, (3) the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Section 4(d) above, or
(4) the rate at which any Convertible Securities referred to in Section 4(d)
above are convertible into or exchangeable for Common Stock, shall change at
any time to a price that is less than the Current Market Value thereof as of
the Issuance Date thereof, then the Company shall make the offer to holders of
the Warrants as required by Section 4(d) above promptly following such change.
(i) OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action described in this Section 4, then the number of Warrant
Shares for which this Warrant is exercisable, shall be adjusted in such manner
as may be equitable in the circumstances. If the Company shall at any time and
from time to time issue or sell (i) any shares of any class of common stock
other than Common Stock, (ii) any evidences of its indebtedness, shares of
stock or other securities which are convertible into or exchangeable for such
shares of common stock, with or without the payment of additional consideration
in cash or property or (iii) any warrants or other rights to subscribe for or
purchase any such shares of common stock or any such evidences, shares of stock
or other securities, then in each such case (other than an issuance to which
Section 4(e) applies) such issuance shall be deemed to be of, or in respect of,
Common Stock for purposes of this Section 4; provided, however, that, without
limiting the generality of the foregoing, if the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of, common stock other than Common
Stock, including shares of non-voting common stock, then the number of Warrant
Shares for which this Warrant is exercisable immediately after the occurrence
of any such event shall be adjusted to equal the aggregate number of shares of
such common stock and of Common Stock that a record holder of the same number
of Warrant Shares for which this Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event.
10
<PAGE> 11
(j) FRACTIONAL INTEREST. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of this Warrant (or specified portion
thereof), the Company shall direct the transfer agent for the Common Stock to
pay an amount in cash calculated by the Company to equal the then Current
Market Value per share (determined pursuant to Section 4(e)) multiplied by such
fraction computed to the nearest whole cent. The holder of this Warrant hereby
expressly waives any and all rights to receive any fraction of a share of
Common Stock or a stock certificate representing a fraction of a share of
Common Stock.
(k) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of
the taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(l) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination of the fair
value of any item under this Section 4, such determination may be challenged in
good faith by the holder hereof, and any dispute shall be resolved by an
independent investment banking firm of national standing retained by the
Company and acceptable to the holder of this Warrant. The fee of such
investment banking firm shall be paid by the Company, unless such fair market
value as determined by the investment banking firm differs by less than 5% from
the fair market value determined by the Board of Directors of the Company, in
which case the challenging holders shall be jointly and severally liable for
such fee.
(m) TREASURY STOCK. The sale or other disposition of any issued
shares of Common Stock owned or held by or for the account of the Company shall
be deemed an issuance thereof and a repurchase thereof and designation of such
shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
(n) NOTICES TO HOLDERS. Upon the occurrence of any event which
requires any adjustment of the Warrant Shares or the Exercise Price, then, and
in each such case, the Company shall give written notice thereof to the
11
<PAGE> 12
holder of this Warrant, which written notice shall state the Exercise Price and
the Threshold Price resulting from such adjustment and the increase or decrease
in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO LIABILITIES AS A SHAREHOLDER. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a shareholder of the Company, whether such liability is asserted by the
Company or a creditor of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, upon surrender of this
Warrant together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) hereof. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right
to purchase the number of shares of Common Stock that may be purchased
hereunder, each of such new Warrants to represent the right to
12
<PAGE> 13
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all
other expenses (other then legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of the
surrender of this Warrant in connection with any transfer or exchange of this
Warrant, this Warrant shall not be registered under the Securities Act of 1933,
as amended (the "Securities Act"), and under applicable state securities or
blue sky laws, the Company may require, as a condition of allowing such
transfer or exchange, (i) that the transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion and
counsel shall be reasonably acceptable to the Company) to the effect that such
transfer or exchange may be made without registration under the Securities Act
and under applicable state securities or blue sky laws; provided that this
clause (i) shall not apply to any transfer to an affiliate of a holder, (ii)
that the transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company, and (iii) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such
13
<PAGE> 14
opinion, letter, or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, dated as of December 2, 1997, by and among the Company, the Investor
and Erica Jesselson.
9. NOTICES. Any notices required or permitted to be given under the terms of
this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed facsimile, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company: Packaged Ice, Inc.
Attention: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attn: Alan Schoenbaum, P.C.
1500 NationsBank Plaza
300 Convent Street
San Antonio, TX 79205
Facsimile: (210) 224-2035
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes
by written notice given in accordance with this Section 9.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. THE UNITED STATES
FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION
WITH RESPECT TO ANY DISPUTE
14
<PAGE> 15
ARISING UNDER THIS WARRANT.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Warrant are inserted for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised in whole at any time
or in part from time to time by presentation and surrender of this Warrant to
the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation of
the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder may
either (x) deliver to the Company a number of shares of 10% Exchangeable
Preferred Stock of the Company with an aggregate liquidation preference (plus
accumulated and unpaid dividends thereon) equal to the aggregate Exercise
Price, (y) if the Common Stock is listed on a national securities exchange or
quoted in the NASDAQ system or in the over-the-counter market at the time, by
surrendering this Warrant (or portion hereof in respect of which is being
exercised) in exchange for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be
entitled if this Warrant were exercised by paying the exercise price in cash by
a fraction, the numerator of which shall be the difference between the then
Current Market Value per share of the Common Stock and the per share purchase
Exercise Price, and the denominator of which shall be the then Current Market
Value per share of Common Stock or (z) any combination of the foregoing.
(SIGNATURE PAGE FOLLOWS)
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
PACKAGED ICE, INC.
By:
----------------------------------
Name: A.J. Lewis III
Title: President
16
<PAGE> 17
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO
EXERCISE THE WARRANT)
The undersigned hereby irrevocably exercises the right to purchase
_____________ of the shares of Common Stock of Packaged Ice, Inc., a Texas
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws, and agrees that the following
legend may be affixed to the stock certificate for the Common Stock if not
registered or if Rule 144(k) is unavailable.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
1
<PAGE> 18
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the holder and delivered to the
undersigned at the address set forth below.
Dated:
------------------------- --------------------------------
Signature of Holder
--------------------------------
Name of Holder (Print)
Address:
--------------------------------
--------------------------------
--------------------------------
2
<PAGE> 19
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all
the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth herein below, to:
Name of Assignee Address Number of Shares
, and hereby irrevocably constitutes and appoints __________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:
-------------------
In the presence of
- --------------------------
Name:
---------------------------------------
Signature:
----------------------------------
Title of Signing Officer or Agent (if any):
--------------------------------------------
Address:
------------------------------------
------------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
1
<PAGE> 1
EXHIBIT 10.4
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND
TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Date: December 2, 1997 WARRANT NO. J-1
PACKAGED ICE, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Erica Jesselson, an
individual residing in the State of New York, (the "Investor"), or her
registered assigns, is entitled to purchase from PACKAGED ICE, INC., a Texas
corporation (the "Company"), at any time or from time to time during the period
specified in Section 2 hereof, One Hundred Fifteen Thousand Three Hundred
Eighty Five (115,385) fully paid and nonassessable shares of the Company's
Common Stock, $.01 par value (the "Common Stock"), at an exercise price (the
"Exercise Price") of $13.00 per share. The number of shares of Common Stock
purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "Warrant" means this
Warrant of the Company issued pursuant to the Securities Purchase Agreement (as
hereinafter defined). The term "Warrant Period" as used herein means the
period commencing on the date this Warrant is issued and delivered pursuant to
the terms of that certain Securities Purchase Agreement, dated as of December
, 1997, by and between the Company and the Investor (the "Securities Purchase
Agreement") and ending on the Expiration Date (as defined below).
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE, ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. Subject to the provisions hereof, this Warrant may be exercised by the
holder, in whole at any time, or in part from time to time, prior to the
Expiration Date, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer for
the account of the Company, of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) delivery to the Company of a
written notice of an election to effect a Cashless Exercise (as defined in
Section 11(c) below) for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall
1
<PAGE> 2
have been surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding five (5) business days,
after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. Notwithstanding the foregoing, if any such
exercise is in connection with a registered public offering of Warrant Shares
to be received upon exercise, then the Exercise Agreement to be delivered in
connection with such exercise need not contain the agreement with respect to
the restrictive legend contained in the form of Exercise Agreement attached
hereto.
2. PERIOD OF EXERCISE. This Warrant may be exercised at any time
on or after the date hereof (the "Effective Date") and ending on the Expiration
Date. As used herein, "Expiration Date" means 5:00 p.m., New York time, on the
earlier to occur of (a) April 15, 2005 and (b) the first anniversary of the
last day of the first period of twenty (20) consecutive Trading Days following
a Qualifying IPO during which there is a Closing Price on each such Trading Day
and the Closing Price on each such Trading Day equals or exceeds the Threshold
Price. "Qualifying IPO" means an underwritten public offering of Common Stock
at an aggregate price to the public of at least $40,000,000 and after which the
Common Stock is listed on a national securities exchange or automated quotation
system. "Closing Price" means, with respect to any Trading Day, the last
reported sale price per share on such day of the Common Stock on the principal
national securities exchange or automated quotation system on which the Common
Stock is then listed. "Threshold Price" means, initially, $26.00, subject to
adjustment as provided in Section 4 hereof. "Trading Day" means any day on
which the principal national securities exchange or automated quotation system
on which the Common Stock is listed is open for business.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will,
upon issuance in accordance with the terms of this Warrant, be validly issued,
fully paid, and nonassessable and free from all taxes, liens, claims and
encumbrances.
(b) RESERVATION OF SHARES. During the Warrant Period,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities
2
<PAGE> 3
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed or become listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE.
The number and kind of Warrant Shares purchasable upon the exercise of this
Warrant, the Exercise Price and the Threshold Price shall be subject to
adjustment, from time to time as follows:
(a) STOCK SPLITS, COMBINATIONS, ETC. In case the
Company shall hereafter (i) pay a dividend or make a distribution on its Common
Stock in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide its outstanding shares of
Common Stock or (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, then (1) the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant thereafter exercised shall be entitled to
receive the number of Warrant Shares (and/or other capital stock referred to in
clause (i) above) that such holder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, (2) the
Exercise Price shall be adjusted to the product obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by a fraction,
the numerator of which shall be the number of Warrant Shares immediately prior
to the adjustment required pursuant to clause (1) above and the denominator of
which shall be the number of Warrant Shares
3
<PAGE> 4
immediately thereafter and (3) the Threshold Price shall be adjusted to the
product obtained by multiplying the Threshold Price in effect immediately prior
to such adjustment by the fraction referred to in clause (2) above. An
adjustment made pursuant to this paragraph shall become effective immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If as a result of an adjustment made pursuant to this
paragraph, the holder of this Warrant thereafter exercised shall become
entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company shall in good faith determine
the allocation of the adjusted Exercise Price between or among shares of such
classes of capital stock.
(b) RECLASSIFICATION, COMBINATIONS, MERGERS, ETC. In
case of any reclassification or change of outstanding shares of Common Stock
(other than as set forth in Section 4(a) above and other than a change in par
value, or from par value to no par value, or from no par value to par value),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock of the Company
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination)) or
in case of any sale or conveyance to another corporation of all or
substantially all of the assets of the Company, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company or such a successor or purchasing corporation, as the case may be,
shall forthwith make lawful and adequate provision whereby the holder of such
Warrant then outstanding shall have the right thereafter to receive on exercise
of such Warrant the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock issuable
upon exercise of such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and enter into a supplemental
warrant agreement so providing. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. If the issuer of securities
deliverable upon exercise of Warrants under the supplemental warrant agreement
is an affiliate of the formed, surviving or transferee corporation, that issuer
shall join in the supplemental warrant agreement. The above provisions of this
paragraph (b) shall similarly apply to successive reclassifications and changes
of shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
In case of any such reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of the Common Stock for which this Warrant is
exercisable that shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. The foregoing
4
<PAGE> 5
provisions of this Section 4(b) shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or dispositions of
assets.
(c) ISSUANCE OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES.
For the purposes of this Warrant, "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued or deemed to be issued by the Company
after the Effective Date, other than Excluded Shares (as defined below).
In the event the Company shall, at any time or from time to time after
the Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) (i) shares of Common Stock or (ii) any rights to
subscribe for or to purchase, or any warrants or options for the purchase of,
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (any such rights, warrants or options being herein called
"Options" and any such convertible or exchangeable stock or securities being
herein called "Convertible Securities") or (iii) any Convertible Securities,
whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise and/or conversion of such Options or
Convertible Securities, shall be deemed to be Additional Shares of Common
Stock.
For purposes of this Warrant Agreement, "Issuance Date" shall mean (i)
with respect to Additional Shares of Common Stock deemed to have been issued in
connection with the issuance of an Option or Convertible Security, the date
such Option or Convertible Security is issued and (ii) in all other cases, the
actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall
mean: (i) shares for which the consideration per share as determined pursuant
to paragraph (d) below would be equal to or more than the Current Market Value
determined on the day prior to the Issuance Date; (ii) shares of Common Stock
issuable upon the exercise of Options or conversion of Convertible Securities
existing as of the Effective Date; and (iii) shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes) issued pursuant to any
stock options granted or obtained after the Effective Date pursuant to the
Company's Stock Option Plan adopted July 26, 1994, as may be amended from time
to time by the Company's Board of Directors. The issuance of Excluded Shares
shall not be an issuance of Additional Shares of Common Stock, and shall not
give rise to a right to purchase the securities pursuant to paragraph (d)
below.
In any such case in which the Additional Shares of Common Stock are
deemed to be issued, no right to purchase securities under Section 4(d) below
will accrue upon the subsequent issue of shares of Common Stock upon the
exercise and/or conversion or exchange of such Option or Convertible Security
unless such Option or Convertible Security shall have been amended or modified
prior to exercise or conversion or exchange so as to increase the number of
Additional Shares of Common Stock deemed to have been issued thereunder or
5
<PAGE> 6
decrease the exercise and/or conversion or exchange price payable thereunder to
an amount less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is
issued or Common Stock is issuable upon the exercise of any Options or upon the
conversion or exchange of any Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or granting of such Common
Stock or Options or any such Convertible Security, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance of Common Stock or the exercise of all such Options or upon conversion
or exchange of all such Convertible Securities, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of shares of Common
Stock issued, sold, distributed or granted or to be issued or issuable upon the
exercise of all such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all Options) shall be less than the
Current Market Value per share of Common Stock (determined pursuant to Section
4(f)) on the record date for the issuance, sale, distribution or granting of
such Common Stock, Convertible Securities or Options then, the Company shall
offer to sell to each holder of Warrants, at the same price and on the same
terms offered to all other prospective buyers (provided that the holders of
Warrants shall not be required to buy any other securities in order to buy such
Common Stock, Options or Convertible Securities), a portion of such Common
Stock, Options or Convertible Securities that is equal to such holder's portion
of the Common Stock then outstanding if immediately prior thereto all the
Warrants had been exercised. Each such holder may elect to buy all or any
portion of the Common Stock or Convertible Securities offered or may decline to
purchase any such securities. The purchase price of such Common Stock or
Convertible Securities may be payable, at the option of such holder, (w) in
cash, (x) by delivering to the Company a number of shares of 10% Exchangeable
Preferred Stock of the Company with an aggregate liquidation preference (plus
accumulated and unpaid dividends thereon) equal to the purchase price, (y) by
surrendering the right to exercise this Warrant with respect to such number of
shares of Common Stock in respect of which such right has an "in-the-money"
value equal to the purchase price (for purposes of this clause (y) the
"in-the-money" value of the right to exercise this Warrant shall be deemed to
equal the number of shares of Common Stock in respect of which such right is
exercisable multiplied by the difference between the then Current Market Value
per share of the Common Stock and the per share Exercise Price) or (z) any
combination of the foregoing.
(e) If the Company shall declare or pay a dividend or
make a distribution to all or substantially all holders of outstanding Common
Stock, in either case, of evidences of its indebtedness, cash or other property
or securities (excluding dividends and distributions referred to in paragraph
(a) above) or shall issue to all or substantially all holders of outstanding
Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than Options or Convertible Securities in respect of which
the holder of this Warrant becomes entitled to purchase Common Stock or
Convertible Securities pursuant to paragraph (d) above), then in each such
case, the Exercise Price and the Threshold Price shall be adjusted so that the
6
<PAGE> 7
same shall equal the price determined by multiplying each of the Exercise Price
and Threshold Price, respectively, in effect immediately prior to the close of
business on the date (the "Record Date") fixed for the determination of holders
of Common Stock entitled to receive such dividend or distribution by a
fraction, of which the numerator shall be the Current Market Value of the
Common Stock as of the business day next preceding the Record Date less the
fair market value (as determined by the Board of Directors of the Company), as
of the Record Date, of the portion of the evidences of indebtedness, cash or
other property or securities so distributed, or of such rights or warrants, in
each case, applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Value, such adjustment to become
effective immediately prior to the opening of business on the day following the
Record Date. In addition' the number of Warrant Shares purchasable upon
exercise of this Warrant shall be adjusted to the product obtained by
multiplying the number of Warrant Shares by a fraction, of which the numerator
shall be the Exercise Price in effect immediately prior to the adjustment
referred to in the preceding sentence, and of which the denominator shall be
the Exercise Price immediately following the adjustment referred to in the
preceding sentence. Notwithstanding the foregoing, in the event that, with
respect to any dividend or distribution to which this paragraph (e) would
otherwise apply, the numerator in the fraction referred to in the first
sentence of this paragraph (e) is zero (or is a negative number), then the
Company may, at its option, elect to have the adjustment provided by this
paragraph (e) not be made and in lieu of such adjustment, the Company shall
deliver to the Investor on the date fixed for payment to stockholders of such
dividend or distribution, the evidences of indebtedness, assets, other property
or securities, rights, or warrants so distributed in respect of the number of
Warrant Shares (determined as of the close of business on the Record Date).
(f) CURRENT MARKET VALUE. As used herein, the term
"Current Market Value" per share of Common Stock or any other security at any
date means, on any date of determination (a) the average of the daily closing
sale prices for each of the fifteen (15) business days immediately preceding
such date (or such shorter number of days during which such security has been
listed or traded), if the security has been listed on the New York Stock
Exchange, the American Stock Exchange, or other national securities exchanges
or the NASDAQ National Market for at least ten (10) business days prior to such
date, (b) if such security is not so listed or traded, the average of the daily
closing bid prices for each of the fifteen (15) business days immediately
preceding such date (or such shorter number of days during which such security
had been quoted), if the security has been quoted on a national
over-the-counter market for at least ten (10) business days, and (e) otherwise,
the fair value of the security most recently determined as of a date within the
six months preceding such day by the Board of Directors of the Company.
(g) CONSIDERATION RECEIVED. If any shares of Common
Stock, Options or Convertible Securities shall be issued, sold or distributed
for a consideration other than cash, the amount of the consideration other than
cash received by the Company in respect thereof shall be deemed to be the then
fair market value of such consideration (as determined by the Board of
Directors of the Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated to
such Options by the parties thereto,
7
<PAGE> 8
such Options shall be deemed to have been issued without consideration;
provided, however, that if such Options have an exercise price equal to or
greater than the Current Market Value of the Common Stock on the date of
issuance of such Options, then such Options shall be deemed to have been issued
for consideration equal to such exercise price.
(h) CHANGES IN OPTIONS AND CONVERTIBLE SECURITIES. If
(1) the issue, sale or grant price of any Common Stock referred to in Section
4(d), (2) the exercise price provided for in any Options referred to in Section
4(d) or 4(g) above, (3) the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in Section
4(d) above, or (4) the rate at which any Convertible Securities referred to in
Section 4(d) above are convertible into or exchangeable for Common Stock, shall
change at any time to a price that is less than the Current Market Value
thereof as of the Issuance Date thereof, then the Company shall make the offer
to holders of the Warrants as required by Section 4(d) above promptly following
such change.
(i) OTHER ACTION AFFECTING COMMON STOCK. In case at any
time or from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, then the
number of Warrant Shares for which this Warrant is exercisable, shall be
adjusted in such manner as may be equitable in the circumstances. If the
Company shall at any time and from time to time issue or sell (i) any shares of
any class of common stock other than Common Stock, (ii) any evidences of its
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for such shares of common stock, with or without the payment of
additional consideration in cash or property or (iii) any warrants or other
rights to subscribe for or purchase any such shares of common stock or any such
evidences, shares of stock or other securities, then in each such case (other
than an issuance to which Section 4(e) applies) such issuance shall be deemed
to be of, or in respect of, Common Stock for purposes of this Section 4;
provided, however, that, without limiting the generality of the foregoing, if
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, common stock other than Common Stock, including shares of
non-voting common stock, then the number of Warrant Shares for which this
Warrant is exercisable immediately after the occurrence of any such event shall
be adjusted to equal the aggregate number of shares of such common stock and of
Common Stock that a record holder of the same number of Warrant Shares for
which this Warrant is exercisable immediately prior to the occurrence of such
event would own or be entitled to receive after the happening of such event.
(j) FRACTIONAL INTEREST. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of this
Warrant. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of this Warrant (or
specified portion thereof), the Company shall direct the transfer agent for the
Common Stock to pay an amount in cash calculated by the Company to equal the
then Current Market Value per share (determined pursuant to Section 4(e))
multiplied by such fraction computed to the nearest whole cent. The holder of
this Warrant hereby expressly waives any and all rights to receive any fraction
of a share of Common Stock or a stock certificate representing a fraction of a
share of Common Stock.
8
<PAGE> 9
(k) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(l) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the
Board of Directors of the Company shall be required to make a determination of
the fair value of any item under this Section 4, such determination may be
challenged in good faith by the holder hereof, and any dispute shall be
resolved by an independent investment banking firm of national standing
retained by the Company and acceptable to the holder of this Warrant. The fee
of such investment banking firm shall be paid by the Company, unless such fair
market value as determined by the investment banking firm differs by less than
5% from the fair market value determined by the Board of Directors of the
Company, in which case the challenging holders shall be jointly and severally
liable for such fee.
(m) TREASURY STOCK. The sale or other disposition of
any issued shares of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof and a repurchase thereof and
designation of such shares as treasury stock shall be deemed to be a redemption
thereof for the purposes of this Agreement.
(n) NOTICES TO HOLDERS. Upon the occurrence of any event
which requires any adjustment of the Warrant Shares or the Exercise Price,
then, and in each such case, the Company shall give written notice thereof to
the holder of this Warrant, which written notice shall state the Exercise Price
and the Threshold Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
5. ISSUE TAX. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of this Warrant.
6. NO LIABILITIES AS A SHAREHOLDER. No provision of this
Warrant, in the absence of affirmative action by the holder hereof to purchase
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a shareholder of the Company, whether such liability is
asserted by the Company or a creditor of the Company.
9
<PAGE> 10
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the
rights granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Section 7(f) hereof. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock that may be
purchased hereunder. each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Section 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other then legal expenses,
if any, incurred by the holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant
to this Section 7
(e) WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), a register for this Warrant,
in which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at
the time of the surrender of this Warrant in connection with any transfer or
exchange of this Warrant, this Warrant shall not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer or exchange, (i) that the transferee of this Warrant, as
the case may be, furnish to the Company a written opinion of counsel (which
10
<PAGE> 11
opinion and counsel shall be reasonably acceptable to the Company) to the
effect that such transfer or exchange may be made without registration under
the Securities Act and under applicable state securities or blue sky laws;
provided that this clause (i) shall not apply to any transfer to an affiliate
of a holder, (ii) that the transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company, and (iii)
that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter, or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement, dated as of December 2, 1997, by and among the Company, the
Investor and Erica Jesselson.
9. NOTICES. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
facsimile, and shall be effective five (5) days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company: Packaged Ice, Inc.
Attention: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attn.: Alan Schoenbaum, P.C.
1500 NationsBank Plaza
300 Convent Street
San Antonio, TX 79205
Facsimile: (210) 224-2035
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes
by written notice given in accordance with this Section 9.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. THE
UNITED STATES FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE
JURISDICTION WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT.
11
<PAGE> 12
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof
may only be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of
the several sections of this Warrant are inserted for purposes of reference
only and shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, this Warrant may be exercised in whole at
any time or in part from time to time by presentation and surrender of this
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder may either (x) deliver to the Company a number of shares of 10%
Exchangeable Preferred Stock of the Company with an aggregate liquidation
preference (plus accumulated and unpaid dividends thereon) equal to the
aggregate Exercise Price, (y) if the Common Stock is listed on a national
securities exchange or quoted in the NASDAQ system or in the over-the-counter
market at the time, by surrendering this Warrant (or portion hereof in respect
of which is being exercised) in exchange for that number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled if this Warrant were exercised by paying the exercise
price in cash by a fraction, the numerator of which shall be the difference
between the then Current Market Value per share of the Common Stock and the per
share purchase Exercise Price, and the denominator of which shall be the then
Current Market Value per share of Common Stock or (z) any combination of the
foregoing.
(SIGNATURE PAGE FOLLOWS)
12
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PACKAGED ICE, INC.
By:
---------------------------------
Name: A.J. Lewis, III
Title: President
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO
EXERCISE THE WARRANT)
The undersigned hereby irrevocably exercises the right to purchase of
the shares of Common Stock of Packaged Ice, Inc., a Texas corporation (the
"Company"), evidenced by the attached Warrant, and herewith makes payment of
the Exercise Price with respect to such shares in full, all in accordance with
the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer
or otherwise dispose of any Common Stock obtained on exercise of the Warrant,
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws, and agrees
that the following legend may be affixed to the stock certificate for the
Common Stock if not registered or if Rule 144(k) is unavailable.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS
SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
13
<PAGE> 14
ii. The undersigned requests that stock certificates for
such shares be issued, and a Warrant representing any unexercised portion
hereof be issued, pursuant to the Warrant in the name of the holder and
delivered to the undersigned at the address set forth below.
Dated:
----------------------- -------------------------------------
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
14
<PAGE> 15
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
herein below, to:
Name of Assignee Address Number of Shares
, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:
------------------------
In the presence of:
- ------------------------------
Name:
--------------------------------------
Signature:
---------------------------------
Title of Signing Officer or Agent (if any):
-------------------------------------------
Address:
----------------------------------
----------------------------------
Note: The above signature should
15
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
Dated as of December 2, 1997
by and among
PACKAGED ICE, INC.,
CULLIGAN WATER TECHNOLOGIES, INC.
and
ERICA JESSELSON
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 (a) Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Effective Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Restrictions on Sale by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Priority in Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 (a) Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Priority in Piggyback Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Limitations, Conditions and Qualifications to Obligations Under Registration Covenants . . . . . . . 8
2.4 Restrictions on Sale by the Company and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Adjustments Affecting Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(j) Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(l) Securities Held by the Company or Its Affiliates . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 2, 1997, by and among PACKAGED ICE, INC., a Texas
corporation (the "Company"), CULLIGAN WATER TECHNOLOGIES, INC., a Delaware
corporation ("Culligan"), and ERICA JESSELSON (together with Culligan, the
"Investors").
This Agreement is entered into in connection with Securities Purchase
Agreements between the Company and each of the Investors, each dated December
, 1997 (the "Securities Purchase Agreements"), pursuant to which the Company
issued and sold to the Investors, among other things, Warrants to purchase an
aggregate of 1,923,077 (subject to adjustment) shares of Common Stock
(collectively, "Warrants").
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the
following defined terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in the last
paragraph of Section 3 hereof.
"Business Day" shall mean a day that is not a Legal Holiday.
"Common Stock" shall mean the shares of common stock, par
value $.01 per share, of the Company.
"Demand Registration" has the meaning ascribed to such term in
Section 2.1(a) hereof.
"Demand Right Holders" means persons with "demand"
registration rights pursuant to a contractual commitment of the
Company.
"DTC" has the meaning ascribed to such term in Section 3(i)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"Holder" means each of the Investors, for so long as it owns
any of the Registrable Securities, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of such Registrable Securities.
"Included Securities" has the meaning ascribed to such term in
Section 2.1(a) hereof.
1
<PAGE> 4
"Indemnified Party" has the meaning ascribed to such term in
Section 4(c) hereof.
"Indemnifying Party" has the meaning ascribed to such term in
Section 4(c) hereof.
"Inspectors" has the meaning ascribed to such term in Section
3(n) hereof.
"Investors" has the meaning ascribed to that term in the
preamble of this Agreement.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on
which banking institutions in New York, New York are required by law,
regulation or executive order to remain closed.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Piggy-Back Registration" has the meaning ascribed to such
term in Section 2.2 hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities
Act), as amended or supplemented by any prospectus supplement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Public Equity Offering" means an underwritten offer and sale
of capital stock of the Company pursuant to a registration statement
that has been declared effective by the Commission pursuant to the
Securities Act (other than a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee
benefit plan of the Company).
"Registrable Securities" means any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) and (ii) any
other securities issued or issuable with respect to any Warrant Shares
or Purchased Shares by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, including without
limitation the additional warrants referred to in Section 4.7 of each
of the Securities Purchase Agreements. As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the
offering of such securities by the Holder thereof shall have been
declared effective under the Securities Act and such securities shall
have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities are eligible for sale to the public
pursuant to Rule 144(k) (or any similar provision then in force, but
not Rule 144A) promulgated under the Securities Act, (iii) such
securities shall have been otherwise transferred by such Holder and
new
2
<PAGE> 5
certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company or its
transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any
similar state law then in force, or (iv) such securities shall have
ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with its obligations, under
this Agreement, including, without limitation, all SEC and stock
exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the
Registrable Securities), preparing, printing, filing, duplicating and
distributing the Registration Statement and the related Prospectus,
the cost of printing stock certificates, the cost and charges of any
transfer agent, rating agency fees, printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for
the Company and all independent certified public accountants, the fees
and disbursements of underwriters customarily paid by issuers or
sellers of securities (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one
counsel for the Holders and other reasonable out-of-pocket expenses of
the Selling Holders.
"Registration Statement" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to
the Securities Act which covers any of the Registrable Securities
pursuant to the provisions of this Agreement and all amendments and
supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Requisite Securities" shall mean a number of Registrable
Securities equal to not less than 25% of the Registrable Securities
held in the aggregate by all Holders.
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter adopted by
the SEC providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the
Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"Selling Holder" shall mean a Holder who is selling
Registrable Securities in accordance with the provisions of Section
2.1 or 2.2 hereof.
3
<PAGE> 6
"Warrants" has the meaning ascribed to such term in the
preamble of this Agreement.
"Warrant Shares" means the shares of Common Stock deliverable
upon exercise of the Warrants.
"Withdrawal Election" has the meaning ascribed to such term in
Section 2.2(b) hereof.
Section 2. Registration Rights.
2.1 (a) Demand Registration. From time to time, after 180
days following the completion by the Company of a Public Equity Offering,
Holders owning, individually or in the aggregate, not less than the Requisite
Securities may make a written request for registration under the Securities Act
of their Registrable Securities (a "Demand Registration"). Within 120 days of
the receipt of such written request for a Demand Registration, the Company
shall file with the SEC and use its best efforts to cause to become effective
under the Securities Act a Registration Statement with respect to such
Registrable Securities. Any such request will specify the number of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. The Company shall give written notice of such
registration request to all other Holders of Registrable Securities within 15
days after the receipt thereof. Within 20 days after notice of such
registration request by the Company, any Holder may request in writing that
such Holder's Registrable Securities be included in such Registration Statement
and the Company shall include in such Registration Statement the Registrable
Securities of any such Holder requested to be so included (the "Included
Securities"). Each such request by such other Holders shall specify the number
of Included Securities proposed to be sold and the intended method of
disposition thereof. Subject to Section 2.1(b) hereof, the Company shall be
required to register Registrable Securities pursuant to this Section 2.1(a) on
a maximum of three separate occasions.
Subject to Section 2.1(f) hereof, no other securities of the
Company except securities held by any Holder, any Demand Right Holder, and any
Person entitled to exercise "piggy back" registration rights pursuant to
contractual commitments of the Company shall be included in a Demand
Registration.
(b) Effective Registration. A Registration Statement
will not be deemed to have been effected as a Demand Registration unless it has
been declared effective by the SEC and the Company has complied in a timely
manner and in all material respects with all of its obligations under this
Agreement with respect thereto; provided, however, that if, after such
Registration Statement has become effective, the offering of Registrable
Securities pursuant to such Registration Statement is or becomes the subject of
any stop order, injunction or other order or requirement of the SEC or any
other governmental or administrative agency or court that prevents, restrains
or otherwise limits the sale of Registrable Securities pursuant to such
Registration Statement for any reason not attributable to any Holder
participating in such registration and such Registration Statement has not
become effective within a reasonable time period thereafter (not to exceed 60
4
<PAGE> 7
days), such Registration Statement will be deemed not to have been effected.
If (i) a registration requested pursuant to this Section 2.1 is deemed not to
have been effected or (ii) a Demand Registration does not remain effective
under the Securities Act until at least the earlier of (A) an aggregate of 90
days after the effective date thereof or (B) the consummation of the
distribution by the Holders of all of the Registrable Securities covered
thereby, then the Company shall continue to be obligated to effect a Demand
Registration pursuant to this Section 2.1 provided, that a Demand Registration
shall not be counted as such unless the Selling Holders have sold at least 80%
of the Registrable Securities covered thereby. For purposes of calculating the
90-day period referred to in the preceding sentence, any period of time during
which such Registration Statement was not in effect shall be excluded. The
Holders of Registrable Securities shall be permitted to withdraw all or any
part of the Registrable Securities from a Demand Registration at any time prior
to the effective date of such Demand Registration.
(c) Restrictions on Sale by Holders. Each Holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to this Section 2.1 and are to be sold
thereunder agrees, if and to the extent reasonably requested by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of Registrable Securities or of securities of the
Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 30-day period prior to, and during the
120-day period beginning on, the closing date of each underwritten offering
made pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or such managing underwriter or underwriters.
The foregoing provisions of Section 2.1(c) shall not apply to
any Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any such public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant
to Rule 144 (except as part of such underwritten offering) during such period,
unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
(d) Underwritten Registrations. If any of the
Registrable Securities covered by a Demand Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected by the Holders of
not less than a majority of the Registrable Securities then outstanding to be
sold thereunder and will be reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities,
5
<PAGE> 8
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
(e) Expenses. The Company will pay all Registration
Expenses in connection with the registrations requested pursuant to Section
2.1(a) hereof. Each Holder of Registrable Securities shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
Registration Statement requested pursuant to this Section 2.1.
(f) Priority in Demand Registration. In a registration
pursuant to Section 2.1 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders who have requested
such Demand Registration or who have sought inclusion therein that in such
underwriter's or underwriters' opinion the total number of securities which the
Selling Holders and any other Person desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event, securities shall be registered in such
registration in the following order of priority: (i) first, the securities
which have been requested to be included in such registration by the Holders of
Registrable Securities pursuant to this Agreement and the Demand Right Holders
(pro rata based on the amount of securities sought to be registered by such
Persons), (ii) second, provided that no securities sought to be included by the
Holders and the Demand Right Holders have been excluded from such registration,
the securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on
the amount of securities sought to be registered by such Persons) and (iii)
third, securities the Company proposes to register.
2.2 (a) Piggy-Back Registration. If at any time
after the Company has completed a Public Equity Offering, the Company proposes
to file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of its
securityholders of any class of its Common Stock in a firmly underwritten
Public Equity Offering (other than (i) a Registration Statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC) or (ii) a
Registration Statement filed in connection with an exchange offer or offering
of securities solely to the Company's existing securityholders), then the
Company shall give written notice of such proposed filing to the Holders of
Registrable Securities as soon as practicable (but in no event fewer than 20
days before the anticipated filing date), and such notice shall offer such
Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request in writing within 30 days after
receipt of such written notice from the Company (which request shall specify
the Registrable Securities intended to be disposed of by such Selling Holder)
(a "Piggy-Back Registration"). The Company shall use its best efforts to keep
such Piggy-Back Registration continuously effective under the Securities Act
until at least the earlier of (A) the 90th day after the effective date thereof
or (B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby. The Company shall use its best efforts
to cause the managing underwriter or underwriters, if any, of such proposed
offering to permit the Registrable Securities requested to be included in a
6
<PAGE> 9
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company or any other securityholder included therein
and to permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Any Selling
Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to this Section
2.2 by giving written notice to the Company of its request to withdraw. The
Company may withdraw a Piggy-Back Registration at any time prior to the time it
becomes effective or the Company may elect to delay the registration; provided,
however, that the Company shall give prompt written notice thereof to
participating Selling Holders. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2, and each Holder of Registrable Securities shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to a Registration Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
of Registrable Securities pursuant to Section 2.1 hereof, and no failure to
effect a registration under this Section 2.2 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) Priority in Piggyback Registration. In a
registration pursuant to Section 2.2 hereof involving an underwritten offering,
if the managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to adversely affect the success of such offering, including
the price at which such securities can be sold, then the Company will be
required to include in such registration only the amount of securities which it
is so advised should be included in such registration. In such event: (x) in
cases initially involving the registration for sale of securities for the
Company's own account, securities shall be registered in such offering in the
following order of priority: (i) first, the securities which the Company
proposes to register and (ii) second, the securities which have been requested
to be included in such registration by Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities sought to be registered by
such Persons); and (y) in cases not initially involving the registration for
sale of securities for the Company's own account, securities shall be
registered in such offering in the following order of priority: (i) first, the
securities of any Person whose exercise of a "demand" registration right
pursuant to a contractual commitment of the Company is the basis for the
registration (provided that if such Person is a Holder of Registrable
Securities, as among Holders of Registrable Securities there shall be no
priority and Registrable Securities sought to be included by Holders of
Registrable Securities shall be included pro rata based on the amount of
securities sought to be registered by such Persons), (ii) second, securities of
other persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments (pro rata based on the amount of securities sought to
be registered by such Persons) and (iii) third, the securities which the
Company proposes to register.
7
<PAGE> 10
If, as a result of the provisions of this Section 2.2(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration (a "Withdrawal Election"); provided, however,
that a Withdrawal Election shall be irrevocable and, after making a Withdrawal
Election, a Selling Holder shall no longer have any right to include
Registrable Securities in the registration as to which such Withdrawal Election
was made.
2.3 Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Company set forth in
Sections 2.1 and 2.2 hereof are subject to each of the following limitations,
conditions and qualifications:
(a) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it hereunder; provided, however, that the
duration of such postponement or suspension may not exceed the earlier to occur
of (A) 15 days after the cessation of the circumstances described in the next
sentence of this paragraph on which such postponement or suspension is based or
(B) 120 days after the date of the determination of the Board of Directors
referred to in the next sentence, and the duration of any such postponement or
suspension shall be excluded from the calculation of the 90-day period
described in Section 2.1(b) hereof. Such postponement or suspension may only
be effected if the Board of Directors of the Company determines in good faith
that the filing or effectiveness of, or sales pursuant to, such Registration
Statement would materially impede, delay or interfere with any financing, offer
or sale of securities, acquisition, corporate reorganization or other
significant transaction involving the Company or any of its affiliates (whether
or not planned, proposed or authorized prior to an exercise of demand
registration rights hereunder or any other registration rights agreement) or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential. If the Company shall so
postpone the filing or effectiveness of a Registration Statement or so suspend
the rights of Holders to make sales it shall, as promptly as possible, notify
any Selling Holders of such determination, and the Selling Holders shall (y)
have the right, in the case of a postponement of the filing or effectiveness of
a Registration Statement, upon the affirmative vote of the Holders of not less
than a majority of the Registrable Securities to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company within 10 days after receipt of such notice or
(z) in the case of a suspension of the right to make sales, receive an
extension of the registration period equal to the number of days of the
suspension. Any Demand Registration as to which the withdrawal election
referred to in the preceding sentence has been effected shall not be counted
for purposes of the three Demand Registrations the Company is required to
effect pursuant to Section 2.1 hereof.
(b) The Company shall not be required by this Agreement
to include securities in a Registration Statement pursuant to Section 2.2
hereof if (i) in the written opinion of counsel to the Company, addressed to
the Holders and delivered to them, the Holders of such securities seeking
registration would be free to sell all such securities within the current
calendar quarter, without registration, under Rule 144, which opinion may be
based in part upon the representation
8
<PAGE> 11
by such Holders, which representation shall not be unreasonably withheld, that
each such Holder is not an affiliate of the Company within the meaning of the
Securities Act and (ii) all requirements under the Securities Act for effecting
such sales are satisfied at such time.
(c) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders acknowledge, to
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Company to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such Registration Statement.
(d) The Company shall not be obligated to cause any
special audit to be undertaken in connection with any registration pursuant to
this Agreement unless such audit is requested by the underwriters with respect
to such registration.
2.4 Restrictions on Sale by the Company and Others. The
Company covenants and agrees that it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of
any securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 90-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to this Agreement, or a
Piggy-Back Registration.
2.5 Rule 144. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities,
make publicly available other information so long as necessary to permit sales
pursuant to Rule 144. Upon the request of any Holder of Registrable
Securities, the Company will in a timely manner deliver to such Holder a
written statement as to whether it has complied with such information
requirements.
Section 3. Registration Procedures. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall:
(a) Prepare and file with the SEC as soon as practicable
each such Registration Statement (but in any event on or prior to the date of
filing thereof required under this Agreement) and cause each such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that before filing any such Registration Statement or any
Prospectus or any amendments or supplements thereto (including documents that
would be incorporated or deemed to be incorporated therein by reference,
including such documents filed under the Exchange Act that would be
incorporated therein by reference), the Company shall afford promptly to the
Holders of the Registrable Securities covered by such Registration Statement,
their counsel and the managing underwriter or underwriters, if any, an
opportunity to review copies of all such documents proposed to be filed a
reasonable time prior to the proposed filing thereof. The
9
<PAGE> 12
Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority of the
Registrable Securities covered by such Registration Statement, their counsel,
or the managing underwriter or underwriters, if any, shall reasonably object in
writing, unless failure to file any such amendment or supplement would involve
a violation of the Securities Act or other applicable law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities, their
counsel and the managing underwriter or underwriters, if any, promptly (but in
any event within two (2) Business Days), and confirm such notice in writing,
(i) when a Prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective (including in such
notice a written statement that any Holder may, upon request, obtain, without
charge, one conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or of any order preventing or suspending the use of any
Prospectus or the initiation or threatening of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the Securities
Act to be delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 3(m) below cease
to be true and correct in any material respect, (iv) of the receipt by the
Company of any notification with respect to (A) the suspension of the
qualification or exemption from qualification of the Registration Statement or
any of the Registrable Securities covered thereby for offer or sale in any
jurisdiction or (B) the initiation of any proceeding for such purpose, (v) of
the happening of any event, the existence of any condition or information
becoming known that requires the making of any change in any Registration
Statement or Prospectus so that, in the case of such Registration Statement, it
will conform in all material respects with the requirements of the Securities
Act and it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of any Prospectus, it
will conform in all material respects with the requirements of the Securities
Act and it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be appropriate.
10
<PAGE> 13
(d) Use every reasonable effort to prevent the issuance
of any order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such order
is issued, to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If requested by the managing underwriter or
underwriters, if any, or the Holders of a majority of the Registrable
Securities being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters, if any, or such
Holders reasonably request to be included therein to comply with applicable
law, (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) Furnish to each Holder of Registrable Securities who
so requests and to counsel for the Holders of Registrable Securities and each
managing underwriter, if any, without charge, upon request, one conformed copy
of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities,
their counsel and each underwriter, if any, without charge, as many copies of
each Prospectus and each amendment or supplement thereto as such Persons may
reasonably request; and, subject to the last paragraph of this Section 3, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Holders of Registrable Securities and the
underwriter or underwriters or agents, if any, in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to
register or qualify, and cooperate with the Holders of such Registrable
Securities, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of, such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as the managing underwriter or
underwriters reasonably request in writing, or, in the event of a
non-underwritten offering, as the Holders of a majority of such Registrable
Securities may request; provided, however, that where Registrable Securities
are offered other than through an underwritten offering, the Company agrees to
cause its counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 3(h); and keep
each such registration or qualification (or exemption therefrom) effective
during the period the Registration Statement relating to such Registrable
Securities is required to be kept effective pursuant to this Agreement and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the securities covered thereby; provided,
however, that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so
11
<PAGE> 14
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject, or (C) become
subject to taxation in any jurisdiction where it is not then so subject.
(i) Cooperate with the Holders of Registrable Securities
and the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any,
or Holders may reasonably request at least two business days prior to any sale
of Registrable Securities in a firm commitment underwritten public offering.
(j) Use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the United
States as may be necessary to enable the seller or sellers thereof or the
underwriter or underwriters, if any, to consummate the disposition of such
Registrable Securities, except as may be required solely as a consequence of
the nature of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of the Registration
Statement and the granting of such approvals.
(k) Upon the occurrence of any event contemplated by
Section 3(c)(v) or 3(c)(vi) above, as promptly as practicable prepare a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and, subject to Section 3(a) hereof, file
such with the SEC so that, as thereafter delivered to the purchasers of
Registrable Securities being sold thereunder, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and will
otherwise comply with law.
(l) Prior to the effective date of a Registration
Statement, (i) provide the registrar for the Registrable Securities with
certificates for such securities in a form eligible for deposit with DTC and
(ii) provide a CUSIP number for such securities.
(m) Enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriter or underwriters
in order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriter or underwriters, with respect to the business of the
Company and the subsidiaries of the Company, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) use reasonable efforts to obtain
opinions of counsel to the Company and updates thereof, addressed to
12
<PAGE> 15
the underwriter or underwriters covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by underwriters; (iii) use reasonable efforts to obtain
"cold comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if applicable, the subsidiaries of the
Company) and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement, addressed to each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings and such other matters as reasonably requested by the managing
underwriter or underwriters and as permitted by the Statement of Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into, the
same shall contain customary indemnification provisions and procedures no less
favorable than those set forth in Section 5 hereof (or such other provisions
and procedures acceptable to Holders of a majority of Registrable Securities
covered by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) Make available for inspection by a representative of
the Holders of Registrable Securities being sold, any underwriter participating
in any such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records and pertinent
corporate documents of the Company and the subsidiaries of the Company, and
cause the officers, directors and employees of the Company and the subsidiaries
of the Company to supply all information in each case reasonably requested by
any such Inspector in connection with such Registration Statement; provided,
however, that all information shall be kept confidential by such Inspector,
except to the extent that (i) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in the Registration Statement,
(ii) the release of such information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) disclosure of such
information is, in the opinion of counsel for any Inspector, necessary or
advisable in connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and arising out
of, based upon, relating to or involving this Agreement or any of the
transactions contemplated hereby or arising hereunder, or (iv) such information
has been made generally available to the public. Each Selling Holder of such
Registrable Securities agrees that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Company or of
any of its affiliates unless and until such is generally available to the
public. Each Selling Holder of such Registrable Securities further agrees that
it will, upon learning that disclosure of such information is sought in a court
of competent jurisdiction, give prompt notice to the Company and allow the
Company to undertake appropriate action to prevent disclosure of the
information deemed confidential at the Company's sole expense.
(o) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earnings statements
satisfying the provisions of
13
<PAGE> 16
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than forty-five (45) days
after the end of any 12-month period (or ninety (90) days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to an underwriter
or to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to an underwriter or to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after
the effective date of the relevant Registration Statement, which statements
shall cover said 12-month periods.
(p) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed.
(q) Cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the Selling Holders may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities.
Each seller of Registrable Securities as to which any
registration is being effected agrees, as a condition to the registration
obligations with respect to such Holder provided herein, to furnish to the
Company such information regarding such seller and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably
request in writing to comply with the Securities Act and other applicable law.
The Company may exclude from such registration the Registrable Securities of
any seller who fails to furnish such information within a reasonable time after
receiving such request. If the identity of a seller of Registrable Securities
is to be disclosed in the Registration Statement, such seller shall be
permitted to include all information regarding such seller as it shall
reasonably request.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(c)(ii),
3(c)(iv), 3(c)(v), or 3(c)(vi) hereof, such Holder will forthwith discontinue
disposition of such Registrable Securities covered by the Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof), or
until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto, and, if so directed by the Company, such
Holder will deliver to the Company all copies, other than permanent file
copies, then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period of time for which a
Registration Statement is required hereunder to be effective shall be extended
by the number of days during such periods from and including the date of the
giving of such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 3(k)
hereof or (y) the Advice.
14
<PAGE> 17
Section 4. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Holder and each Person, if any, who
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder, from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other reasonable out-of-pocket expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused
by, arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or caused by any omission or alleged omission to state in any such
Prospectus a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Holder furnished to the Company in writing by such
Holder expressly for use therein; provided, however, that the Company will not
be liable if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, claim, damage, liability or expense suffered or
incurred by the Holders resulted from any action, claim or suit by any Person
who purchased Registrable Securities which are the subject thereof from such
Holder and it is established in the related proceeding that such Holder failed
to deliver or provide a copy of the Prospectus (as amended or supplemented) to
such Person with or prior to the confirmation of the sale of such Registrable
Securities sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
any Registration Statement, and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Holder, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement or any Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus. The liability of any Holder under this
paragraph shall in no event exceed the proceeds received by such Holder from
sales of Registrable Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
either paragraph (a) or (b) above, such Person (the
15
<PAGE> 18
"Indemnified Party") shall promptly notify the Person against which such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses actually incurred of
such counsel relating to such proceeding; provided, however, that the failure
to so notify the Indemnifying Party shall not relieve it of any obligation or
liability which it may have hereunder or otherwise (unless and only to the
extent that such failure directly results in the loss or compromise of any
material rights or defenses by such Indemnifying Party and such Indemnifying
Party was not otherwise aware of such action or claim). In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Party shall have failed to retain within a reasonable period of
time counsel reasonably satisfactory to such Indemnified Party or parties, or
(iii) the named parties to any such proceeding (including any impleaded
parties) include both such Indemnified Party or Parties and the Indemnifying
Parties or an affiliate of the Indemnifying Parties or such Indemnified Parties
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that, unless there exists a conflict among Indemnified Parties, the
Indemnifying Parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Parties and that all such fees and expenses shall be
reimbursed promptly after receipt of the invoice therefore as they are
incurred. Any such separate firm for the Holders and such control Persons of
the Holders shall be designated in writing by Holders who sold a majority in
interest of Registrable Securities sold by all such Holders and any such
separate firm for the Company, its directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there is a final non-appealable judgment for the plaintiff for which the
Indemnified Party is entitled to indemnification pursuant to this Agreement,
the Indemnifying Party agrees to indemnify any Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Party
shall have requested an Indemnifying Party to reimburse the Indemnified Party
for reasonable fees and expenses actually incurred by counsel as contemplated
by the third sentence of this paragraph, the Indemnifying Party agrees that it
shall be liable for any settlement of any proceeding effected without its prior
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Party of the aforesaid request and (ii) such
Indemnifying Party shall not have reimbursed the Indemnified Party in
accordance with such request prior to the date of such settlement; provided,
however, that the Indemnifying Party shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Party is contesting, in good faith, the request for reimbursement. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Party is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Party, unless such
settlement (1) includes an unconditional release of such Indemnified Party in
form and substance satisfactory to such Indemnified Party from all
16
<PAGE> 19
liability on claims that are the subject matter of such proceeding and (2) does
not include any statement as to an admission of fault, culpability or failure
to act by or on behalf of any Indemnified Party.
(d) If the indemnification provided for in paragraph (a)
or (b) of this Section 4 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
Indemnified Party in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Party under such paragraphs, in
lieu of indemnifying such Indemnified Party thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holders on the other
hand from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company on the one hand
and the Holders on the other in connection with the statements or omissions (or
alleged statements or omissions) that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand
and the Holders on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 4, in no event shall
a Holder be required to contribute any amount in excess of the amount by which
proceeds received by such Holder from sales of Registrable Securities exceeds
the amount of any damages that such Holder has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 4 will be in addition to any which the Indemnifying Parties may
otherwise have to the Indemnified Parties referred to above.
17
<PAGE> 20
Section 5. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not
entered into nor will the Company on or after the date of this Agreement enter
into, or cause or permit any of its subsidiaries to enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. The
Company shall not, directly or indirectly, take any action with respect to the
Registrable Securities as a class that would adversely affect the ability of
the Holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company
has obtained the prior written consent of Holders of not less than a majority
of the outstanding Registrable Securities; provided, however, that Section 4
hereof and this Section 5(c) may not be amended, modified or supplemented
without the prior written consent of each Holder (including any Person who was
a Holder of Registrable Securities disposed of pursuant to any Registration
Statement). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by the Holders of not less than a majority of the
Registrable Securities proposed to be sold by such Holders pursuant to such
Registration Statement. In addition, each such amendment, modification,
supplement and waiver must be agreed to in writing by the Company.
(d) Notices. All notices, requests, demands and other
communications hereunder, and each other agreement required to be entered into
pursuant to the terms and conditions of this Agreement, shall be in writing and
shall be delivered by hand, overnight courier, facsimile transmission, or by
United States Mail, and shall be deemed to have been duly given when actually
received, or when mailed, first class postage prepaid, certified mail, return
receipt requested, to the addresses set forth below, or to such other address
as may be designated hereafter by prior written notice from the recipient to
the sender:
If to the Company: Packaged Ice, Inc.
Attention: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77024
18
<PAGE> 21
With a copy to: Akin, Gump, Strauss, Hauer &
Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
1500 NationsBank Plaza
300 Convent
San Antonio, Texas 78205
Facsimile: (210) 224-2035
If to the Investors: Culligan Water Technologies, Inc.
Attention: Edward A. Christensen,
Esq.
One Culligan Parkway
Northbrook, Illinois 60062-6209
Erica Jesselson
c/o Jesselson Capital Group
Attention: Michael Jesselson
1301 Avenue of the Americas,
Suite 41-01
New York, New York 10019
With a copy to: Skadden, Arps, Slate, Meagher &
Flom LLP
Attention: Gregory A. Fernicola,
Esq.
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto and the Holders; provided, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of a
Holder unless such successor or assign holds Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF TEXAS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
19
<PAGE> 22
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Third Party Beneficiary. The Holders are intended
third party beneficiaries of this Agreement and this Agreement may be enforced
by such Persons.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of, and is intended to be a complete and
exclusive statement of, the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(l) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or by any of its affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the holders of such required percentage.
20
<PAGE> 23
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY:
PACKAGED ICE, INC.
By:
-------------------------------------
Name: A.J. Lewis III
Title: President
THE INVESTORS:
CULLIGAN WATER TECHNOLOGIES, INC.
By:
-------------------------------------
Name: Edward A. Christensen
Title: Vice President, General Counsel
and Secretary
ERICA JESSELSON
By:
-------------------------------------
<PAGE> 1
EXHIBIT 10.6
CULLIGAN VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into and
shall be effective the 2nd day of December, 1997, by and among PACKAGED ICE,
INC., A TEXAS CORPORATION (the "Company"), CULLIGAN WATER TECHNOLOGIES, INC., A
DELAWARE CORPORATION ("Culligan") and certain shareholders of the Company who
have executed a counterpart signature of this Agreement (individually, a
"Shareholder," and collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, Culligan has agreed to acquire a total of 235,000 shares of
10% Exchangeable Preferred Stock of the Company (the "10% Exchangeable
Preferred Stock"), warrants to purchase shares of the Company's $.01 par value
per share common stock ("Common Stock") and 94 shares of Series C Preferred
Stock pursuant to that certain Securities Purchase Agreement dated
December 2, 1997 (the "Securities Purchase Agreement"); and
WHEREAS, there is a continuing desire on behalf of the Shareholders of
the Company to agree to elect two representatives of Culligan to the Board of
Directors of the Company.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
Shareholders agree as follows:
1. OWNERSHIP OF SHARES. Each Shareholder represents and
warrants to Culligan that, on the date hereof, he beneficially owns and is the
registered holder of the number of shares of Common Stock, Series A Convertible
Preferred Stock ("Series A Preferred Stock") and Series B Convertible Preferred
Stock ("Series B Preferred Stock") set forth below his name on the counterpart
signature page executed by such Shareholder. All of such shares of Common
Stock, Series A Preferred Stock, Series B Preferred Stock, and any additional
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock or
any other voting securities, hereinafter acquired by the Shareholders or
Culligan (including, without limitation, any shares of stock issued in
connection with a conversion or exercised of Series A Preferred Stock, Series B
Preferred Stock and/or warrants to acquired Common Stock, stock split, stock
dividend, recapitalization of the Company, or upon the exercise of other
convertible securities of the Company) are collectively referred to herein as
the "Shares".
2. INSPECTION OF AGREEMENT. A counterpart of this Agreement
shall be deposited with the Company at its principal offices, and shall be open
to inspection by any shareholder of the Company, in person or by agent or
attorneys to the same extent as such shareholder would be entitled to examine
the books and records of the Company under article 2.44 of the Texas Business
Corporation Act ("TBCA") or other applicable law.
3. STOCK CERTIFICATES. Each new certificate representing the
Shares, and each certificate that may be issued and delivered upon transfer of
such Shares, shall contain the following legend:
<PAGE> 2
"The shares evidenced by this certificate are subject to the
provisions of the Culligan Voting Agreement dated December 2, l997,
a counterpart of which has been deposited with the Company at its
principal office."
4. ELECTION OF DIRECTORS. At each annual meeting of the
shareholders of the Company, or at each special meeting of the shareholders of
the Company involving the election of directors of the Company, and at any
other time at which shareholders of the Company will have the right to or will
vote for or render consent in writing, regarding the election of directors of
the Company, then and in each event, the Shareholders hereby covenant and agree
to vote all shares of capital stock of the Company presently owned or hereafter
acquired by them (whether owned of record or over which any person exercises
voting control) to cause and maintain the election of two representatives to
the Board of Directors of the Company designated by the holders of the
outstanding shares of Series C Preferred Stock.
The rights of the holders of the outstanding shares of Series C
Preferred Stock to designate two representatives to be elected to the Board of
Directors as set forth in the next preceding paragraph shall terminate in the
event the Investors (as defined in the Series C Preferred Certificate
Resolution) cease to own 50% of the Fully Diluted Warrant Common Stock (as
defined in the Series C Preferred Stock Certificate of Resolution) which it
owned as of the date hereof, adjusted for stock dividends, stock splits,
reverse stock splits, reorganizations, recapitalizations and the like. "
In the event the Company breaches a covenant under the Securities
Purchase Agreement at any time any share of 10% Exchangeable Preferred Stock is
outstanding, the Shareholders agree that the number of directors will be
increased to an even number, and the holders of the outstanding shares of
Series C Preferred Stock shall have the right to designate one-half of the
directors until such breach is cured or waived, and the Shareholders shall vote
all of their shares of capital stock of the Company presently owned or
hereafter acquired by them (whether owned of record or over which any person
exercises voting control) to remove such directors as is necessary to allow the
holders of the outstanding shares of Series C Preferred Stock to elect one-half
of all directors, and to cause and maintain the election of such directors as
designated by the holders of the outstanding shares of Series C Preferred Stock
until such breach is cured or waived.
At the request of the holders of the outstanding shares of Series C
Preferred Stock, each of the parties hereto shall vote or cause to be voted all
Shares owned by them or any shares over which they have voting control (i) to
remove from the Board of Directors any director designated by the holders of
the outstanding shares of Series C Preferred Stock, and (ii) to fill any
vacancy in the membership of the Board of Directors with a designee of the
holders of the outstanding shares of Series C Preferred Stock whose designee's
resignation or removal from the Board caused such vacancy.
<PAGE> 3
The Company shall provide to the holders of outstanding Series C
Preferred Stock prior written notice of any intended mailing of notice to
shareholders for a meeting at which directors are to be elected, and Culligan
shall notify the Company in writing, prior to such mailing, of the persons
designated by it as its nominees for election as directors.
If the holders of outstanding Series C Preferred Stock fail to give
notice to the Company as provided above, it shall be deemed that the designees
of Culligan then serving as director shall be their designee for reelection.
5. TERM. The term of this Agreement shall commence on the date
hereof and shall continue until the earlier of (i) the written agreement
executed by Culligan and the holders of not less than eighty percent (80%) of
the Shares held by the Shareholders other than Culligan (with Common Stock,
Series A Preferred Stock, Series B Preferred Stock, and other convertible
securities of the Company, voting as a single class, with the Series A
Preferred Stock, the Series B Preferred Stock, and other convertible securities
of the Company voting, on an as-converted basis) to terminate this Agreement;
(ii) the completion by the Company of a firmly underwritten initial public
offering of the Company's Common Stock pursuant to the Securities Act of 1933,
as amended, resulting in aggregate net proceeds to the Company and its
Shareholders of $40,000,000 or more; (iii) the merger or consolidation of the
Company with or into another entity which results in the shareholders of the
Company holding less than 50% of the voting securities of the surviving entity,
or the sale of all or substantially all of the Company's assets; or (iv) notice
by Culligan to the Company of its intention to terminate this Agreement.
6. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, legal
representatives and assigns (including each transferee of any party's Common
Stock, Series B Preferred Stock, Series A Preferred Stock and 10% Exchangeable
Preferred Stock; provided, however, no transferee of Common Stock in a public
offering registered under the Securities Act of 1933 or in an unsolicited open
market sale effected through a securities broker shall be bound by or entitled
to the benefits of this Agreement. As used in this Agreement, the term
"Shareholder" shall include any transferee of such a person, as appropriate,
who is bound by and entitled to the benefits of this Agreement under the
preceding sentence.
7. ENFORCEABILITY. The Shareholders and Culligan jointly and
severally agree that upon deposit of a counterpart of this Agreement at the
principal office of the Company, as provided above, and upon endorsement of the
above described legend upon the certificates representing the shares, this
Agreement shall be specifically enforceable by Culligan in a court of competent
jurisdiction, which remedy shall be in addition to and not exclusive of any
other remedies that may be available to it at law or in equity.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
<PAGE> 4
9. AMENDMENT. This Agreement may be amended, and any provision
hereof may be waived, only by a written agreement executed by Culligan and 80%
of the total Shares (voting as a single class, on an as-converted basis) held
by Shareholders other than Culligan.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument. A facsimile of an executed Agreement shall be deemed to be an
original, executed counterpart.
11. CORPORATE AUTHORITY. Each entity which is a party to this
Agreement respectively represents and warrants to the other parties that all
necessary corporate, trust or other action has been duly taken to authorize
execution and delivery of this Agreement and the performance or observance of
the provisions of this Agreement.
12. NUMBER AND GENDER OF WORDS; THE TERM PERSON, ETC. Where the
context so requires in this Agreement, words of gender shall include either or
both genders and the singular shall include the plural. When used in this
Agreement, the term "person" shall mean any corporation, partnership, venture,
proprietorship, trust benefit plan or other entity or enterprise.
[SIGNATURE PAGES FOLLOW]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
The Company: PACKAGED ICE, INC.
By:
--------------------------------
Name: A.J. LEWIS, III
Title: President
Culligan: CULLIGAN WATER TECHNOLOGIES, INC.
By:
--------------------------------
Name:
------------------------------
Title: President
[SHAREHOLDER COUNTERPART SIGNATURE PAGES FOLLOW]
<PAGE> 6
[SHAREHOLDER COUNTERPART SIGNATURE PAGE]
- ---------------------------------------------------------
Name of Shareholder if Entity/Signature if Individual
By:
------------------------------------------------------
Title:
---------------------------------------------------
- ---------------------------------------------------------
Please type or print name
Number of Shares of Common Stock:
------------------------
Number of Shares of Series A Convertible Preferred Stock:
---------------
Number of Shares of Series B Convertible Preferred Stock:
---------------
<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO. 3
TO
AMENDED AND RESTATED VOTING AGREEMENT
This Amendment No. 3 dated as of November 4, 1997 (this "Amendment")
to that certain Amended and Restated Voting Agreement effective the 20th day of
September, 1995 as amended by that certain Amendment No. 1 to Amended and
Restated Voting Agreement dated as of January 17, 1997, as amended by that
certain Amendment No. 2 to Amended and Restated Voting Agreement dated as of
March 14, 1997 (together, the "Voting Agreement") is entered into by and among
Packaged Ice, Inc., a Texas corporation (the "Company"), and the shareholders
of the Company (the "Shareholders") who have executed a counterpart signature
page of this Agreement. All capitalized terms used herein and not defined
herein shall have the meanings set forth in the Voting Agreement.
WHEREAS, the parties are desirous of expanding the Board of Directors
in the future.
NOW, THEREFORE, in consideration of the premises and the mutual
obligations of the parties hereto, the parties do hereby agree as follows:
1. Amendments. Section 4, subparagraph (A) of the Voting
Agreement is hereby amended and restated in its entirety as follows:
"(A) to fix and maintain the number of directors no more
than twelve (12)."
2. Section 4 of the Voting Agreement is amended to add a new
paragraph as follows:
Notwithstanding anything to the contrary contained in
this Agreement, in the event the Company breaches a covenant
under the Securities Purchase Agreement between the Company
and Culligan Water Technologies, Inc. entered into on or about
December 2, 1997, at any time any share of 10% Exchangeable
Preferred Stock is outstanding, the Shareholders agree that
the number of directors will be increased to an even number
and the holders of the outstanding shares of Series C
Preferred Stock shall have the right to designate one-half of
the directors until such breach is cured or waived, and the
Shareholders shall vote all of their shares of capital stock
of the Company presently owned or hereafter acquired by them
(whether owned of record or over which any person exercises
voting control) to remove such directors as is necessary to
allow the holders of the outstanding shares of Series C
Preferred Stock to elect one- half of all directors, and to
cause and maintain the election of such directors as
designated by the holders of the outstanding shares of Series
C Preferred Stock until such breach is cured or waived.
<PAGE> 2
3. Effective Date. This Amendment shall be effective (i) when
executed by 80% of the Shareholders (in interest, with the Common Stock, the
Series A Preferred Stock and the Series B Preferred Stock voting as a single
class, with the Series A Preferred Stock and Series B Preferred Stock voting on
an as-converted basis) and (ii) when executed by Culligan Water Technologies,
Inc..
4. Effect of Amendment. Except as expressly amended hereby, the
Voting Agreement is hereby ratified and confirmed in every respect and shall
remain in full force and effect in accordance with its terms.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, all of
which taken together shall constitute one and the same instrument. A facsimile
of an executed counterpart shall be deemed to be an original, executed
counterpart.
6. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Texas.
7. Corporate Authority. Each entity which is a party to this
Amendment respectively represents and warrants to the other parties that all
necessary corporate, trust or other action has been duly taken to authorize
execution and delivery of this Amendment and the performance or observance of
the provisions of this Amendment.
8. Severability. If any provision of this Amendment is to any
extent found to be invalid, illegal or unenforceable in any respect under
applicable law, that provision shall still be effective to the extent it
remains valid, and the remainder of this Amendment also will continue to be
valid.
9. Entire Agreement. This Amendment supersedes all previous and
contemporaneous oral negotiations, commitments, writings and understandings
among the parties hereto concerning the subject matter of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
PACKAGED ICE, INC.
By:
---------------------------------
A.J. Lewis III, President
2
<PAGE> 3
SIGNATURE PAGE FOLLOWS
AMENDMENT NO. 3 TO AMENDED AND RESTATED VOTING AGREEMENT
SHAREHOLDERS COUNTERPART SIGNATURE PAGE
SHAREHOLDER:
If a Person:
--------------------------------
Print Name
----------------------
If an Entity:
--------------------------------
By:
-----------------------------
Print Name:
---------------------
Title:
--------------------------
Number of Shares of Common
Stock:
--------------------------
Number of Shares of Series A
Preferred Stock:
----------------
Number of Shares of Series B
Preferred Stock:
----------------
3
<PAGE> 1
EXHIBIT 10.8
December 2, 1997
Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, Illinois 60062-6209
Dear Sirs:
This letter agreement (the "Letter Agreement") confirms our
mutual understandings following the consummation of the transactions
contemplated by the Securities Purchase Agreement (the "Securities Purchase
Agreement"), dated December , 1997, between you (the "Investor") and us (the
"Company").
The parties hereto hereby agree as follows:
1. Use of the Investor's Sales and Service Network. The
Company and the Investor will explore opportunities that may result in mutual
benefits from the Company's use of the Investor's sales and service network to
procure, service and maintain accounts for the Company. Notwithstanding the
foregoing, except for the obligation to explore such opportunities in good
faith, the Investor shall have no obligation to provide the Company with use of
the Investor's sales and service network.
2. Development of Supermarket Vended Bottled Water
Business. The Company and the Investor will explore opportunities for the
development of a supermarket and grocery store vended bottled water business
and the use of the Investor's "Water by Culligan(R)" trademark in that
business. Notwithstanding the foregoing, (a) the Company and the Investor may
each seek to develop such a business independently of the other and/or with
others and (b) except for the obligation to explore such opportunities
<PAGE> 2
Culligan Water Technologies, Inc.
December 2, 1997
Page 2
in good faith, the Investor shall have no obligation to provide the Company
with the use of such trademark in connection with any such business.
3. Right of First Negotiation. The Company grants the
Investor a right of first negotiation to supply all water filtration and
treatment components which the Company may require after the date hereof for
its ice machines, ice plants and water vending machines. The Investor agrees
to offer the Company prices on such water filtration and treatment component
equipment within the range that the Investor then generally charges its dealers
for such equipment.
4. Public Announcements. Except as may be required by
applicable law in the reasonable opinion of counsel to each of the parties
hereto, neither of the parties hereto shall make any public announcement
pertaining to the transactions contemplated by the Securities Purchase
Agreement without the prior written consent of the other party hereto (which
consent shall not be unreasonably withheld).
5. Effect of Agreement. It is understood that this
Letter Agreement constitutes a statement of our mutual intentions and specifies
our agreement as to the possible business opportunities described in Sections 1
and 2 hereof (the "Business Opportunities"). This Letter Agreement does not
obligate either of the parties hereto to consummate any of the Business
Opportunities and does not purport to set forth all of the issues that would
need to be resolved before an agreement thereon would be reached in order to
proceed with each of the Business Opportunities and, therefore, does not
constitute a binding commitment with respect to any of such Business
Opportunities. A binding commitment with respect to the Business Opportunities
will result only from the execution of definitive agreements with respect to
each of such Business Opportunities, subject to the conditions expressed
therein.
<PAGE> 3
Culligan Water Technologies, Inc.
December 2, 1997
Page 3
This Letter Agreement shall be governed by the laws of the
State of Illinois and may be executed in counterparts, each of which will be
deemed an original but both of which together will constitute one and the same
instrument.
If the foregoing accurately summarizes our understanding,
please return a signed copy of this Letter Agreement to the undersigned.
Very truly yours,
PACKAGED ICE, INC.
By:
----------------------------
Name: A.J. Lewis III
Title: President
Accepted and Agreed to:
CULLIGAN WATER TECHNOLOGIES, INC.
By:
-------------------------------------
Name: Edward A. Christensen
Title: Vice President, General
Counsel and Secretary
Date: December 2, 1997
<PAGE> 1
EXHIBIT 10.9
PARALLEL EXIT AGREEMENT
THIS PARALLEL EXIT AGREEMENT is made and entered into effective as of
December 2, 1997, by and among PACKAGED ICE, INC., a Texas corporation (the
"Company"), JAMES F. STUART ("Stuart"), A.J. LEWIS III ("Lewis") and STEVEN P.
ROSENBERG ("Rosenberg") and Culligan Water Technologies, Inc., a Delaware
corporation and ERICA JESSELSON (collectively, the "Investors").
WHEREAS, the parties hereto are desirous of setting forth certain
matters with respect to the transfer of their common stock in the Company (the
"Common Stock").
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following defined
terms shall have the meanings as set forth hereinbelow:
"Adjusted Pro Rata Share" shall mean a fraction, the numerator
of which is the number of Fully-Diluted Shares held by a shareholder
participating in a Subject Sale, and the denominator of which is the total
number of Fully-Diluted Shares held by all shareholders participating in a
Subject Sale, excluding the number of Fully-Diluted Shares held by each of the
participating shareholders who elect not to sell their entire Pro Rata Share in
a Subject Sale.
"Common Stock" shall mean the Company's $.01 par value common
stock.
"Fully-Diluted Shares" shall mean the Company's outstanding
Common Stock, after giving effect to all outstanding warrants, options, rights,
stock-splits, adjustments, convertible securities, and the like.
"Insider Shareholders" shall mean Stuart, Lewis and
Rosenberg.
"Investors" shall mean Culligan Water Technologies, Inc. and
Erica Jesselson.
"Pro Rata Share" shall mean a fraction, the numerator of which
is the number of Fully-Diluted Shares held by a shareholder participating in a
Subject Sale, and the denominator of which is the total number of Fully-Diluted
Shares held by all shareholders participating in a Subject Sale.
"Subject Sale" shall mean any sale or disposition for value of
Common Stock of the Company beneficially-owned by an Insider Shareholder (other
than a sale to the general public for cash that is registered under the
Securities Act of 1933, as amended, or an unsolicited open market sale for cash
effected through a securities broker at such time as there shall exist a bona
fide public market for the Common Stock), if, immediately after giving effect
to such
<PAGE> 2
Subject Sale and to all other sales and dispositions of Common Stock made by
said Insider Shareholder (whether or not such sales or dispositions are subject
to this Agreement) since and including the first day of the calendar year in
which such Subject Sale is to be made, said Insider Shareholder's beneficial
ownership of the Company's outstanding Common Stock on a fully-diluted basis
would be decreased to an amount which is less than 95% of the amount of such
ownership as of the opening of business on the first day of the calendar year
in which such Subject Sale is to be made.
2. PARALLEL EXIT. No Insider Shareholders will participate as a
seller in any Subject Sale, including, but not limited to, a sale to the
Company, without causing the purchaser in such Subject Sale to offer the
Investors the opportunity to participate in such Subject Sale on the same terms
and conditions and on a pro rata basis as Insider Shareholders with respect to
shares of Common Stock (and rights or other securities exercisable for, or
convertible or exchangeable into, Common Stock) held by such Investors. The
Investors who elect to participate in such Subject Sale shall be entitled to
sell their Pro Rata Share of the number of shares the purchaser is willing to
purchase. Provided, however, in the event a participating shareholder chooses
not to sell his entire Pro Rata Share, the other participating shareholders
shall have the right to sell their Adjusted Pro Rata Share of the shares of
Common Stock which the participating shareholder does not choose to sell.
Each Insider Shareholder shall give the Investors at least ten (10) days prior
written notice of any Subject Sale. Investors should provide the Company with
the number of Fully-Diluted Shares which the Investors desire to sell as part
of the Subject Sale at least two days prior to the Subject Sale. Each Insider
Shareholder participating in such sale must then sell all shares offered by the
Investors as part of the Subject Sale as a condition to complete such Subject
Sale.
3. TERMINATION. This Agreement shall continue in effect from the
date of execution until the Company has completed an initial public offering of
its Common Stock, on a firm commitment basis with a nationally recognized
underwriter, resulting in aggregate offering proceeds of $7,500,000 or more,
before deduction of underwriting discounts and expenses of sale.
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and benefit the parties hereto and their respective successors and assigns
(including each transferee of any party's Common Stock); provided, however, no
transferee of Common Stock in a public offering registered under the Securities
Act of 1933 or in an unsolicited open market sale effected through a securities
broker shall be bound by or entitled to the benefits of this Agreement. As
used in this Agreement, the terms "Insider Shareholders" and "Investors" shall
include any transferee of such persons, as appropriate, who are bound by and
entitled to the benefits of this Agreement under the preceding sentence.
5. LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF TEXAS.
6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall together constitute a single agreement, but
shall be effective only at such time as
2
<PAGE> 3
all parties have executed a counterpart (but not necessarily the same
counterpart) of this Agreement.
7. AMENDMENTS. This Agreement may be amended, and any provision
hereof may be waived, only by a written agreement executed by the Insider
Shareholders and the Investors.
8. LEGENDS. The Company will cause each certificate that
evidences any securities or stock that is subject to this Agreement to bear a
legend substantially like the following legend, which shall be typed, printed,
or stamped thereon in a conspicuous manner:
"The shares evidenced by this certificate are subject
to a Parallel Exit Agreement dated December 2, 1997, among the
Company and certain of its shareholders. The Company will furnish to
the record holder of this certificate (without charge) a copy of such
Agreement upon written request therefor to the Company at its
principal place of business or registered office."
The Company agrees that a counterpart of this Agreement shall be kept at the
principal office of the Company and shall be subject to the same right of
examination by any shareholder of the Company, in person or by agent, attorney,
or other designated representative, as are the books and records of the
Company.
9. NOTICES. Any notice or other communication provided for
herein or given hereunder to a party hereto shall be in writing and shall be
deemed to have been duly given if signed by the party giving it. Notice shall
be deemed effective upon delivery by hand, or on the third (3rd) business day
after it is deposited in the United States mail, postage prepaid (registered or
certified mail), or on the business day after it is sent by Federal Express or
a similar overnight service to the addresses of the parties as set forth
herein, or to such other addresses as a party shall provide to the other
parties in accordance with this Section.
10. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement between the parties hereto relating to the subject matter herein, and
shall supersede all previous agreements between the parties hereto relating to
the subject matter herein.
(SIGNATURE PAGE FOLLOWS)
3
<PAGE> 4
(PARALLEL EXIT AGREEMENT SIGNATURE PAGE)
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INSIDE SHAREHOLDERS
------------------------------------
James F. Stuart
------------------------------------
A.J. Lewis III
------------------------------------
Steven P. Rosenberg
PACKAGED ICE, INC.
By:
---------------------------------
A. J. Lewis III, President
INVESTORS:
CULLIGAN WATER TECHNOLOGIES, INC.
By:
---------------------------------
Edward A. Christensen,Vice
President, General Counsel and
Secretary
------------------------------------
ERICA JESSELSON
4
<PAGE> 1
EXHIBIT 10.10
TRANSFER RESTRICTION AGREEMENT
This TRANSFER RESTRICTION AGREEMENT (this "Agreement") is entered into
as of December 2, 1997, by and between Packaged Ice, Inc., a Texas corporation
(the "Company"), and Culligan Water Technologies, Inc., a Delaware Corporation
(the "Investor").
W I T N E S S E T H :
WHEREAS, the Investor is the holder of 235,000 shares of the Company's
10% Exchangeable Preferred Stock (the "10% Preferred Stock") and 94 shares of
the Company's Series C Preferred Stock (the "Series C Preferred Stock") and
Warrants to acquire 1,807,692 shares of common stock (the "Warrants"); and
WHEREAS, for the purposes of this Agreement, the 10% Preferred Stock,
the Series C Preferred Stock and the Warrants and any Additional Shares of 10%
Preferred Stock (as defined in the 10% Preferred Stock Certificate of
Resolution) and any additional warrants (as calculated in Section 4.7 of the
Securities Purchase Agreement) of the Company, acquired by the Investor on or
after the date hereof shall hereinafter collectively be referred to as the
"Securities."
NOW, THEREFORE, for and in consideration of the premises set forth
above, the mutual promises, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
agree as follows:
1. RESTRICTION ON TRANSFER OF STOCK
1.1. Without the prior written consent of the Company as authorized
by a disinterested majority of the Board of Directors of the Company, Investor
shall not sell, make a gift of, assign, transfer or otherwise dispose of
(collectively, a "Transfer") any of the Securities or any right, title or
interest therein, to Suiza Foods, Inc., Reddy Ice, and their respective
subsidiaries, affiliates, and successors resulting from a Business Combination.
For the purposes of this Agreement, "Business Combination" shall mean a merger,
consolidation or sale of substantially all of the assets of a corporation or
other entity. Any purported Transfer in violation of any provision of this
Agreement shall not operate to transfer any interest to the intended
transferee, and shall not be given any effect by the Company.
1.2. All Securities now owned or hereafter acquired by the Investor
shall be issued, held and transferred in accordance with, and shall at all
times be subject to, the terms and conditions of this Agreement. Any Transfer
of such Securities (in accordance with this Agreement) shall be contingent upon
the transferee executing and delivering to the Company and the other party a
written agreement containing substantially the same terms set forth herein.
1.3. Each certificate representing Securities now owned or
hereafter acquired by the Investor shall be endorsed substantially as follows:
<PAGE> 2
"The Securities represented by this Certificate and the
Transfer thereof are subject to and restricted by a Transfer
Restriction Agreement entered into by the Company and the holder
hereof, a copy of which may be obtained without charge by the holder
hereof upon written request to the Company at its principal office."
2. TERMINATION
This Agreement shall terminate upon the occurrence of any one of the
following events:
(a) the Company permanently ceases to do business;
(b) the Company and Reddy Ice consummate a Business Combination;
(c) the shareholders of the Company, as of the date
hereof, own less than 50% of the stock outstanding of
the Company after a Business Combination;
(d) there is consummated an underwritten public offering
of the Company's common stock, which results in net
proceeds to the Company and the shareholders of at
least $40,000,000; or
(e) the written agreement of the Investor and the Company.
3. GENERAL
3.1. Delivery of Notices. Any notice, offer, demand, payment,
request, response or other communication required or permitted hereunder shall
be given in writing, by personal delivery, fax, express mail, or by United
States certified mail (postage prepaid, return receipt requested) to the
Company and the Investor at the respective addresses set forth below:
If to the Company: Packaged Ice, Inc.
Attn: President
8572 Katy Freeway, Ste. 101
Houston, Texas 77024
If to the Investor: Culligan Water Technologies, Inc.
Attn.: General Counsel
One Culligan Parkway
Northbrook, IL 60062-6209
or to such other address as the party to receive such communication has last
designated by written notice delivered to the other party in accordance with
the foregoing provisions. All communications (including offers) hereunder
shall be deemed "dated" (i) when sent or dispatched, if given in accordance
with this Section 3.1 or (ii) when received, if given in any
2
<PAGE> 3
other manner. Any time period referenced in this Agreement shall be deemed to
include the last day of such period.
3.2. Further Assurances. Each party hereto agrees to perform any
further acts, and to execute and deliver any further documents or instrument,
which may be reasonably necessary to carry out the provisions of this
Agreement.
3.3. Severability. In the event any of the provisions of this
Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not be affected thereby.
3.4. Binding Effect and Assignment. Subject to the restrictions
against transfer as set forth herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective legal
representatives, successors and assigns.
3.5. Captions and Section Headings. Captions and section headings
used herein are for convenience only and shall not be used in construing this
Agreement. All section cross-references are to sections within this Agreement.
3.6. Governing Law. This Agreement has been executed in and shall
be governed by the laws of the State of Illinois.
3.7. Waiver. No waiver or indulgence by either party of any
failure by the other party to keep or perform any terms or provision of this
Agreement shall be a waiver of any preceding or succeeding breach of the same
or of any other term or provision of this Agreement.
3.8. Confidentiality. Except as otherwise set forth herein or as
otherwise required by law, including the federal securities law, the Company
and the Investor agree to maintain in confidence the terms of this Agreement.
3.9. Gender. Whenever herein, the masculine gender shall include
the feminine and neuter genders, and vice versa, as the context may require.
3.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Investor have executed this
Transfer Restriction Agreement on the date first above written.
SIGNATURE PAGE FOLLOWS
3
<PAGE> 4
TRANSFER RESTRICTION AGREEMENT SIGNATURE PAGE
"COMPANY" PACKAGED ICE, INC.
By:
-------------------------------
A.J. Lewis III, President
"INVESTOR" CULLIGAN WATER TECHNOLOGIES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
4
<PAGE> 1
EXHIBIT 10.11
TRANSFER RESTRICTION AGREEMENT
This TRANSFER RESTRICTION AGREEMENT (this "Agreement") is entered into
as of December 2, 1997, by and between Packaged Ice, Inc., a Texas corporation
(the "Company"), and Erica Jesselson, an individual residing in the state of New
York (the "Investor").
W I T N E S S E T H :
WHEREAS, the Investor has agreed to purchase 15,000 shares of the
Company's 10% Exchangeable Preferred Stock (the "10% Preferred Stock") and 6
shares of the Company's Series C Preferred Stock (the "Series C Preferred
Stock") and Warrants (the "Warrants") to acquire 115,385 shares of common stock
par value $.01 per share ("Common Stock"); and
WHEREAS, for the purposes of this Agreement, the Series C Preferred
Stock, the Warrants, any additional warrants (as calculated in Section 4.7 of
the Securities Purchase Agreement dated December 2, 1997 between the Company and
the Investor (the "Securities Purchase Agreement")), and any shares of Common
Stock acquired through the exercise of the Warrants or any other warrants, which
are acquired by the Investor on or after the date hereof shall hereinafter
collectively be referred to as the "Securities." The defined term Securities
shall not include shares of the 10% Preferred Stock.
NOW, THEREFORE, for and in consideration of the premises set forth
above, the mutual promises, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor agree
as follows:
1. RESTRICTION ON TRANSFER OF STOCK
1.1. Without the prior written consent of the Company as
authorized by a majority of the Board of Directors of the Company, Investor
shall not sell, make a gift of, assign, transfer or otherwise dispose of
(collectively, a "Transfer") any of the Securities or any right, title or
interest therein, to Suiza Foods Corporation, Reddy Ice Corporation ("Reddy
Ice") and their respective subsidiaries, affiliates, and successors resulting
from a Business Combination. For the purposes of this Agreement, "Business
Combination" shall mean a merger, consolidation or sale of substantially all of
the assets of a corporation or other entity. Any purported Transfer in violation
of any provision of this Agreement shall not operate to transfer any interest to
the intended transferee, and shall not be given any effect by the Company.
1.2. All Securities now owned or hereafter acquired by the
Investor shall be issued, held and transferred in accordance with, and shall at
all times be subject to, the terms and conditions of this Agreement. Any
Transfer of such Securities (in accordance with this Agreement) shall be
contingent upon the transferee either (a) executing and delivering to the
Company a written agreement containing substantially the same terms set forth
herein, or (b) becoming a party to the Amended and Restated Shareholders
Agreement dated September 20,
<PAGE> 2
1995, as amended, by delivering signed signature pages of the aforementioned
Amended and Restated Shareholders Agreement to the Company.
1.3. Each certificate representing Securities now owned or
hereafter acquired by the Investor shall be endorsed substantially as follows:
"The Securities represented by this Certificate and the
Transfer thereof are subject to and restricted by a Transfer
Restriction Agreement entered into by the Company and the holder
hereof, a copy of which may be obtained without charge by the holder
hereof upon written request to the Company at its principal office."
2. TERMINATION
This Agreement shall terminate upon the occurrence of any one
of the following events:
(a) the Company permanently ceases to do business;
(b) the Company and Reddy Ice consummate a Business Combination;
(c) the shareholders of the Company, as of the date hereof, own
less than 50% of the stock outstanding of the Company after a
Business Combination;
(d) the consummation of a sale of all or substantially all of the
Company's assets, or the sale of a majority of the Common Stock
by the holders thereof, or a merger or consolidation of the
Company (other than a merger or consolidation in which the
holders of a majority of the outstanding Common Stock as of the
date immediately prior to the merger or consolidation maintain
ownership of a majority of the voting securities of the surviving
or resulting entity);
(e) there is consummated an underwritten public offering of the
Company's common stock, which results in net proceeds to the
Company and the shareholders of at least $40,000,000;
(f) the written agreement of the Investor and the Company; or
(g) the occurrence of any monetary default by the Company under the
10% Exchangeable Preferred Stock, the Company's bank credit
facility or any indenture to which the Company is subject,
however, only after the expiration of any applicable notice and
cure period, where such monetary default remains uncured.
3. GENERAL
3.1. Delivery of Notices. Any notice, offer, demand, payment,
request, response or other communication required or permitted hereunder shall
be given in writing, by personal
2
<PAGE> 3
delivery, fax, express mail, or by United States certified mail (postage
prepaid, return receipt requested) to the Company and the Investor at their
respective addresses set forth below:
If to the Company: Packaged Ice, Inc.
Attn.: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
If to the Investor: Erica Jesselson
c/o Michael Jesselson
1301 Avenue of the Americas, Suite 4101
New York, NY 10019
or to such other address as the party to receive such communication has
last designated by written notice delivered to the other party in accordance
with the foregoing provisions. All communications (including offers) hereunder
shall be deemed "dated" (i) when sent or dispatched, if given in accordance with
this Section 3.1 or (ii) when received, if given in any other manner. Any time
period referenced in this Agreement shall be deemed to include the last day of
such period.
3.2. Further Assurances. Each party hereto agrees to perform any
further acts, and to execute and deliver any further documents or instrument,
which may be reasonably necessary to carry out the provisions of this Agreement.
3.3. Severability. In the event any of the provisions of this
Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not be affected thereby.
3.4. Binding Effect and Assignment. Subject to the restrictions
against transfer as set forth herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective legal
representatives, successors and assigns.
3.5. Captions and Section Headings. Captions and section headings
used herein are for convenience only and shall not be used in construing this
Agreement. All section cross-references are to sections within this Agreement.
3.6. Governing Law. This Agreement has been executed in and shall
be governed by the laws of the State of Texas.
3.7. Waiver. No waiver or indulgence by either party of any
failure by the other party to keep or perform any terms or provision of this
Agreement shall be a waiver of any preceding or succeeding breach of the same or
of any other term or provision of this Agreement.
3.8. Confidentiality. Except as otherwise set forth herein or as
otherwise required by law, including the federal securities law, the Company and
the Investor agree to maintain in confidence the terms of this Agreement.
3
<PAGE> 4
3.9. Gender. Whenever herein, the masculine gender shall include
the feminine and neuter genders, and vice versa, as the context may require.
3.10. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Investor have executed this
Transfer Restriction Agreement on the date first above written.
SIGNATURE PAGE FOLLOWS
4
<PAGE> 5
TRANSFER RESTRICTION AGREEMENT SIGNATURE PAGE
"COMPANY" PACKAGED ICE, INC.
By:
-------------------------
A.J. Lewis III, President
"INVESTOR" ERICA JESSELSON
By:
-------------------------
Erica Jesselson
5
<PAGE> 1
EXHIBIT 10.12
November 20, 1997
To: The Holders of Packaged Ice, Inc. 12% Series B
and Series C Senior Notes due April 15, 2004
Re: Option to Purchase
$50,000,000 12% Series B Senior Notes due 2004 ("Series B") and
$25,000,000 12% Series C Senior Notes due 2004 ("Series C")
Ladies and Gentlemen:Gentlemen:
Packaged Ice, Inc. (the "Company") does hereby offer, upon the terms
and subject to the conditions set forth herein, to pay each holder of record of
the Series B and Series C Notes, which are anticipated to be exchanged into a
new series of notes, (collectively the "Notes") as of Friday, November 14, 1997
(the "Record Date"), $15 for each $1,000 in principal amount of the outstanding
Notes ("Option Fee") for the option to purchase the Notes held by such holder.
This offer is being made to facilitate certain refinancing options under review
by the Company. This offer to purchase an option expires Friday, November 21,
1997. In the event that the Company is acquired while the Option (as defined
below) is outstanding the undersigned may return the Option Fee and terminate
the Option. In addition, in the event that the Company receives or agrees to
receive (which agreement shall be promptly disclosed to the Seller) any equity
investment other than (i) the presently contemplated $25 million equity
investment by Culligan Water Technologies, Inc. (the "Culligan Investment"),
(ii) up to $15 million of an equity investment with substantially the same
terms as the Culligan Investment by institutional investors and (iii) stock
issued by the Company as consideration for acquisitions including warrants and
stock issuable upon exercise of such warrants and (iv) stock issuable in
connection with any existing option, right or warrant, the undersigned may
return the Option Fee and terminate the Option (any such event being termed
"Cancellation Event"). By accepting this offer and executing this Letter
Agreement, the undersigned holder agrees to and does hereby grant to the
Company the following option to purchase. The Company agrees to pay to the
undersigned Seller the Option Fee by cashier's check or official bank check
within five business days of the receipt of this fully executed Letter
Agreement.
1. For and in consideration of the payment of the Option Fee and
subject to the provisions contained herein, the undersigned holder of the Notes
(the "Seller") agrees to and does hereby grant to the Company the option (the
"Option") to purchase 100%, and not less, of the Notes of the Company held or
controlled by the Seller. Upon exercise of the Option by the Company, the
purchase price for each Notes shall be 105% of the outstanding principal, plus
<PAGE> 2
accrued but unpaid interest to the date of closing (the "Purchase Price").
Exercise of the Option shall be by written notice to the Seller specifying the
number of Notes to be purchased by the Company (the "Option Notes") and a place
and date for the closing, such date to be not later than 60 days from the date
such notice is given.
2. The Option may be exercised by the Company, in whole, at any
time and from time to time prior to 5:00 PM, Eastern Standard Time, on January
31, 1998.
3. At any closing hereunder, the Company will make payment to the
Seller for the Option Notes so purchased by a cashier's check or official bank
check equal to the aggregate purchase price of such Option Notes, and the
Seller will deliver to the Company duly executed Notes representing the number
of Option Notes so purchased. In the event such Notes are held by the
Depository Trust Company (the "DTC") or any other nominee, such Seller must
instruct the DTC or nominee to transfer such Notes to the Company and take such
actions as may be necessary to deliver the Option Notes to the Company free of
any liens, claims or encumbrances.
4. The Company represents and warrants (such representations and
warranties being deemed repeated at any closing hereunder) that:
(a) The Company has the requisite corporate power and
authority to enter into and perform this Agreement;
(b) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary corporate action
on the part of the Company, and this Agreement has been duly executed
by a duly authorized officer of the Company;
(c) The purchase of the Option Notes pursuant to the
Option will be made in compliance with all applicable provisions of
the Securities Act and the rules and regulations thereunder.
5. The Seller represents and warrants (such representations and
warranties being deemed repeated at any closing hereunder) that:
(a) The Seller has the requisite power and authority to
enter into and perform this Agreement;
(b) The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action
on the part of the board of directors of the Seller, and this
Agreement has been duly executed by a duly authorized officer of the
Seller, if applicable;
(c) The performance of this Agreement by the Seller
will not require the consent, waiver or approval of any person and
will not violate, result in a breach of or constitute a default under
any agreement or restriction by which the Seller is bound; and
(d) The Seller has had the opportunity to review the
publicly filed documents regarding the Company, including, but not
limited to the following:
<PAGE> 3
<TABLE>
DATE FILED FORMS CIK CODE COMPANY NAME
---------- --------- -------- ----------------
<S> <C> <C> <C>
10-31-1997 8-K 917731 PACKAGED ICE INC
09-05-1997 424(b)(3) 917731 PACKAGED ICE INC
</TABLE>
and has had the opportunity to ask questions of representatives of the
Company and received satisfactory answers with respect thereto.
6. The Seller agrees that if for any reason the Company has
exercised its rights under the Option and the Seller has failed to issue any of
the Option Notes or to perform its other obligations under the Option or this
Agreement, other than due to the Company or the Seller's failure to comply with
the term of this Agreement, then the Company shall be entitled to specific
performance and injunctive and other equitable relief, and the Seller further
agrees to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable relief.
This provision is without prejudice to any other rights that the Company may
have against the Seller for any failure to perform its obligations under this
Agreement.
7. The Company agrees that if for any reason it has exercised its
rights under the Option and failed to perform its obligations under the Option
or this Agreement, other than due to the Company or the Seller's failure to
comply with the term of this Agreement, then the Seller shall be entitled to
specific performance and injunctive and other equitable relief, and the Company
further agrees to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that the
Seller may have against the Company for any failure to perform its obligations
under this Agreement.
8. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9. Each party hereto shall pay its own expenses incurred in
connection with this Agreement.
10. This Agreement shall be binding upon and inure to the benefit
of the Company and the Seller and their respective successors and permitted
assigns. This Agreement shall not be assigned by the Company without the prior
written consent of the Seller, except to (i) a direct or indirect wholly-owned
subsidiary of the Company or (ii) a newly organized parent holding company of
Company.
11. This Agreement not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto. However, either party may waive any condition
to the obligations of such party hereunder.
12. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by
<PAGE> 4
personal delivery or by mail (registered or certified mail, postage prepaid,
return receipt requested) to the respective parties as follows:
If to the Company:
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: James F. Stuart
If to Seller:
--------------------------------
--------------------------------
--------------------------------
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
13. The Notes may be sold to third parties by the Seller if the
third party purchases the Notes subject to the Option.
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. This Agreement may be executed in several counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
16. The Company agrees that, upon the occurrence of a
Cancellation Event, Seller shall have the option to return the Option Fee and
the Option shall be terminated.
17. The Company hereby acknowledges and agrees that this
Agreement, and the Option granted hereby, does not grant the Company any rights
with respect to the Company's warrants to purchase 255,943 shares of the
Company's Common Stock, as described in the offering circular dated October 10,
1997.
Very truly yours,
PACKAGED ICE, INC.
By:
---------------------------
A.J. Lewis, III
President
Agreed and Accepted:
SELLER
By:_______________________________
Name:_____________________________
Title:____________________________
Number of Notes:__________________
